Sub-Regional Development Banks in Sub-Saharan Africa: Exploring New Forms of Capitalization and Leveraging

Sub-Regional Development Banks (SRDBs) are hybrid institutions (neither purely national nor multilateral), underexplored in the developing banking theoretical literature. This article adopts an institutional-historical approach to examine their role in Sub-Saharan Africa. It argues that SRDBs can potentially aggregate scale and overcome structural constraints for investment finance in Africa. SRDBs can address institutional gaps by providing anticipatory credit for development and serve as vehicles for developing and connecting domestic and international capital. Empirically, the article combines desk research – mapping ownership structures, funding sources, and strategic priorities – with semi-structured interviews of senior bank officials to identify barriers to ownership expansion and funding diversification. Key findings reveal that while SRDBs are pursuing broader funding bases and higher-rated shareholders, they face constraints from institutional charters, administrative burdens, and managerial costs. Importantly, the article also discusses the costs of ceding current levels of banks’ ownership to new, more powerful shareholders, which risks curtailing sovereignty and ability to determine banks’ strategic orientation in the future. The article concludes that SRDBs should be an integral part of the ecosystem of development banks, operating in conjunction with Multilateral Development banks and national counterparts. If their functional role is maximized, SRDBs can play a unique role in tapping long-term international capital at reasonable cost, articulating national and international capital and leveraging the latter, providing additional capital for development and socio-economic transformation.