The Association of African Development Finance Institutions (AADFI) has released the 14th Peer Review and Rating of African DFIs report based on the AADFI Prudential Standards, Guidelines, and Rating System (PSGRS). The exercise covers the assessment of DFIs in the following key aspects: governance, operation, financial management, and development impact.
Twenty-nine (29) DFIs submitted to the 14th PSGRS annual self-assessment exercise, which follows a systematic process that includes the participating institutions’ self-assessment with the PSGRS tool before submitting their results to their external auditors for validation. After that, the results are forwarded to the AADFI Secretariat for further evaluation by an independent consultant to arrive at the PSGRS Compliance Results (Compliance Index).
Institutions that scored 80% and above on the Compliance index are further evaluated for the AADFI Rating based on their Development Impact performance. The rating results are classified into three categories (A, B, and C) as follows:
Category A includes institutions whose medium-term performance prospects are considered very reassuring; Category B covers institutions whose medium-term performance prospects are considered reassuring; and Category C comprises institutions whose medium-term performance prospects are considered fair and require strengthening in some areas. The compliance and rating results are validated by an independent consultant and approved by the AADFI Peer Review Committee.
The report of the 14th peer review shows that the 29 DFIs that submitted their self-assessments comprised 21 ordinary members, 7 regional members, and 1 non-member. The overall compliance performances by areas and sectors, as assessed by the Prudential Standards, Guidelines, and Rating System (PSGRS), reveal significant improvements in 2024.
In the area of governance, compliance has steadily increased from 89% in 2022 and 2023 to 93% in 2024, indicating enhanced adherence to governance standards. Operational management improved from 85% in the previous two years to 89% in 2024, reflecting better management practices and operational efficiency. Financial management compliance followed a similar trend, with a notable increase from 82% in 2023 to 87% in 2024, suggesting improved financial oversight and control. When considering all three areas combined, the overall compliance rose from 86% in 2022 and 2023 to 90% in 2024, indicating a holistic enhancement in adherence to the PSGRS standards.
On the other hand, eight (8) sectors scored in the very high compliance zone (90% and above), including capital adequacy (97%), accounting and auditing (96%), management independence and incentives (95%), and other governance practices (95%). Operating in accord with commercial principles, commercial principles, management information systems & procedures, supervision and collection policies, and funds mobilization all reached 91%. In the high compliance zone (80%-89%), liquidity and lending policies improved to 89%, loan appraisal to 88%, asset quality to 87%, and risk management to 86%. Funding remained strong at 86%, board independence at 85%, asset diversity and safety at 85%, and profitability and efficiency at 83%. The measurement of development impact was in the high compliance zone for the past two years, but in 2024, it fell to the strong compliance zone (70%-79%), reaching the upper limit of this zone at 79%.
Of the 29 institutions assessed for the Compliance Rating, 26 DFIs were eligible. However, only 24 DFIs were rated because they responded to specific data requested for the rating. The rated institutions were categorized as follows: 13 DFIs (54%) in Category A, 10 DFIs (42%) in Category B, and 1 DFIs (4%) in Category C.
The AADFI PSGRS is an assessment tool for African DFIs, focusing on governance, operation, financial management, and development impact. It aims to help the participating institutions identify their weaknesses and strengths. The exercise’s outcome also provides solutions to remedy the weaknesses and consolidate the strengths. The full report on the 14th Peer Review of African DFIs following the AADFI Assessment Mechanisms can be accessed at https://adfi-ci.org/14-peer-review/.
The full report on the 14th Peer Review of African DFIs following the AADFI Assessment Mechanisms can be accessed below.