|
Introduction
"The life of money making is one undertaken under compulsion, and wealth is evidently not the good we are seeking; for it is merely useful and for the sake of something else".
Aristotle, The Nichomachean Ethics, Book I.5, written around 350 B.C.
Over the past decade we have witnessed a double convergence. Aid donors have developed an increasing interest in the private sector while private banks have created corporate social responsibility programs, sustainable lending or microfinance programmes. This paper aims to map potential synergies between private banks and aid donors.
Over the course of the first OECD Global Forum on Development, held in early April 2007, many aid donors expressed a growing interest for a deeper dialogue with the private sector, including corporations or foundations, for example1. This interest found echo in the first flagship publication of the OECD Development Centre on development financing (OECD, 2007a), which argued on the need to go beyond aid and incorporate new actors into the financing of development. The 2005 OECD Development Assistance Committee (DAC) annual report also stressed the fundamental importance of this deepening dialogue with the private sector (OECD, 2007b).
Over the past decade, bilateral donors have developed new financial tools and institutions to improve their work with developing countries. Following the assumption that public money may be a catalyst for private resources, leading donor agencies have strived to mobilise private sector resources and capacities for poverty reduction. Most European donors, for example, have established Development Finance Institutions (DFIs) operating on a commercial basis, that have become an integral part of government development policy.
For instance, in 2005, Switzerland established the Swiss Investment Fund for Emerging Markets (SIFEM)2, as a spin-off of SECO (Swiss State Secretariat for Economic Affairs, one of the main national institutions in charge of development cooperation). In collaboration with other donor agencies such as Proparco (the French Development Finance Institution, a subsidiary of the French Development Agency3) or the Belgian Investment Company for Developing Countries (BIO4), SIFEM now participates in many private equity projects around the developing world, working with local private financial operators like Tuninvest in Tunisia, Fidelity Capital Partners (a private venture capital and private equity company, subsidiary of Fidelity Investment) in Ghana, Ethos in South Africa, Nexxus in Mexico or BTS Investment Advisors in India5. As we will see, these initiatives are not the only ones where private and public institutions have converged to boost development projects.
These national financial institutions also developed the European Development Finance Institutions (EDFI) network, a group of fifteen bilateral institutions providing long-term capital for private sector enterprises in developing and reforming economies. The institutions in this group share common objectives but are quite different in the way they develop their operations. Some of them are still mostly financial institutions offering capital and advice to joint venture enterprises in developing countries, and collaborating on projects with national. Danish IFU, Swedish Swedfund or Spanish COFIDES6, both members of EDFI, support projects mostly in a context of Danish or Spanish companies’ involvement.
Other members like CDC7, a UK government-owned fund with nearly $3 billion of net assets, work actively with worldwide private equity partners like London based Aureos Capital, Indian based Barings Private Partners or ICICI Venture, Canadian based Cordiant or Citigroup Venture Capital8. As an example, in 2007 CDC backed a new African initiative, committing $100 million to Citigroup’s first private equity vehicle entirely dedicated to Africa. The Netherlands Development Finance Company (FMO)9, another leading and very active EDFI, launched with Citigroup in 2006 a $540 million risk sharing facility aimed at providing loans to small and medium sized companies in poor countries. This was the first global partnership between an EDFI institution and a leading private retail bank. EDFIs have even participated in the creation of private equity companies, one of the most dynamic being Aureos Capital, created in 2001 by two leading EDFIs, the Norwegian Norfund (Norwegian Investment Fund for Developing Countries) and the UK’s CDC Capital Partners10.
Private banks have also shown an increasing awareness of social, environmental or labour issues in developing countries. In the course of their global expansion and acquisitions, OECD-based bankers have encountered new realities, constraints and opportunities in developing countries. Through either their lending operations, retail business on the ground or investment banking and asset management activities, emerging markets and developing countries have gradually grown to become core business areas. In parallel, when faced with increased pressures and demands from NGOs, activist investors and government pressures, private banks have also developed new programmes of sustainable lending and investment, and corporate social responsibility. These private institutions have thus found themselves entering projects in which they, directly or indirectly, may find themselves working to provide public goods such as education, health, microfinance and remittances-related services to the poor.
Private banks have also become involved in infrastructure projects, and increasingly often sealing partnerships with the public sector in many countries. In Brazil, the ABN Amro subsidiary Banco Real11 became a leading provider of micro-credits and grants to the poor for education related activities. Spanish banks, which are heavily involved in Latin America, have multiplied their initiatives throughout the region. Banco Santander, for example, promoted the creation of a huge educational platform Universia12. Both of Spain’s leading banks, Santander and BBVA13, in 2000 participated together with other ministries and private corporations in the creation of the Fundaciуn Carolina, a unique Spanish institution funded by both the public and private sectors whose aim is to provide grants for Latin American wishing to pursue studies in Spain14.
Footnotes:
-
See the web page devoted to the OECD Global Forum on Development: http://www.oecd.org/dev.
-
See for more information: http://www.sifem.ch/.
-
See http://www.proparco.fr/. Interestingly, among the institutions that fund Proparco are also some French private banks like BNP Paribas, SociР№tР№ GР№nР№rale, Natixis, Dexia CrР№dit Local or other private financial institutions like COFACE or Gras Savoye. African banks or other financial institutions from developing countries also participate in the capital, for example, Banque Marocaine du Commerce ExtР№rieur, Aga Khan Fund for Economic Development (AKFED) or Banque de Tunisie. The Aga Khan Fund is particularly interesting. It is an international development agency dedicated to promoting entrepreneurship and building economically sound enterprises in the developing world. On Aga Khan Fund see http://www.akdn.org/.
-
http://www.b-i-o.be/.
-
See: http://www.tuninvest.com/; http://fidelitycapitalpartners.com/; http://www.btsadvisors.com/; http://www.nexxuscapital.com/; and http://www.ethos.co.za/live/index.php.
-
See http://www.ifu.dk/; http://www.swedfund.se/; and http://www.cofides.es/. Swedfund developed an
interesting strategy of partnering with private sector asset managers and private equity companies like East Capital (http://www.eastcapital.com/) or Swedish companies like Tetra Pak or Ikea. Interestingly, as for Proparco, COFIDES also has private banks involved in its core capital, mainly BBVA, Santander and Banco Sabadell.
-
See http://www.cdcgroup.com/.
-
See http://www.aureos.com/; https://www.citigroupai.com/; http://www.bpepindia.com/; http://www.iciciventure.com/; and http://www.cordiantcap.com/.
-
FMO was formed in 1970 through a partnership between the Dutch government (the majority shareholder with 51 per cent) and Dutch financial institutions like ABN Amro, ING and Rabobank, In 2007, FMO has an investment portfolio of almost Р‚2 billion and a staff of more than 200. It is one of the
largest bilateral private sector oriented development banks worldwide.
-
See http://www.norfund.no/. Norfund also participated in the creation of another private equity company, specializing in renewable energy related investments in Asia, Africa and Latin America: SN Power. See http://www.snpowerinvest.com/.
-
See http://www.bancoreal.com.br/. In 2006, Banco Real doubled its microfinance clients (350 000 worldwide) and consolidated its sustainable banking division. See its Sustainability Report: http://www.abnamro.com/com/about/reports.jsp.
-
See http://www.universia.es/.
-
For BBVA corporate social responsibility programs, see http://www.bbva.com/TLBB/tlbb/jsp/ing/resreco/index.jsp.
-
See http://www.fundacioncarolina.es/fundacioncarolina/.
|
|
Related documents
- 738Kb ~ 4 min (51 pages)
