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The African Development Bank Migration and Development Fund (MDF)

 Mobilising migrant resources for development in Africa

The reduction of transfer costs of migrant remittances and the mobilisation of these resources to complement other sources of finance for the development of the African continent have for several years been a subject of increasing interest for the African Development Bank, which has supported several initiatives in this area including the recent World Bank study “Leveraging Migration for Africa”.

The creation of the Migration and Development Fund (MDF) responds to this interest and the impetus to further explore ways and means of mobilising migrant resources and using them in the best interests of the recipients and migrants themselves, as well as in the service of the development of the receiver countries. The MDF is a trust fund supported by France –with an initial endowment of 6 million euros- and IFAD.

Results from the 1st call for proposals

A first call for proposals was launched in December 2010 to select projects in three main areas. The “Development of new financial products” project category includes the development and testing of new financial products that promote financial access and meet the preferences, expectations and capacities of migrants and remittance recipients, as well the role of microfinance institutions in remittance transfer operations. Under the “Support to productive investment” category, projects are expected to strengthen and support the participation of diaspora-led registered businesses and diaspora associations in financial investment projects. Finally, the “Support to local development” category includes not for profit activities that support and strengthen social development projects in local communities.

The first call for proposals launched in December 2010, which covered North, West and Central Africa, attracted more than 220 applications.

A series of grants amounting to 1.4 million euros have recently been approved to co-finance six initiatives in Northern and Western Africa, including Algeria, Benin, Côte d’Ivoire, Morocco, Togo and Tunisia. Four of these projects are located in the Maghreb and support private investments and implement capacity building supported by the Diaspora. The objective is to develop local entrepreneurship and micro, small and medium enterprises in underprivileged and rural areas to foster access to employment for youth and women. The project in Côte d’Ivoire aims to develop corporate social responsibility. The purpose of the project covering both Benin and Togo is to develop new financial products and e-banking to foster access to financial services in isolated areas.

In a second phase starting in August 2011, the Fund will expand financing to the entire African continent (including Eastern and Southern Africa).

Improving knowledge and the functioning of remittance markets

Aside from the calls for proposals, the MDF also supports activities through specific procedures in two key areas: improvement of available knowledge about remittances in Africa (i.e. remittance mapping) and support to the reform of regulatory frameworks and the upgrading of operators engaged in remittance operations: By performing legal review and upgrading operators and the regulatory frameworks of operators, micro financial institutions and other money transfer intermediaries, projects in this category aim to strengthen the financial markets in Africa, ultimately in favour of migrants and the recipients.