Abidjan, November 21, 2023. The Association of African Development Finance Institutions (AADFI) has released the 13th 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.
34 DFIs submitted to the 13th PSGRS annual self-assessment exercise. The self-assessment 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 13th peer review shows that 34 DFIs submitted their self-assessments, comprising 27 national DFIs and 7 regional DFIs. The overall compliance performance by areas and sectors shows an average performance for the Areas (Governance, Operational management, and Financial Management) of 86%, the same as in 2022.
For the Sectors, the results showed that five sub-categories recorded very high compliance (90% and above). Most were the Governance sectors (management independence and Incentives, Accounting and Auditing, and other Governance practices, Fund Mobilization – Financial –, and Supervision and Collection policies – Operational Management –, which have continued to improve through 2021 and 2022.
Furthermore, 11 Sectors scored in the high compliance zone (80%-89%). This was a slight increase from the 2022 performance of 10 sectors. The most remarkable performance was in the Governance area – the Sufficient Independence of the Board from the Government – which registered 82% compared to 77% in 2022, while the score for Operating in Accord with Commercial Principles (also a Governance sector) dropped to 87% from 91% in 2022. Capital Adequacy, which had dropped in 2022 to 84%, improved to 89% in 2023. In addition, two (2) sectors (Risk Management Practices and Profitability and Efficiency) scored in the strong compliance zone (70%-79%), scoring respectively 79% as in 2022 and 72% as against 74% in 2022.
Of the 34 institutions assessed for Compliance Rating, 25 DFIs were eligible for rating. However, only 22 DFIs were rated because they responded to specific data requested for the rating. The rated institutions were categorized as follows: 12 DFIs (55%) in Category A, 8 DFIs (36%) in Category B, and 2 DFIs (9%) 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 and provide solutions to remedy the weaknesses and consolidate the strengths. The full report on the 13th Peer Review of African DFIs following the AADFI Assessment Mechanisms can be accessed below.