Webinar "Blended Binds: How DFI’s Support Programs Stifle Bank Lending in Africa"

Organized by the Private Sector Development Research Network

Hosted by the African Development Bank Group (AfDB)

Moderated by Francis Kemeze, Chief Research Economist, AfDB

Intervention by Florian Léon, Research Officer, FERDI

Florian Leon will discuss his paper, "Blended Binds: How DFI’s Support Programs Stifle Bank Lending in Africa".

This paper examines the lending behavior of African banks that received support through intermediated lending programs from major development finance institutions between 2010 and 2021. Using comprehensive bank-level data, the study reveals a surprising 8% decline in loan growth among supported banks following program implementation. This counterintuitive outcome appears to stem from recipient banks’ limited absorptive capacity,  leading them to focus on new clients while neglecting existing borrowers.

The discussion will also  address the research findings on the absence of spillover effects to ineligible banks and the contrasting observation that supported microfinance institutions maintained stable lending activity throughout the same period.