Read Online

Download PDF (EN)

Abstract

Africa faces a significant green infrastructure financing gap, yet institutional investment remains scarce due to perceived risks. In spite of the widespread policy advocacy for blended finance, empirical evidence on how Development Finance Institutions (DFIs) catalyze institutional capital remains limited. This study analyzes a balanced panel of 15 African countries (2005–2023), applying Fixed Effects models with robust standard errors to examine DFIs’ de-risking mechanisms, including guarantees, co-financing, subordinated debt, and local currency financing. The Results shows that DFI interventions positively correlate with the institutional capital flows, particularly in countries with stable macroeconomic policy and deeper financial markets such as South Africa, Kenya, and Egypt. Conversely, macroeconomic volatility and governance weaknesses, as in Zambia and Cameroon, constrain these effects. Findings advance literature on financial frictions and blended finance by offering Africa-specific quantitative evidence of DFIs’ catalytic role. Policy recommendations emphasize tailored de-risking strategies, macro-financial reforms, and enhanced transparency in impact reporting to maximize DFIs’ effectiveness in advancing Africa’s green transition.