The African Development Fund (ADF), the concessional lending arm of the African Development Bank Group, is preparing to raise about US$1 billion on international financial markets in what would be the first market borrowing in its history, officials said.
The move marks a strategic shift for the fund, which has traditionally relied on donor contributions and loan repayments to finance development projects in Africa’s poorest countries. It comes amid tighter global aid budgets, rising financing needs across the continent and mounting pressure on multilateral lenders to stretch limited concessional resources.
The ADF is replenished every three years through pledges from donor countries. However, its most recent replenishment round, concluded in London in December, mobilised about US$11 billion, less than half of the initial US$25 billion target, according to officials familiar with the discussions.
The shortfall has heightened concerns about the fund’s ability to maintain lending volumes to its 37 eligible low-income countries, which depend on ADF resources for long-term financing at highly concessional rates.
In response, the fund has launched a process to obtain a credit rating, a prerequisite for issuing bonds on capital markets. Officials at the African Development Bank said a first bond issuance could take place within the next two years, depending on market conditions and regulatory approvals.
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Funds raised through market borrowing would be used to support continued lending for priority sectors such as infrastructure, agriculture, energy access and climate resilience, while preserving the concessional nature of ADF financing.
The shift would bring the ADF closer to the operating model of other multilateral concessional windows, notably the World Bank’s International Development Association (IDA), which has for several years used capital market borrowing to leverage donor contributions and expand its lending capacity.
The move comes as donor support for concessional finance has come under increasing strain. The absence of a contribution from the United States, historically one of the ADF’s largest donors, weighed heavily on the latest replenishment outcome.
Washington announced that it would not support the ADF in its 2025 replenishment cycle, arguing that the fund placed excessive emphasis on climate and social objectives at the expense of economic growth and poverty reduction.
During the previous replenishment cycle in 2022, the administration of former U.S. President Joe Biden pledged $550 million. However, a change of administration meant that US$197 million of that amount was never disbursed, officials said.
Despite the U.S. withdrawal, several European donors, including Denmark and Norway, increased their commitments, helping to partially offset the funding gap. In a notable development, African countries also stepped up their role.
For the first time, a group of African member states made direct contributions to the ADF, totalling $182.7 million. Initial contributions came from Kenya, Zambia, Madagascar and Côte d’Ivoire, a move the African Development Bank described as a sign of growing ownership and solidarity among regional members.
Since 2022, the ADF has increased its focus on climate adaptation while continuing to support food security, rural development and access to electricity, areas seen as critical for economic stability and poverty reduction in low-income countries.
Created in 1972, the African Development Fund has mobilised about US$45 billion for Africa’s poorest nations, financing projects ranging from irrigation schemes and rural roads to power generation and social infrastructure.
Analysts say access to capital markets could significantly enhance the fund’s financial firepower, but caution that it will require careful risk management to preserve its strong credit profile and concessional mandate.
If successful, the planned US$1 billion borrowing would represent a landmark step in the evolution of Africa’s multilateral development finance architecture, as institutions adapt to a more constrained and uncertain global aid environment.
