Vice President lauds DFIs

Vice President lauds DFIs

The Vice President of Botswana, Hon. Mokgweetsi Masisi yesterday (Thursday 3^rd November) commended development finance institutions (DFIs) for their role in accelerating industrialisation, economic growth and human development. When delivering a keynote address at the opening ceremony of the Chief Executive Officers (CEO) Forum of the World Federation of Development Finance Institutions (WFDFI); Hon. Masisi said DFIs are fundamentally set up to address prevailing market failures and reach underserved segments of the economy.

Over the years, he said, DFIs have gone beyond fulfilling their traditional mandate as they are now expected to foster private sector development, employment creation, income distribution, import substitution and the development of poor groups or regions.

“Therefore the role of DFIs in developing countries has gone beyond addressing market failures to addressing developmental failures,” he said.                                   

As an example, Hon. Masisi cited the role played by DFIs to provide lending aimed at helping economies recover in the aftermath of the 2008/09 global financial crisis. He added that it is the norm for subdued growth in global and national economies to exert pressure on DFIs.

With regards to Botswana, Hon. Masisi explained that government set up a number of DFIs to harness the development of sustainable citizen owned enterprises and increase citizen participation in the national economy.

“We did this because we were cognizant of the fact that capital is often not readily available for budding entrepreneurs, especially in developing economies,” he said.

He further said government uses these DFIs to live up to its obligations to the people of Botswana by protecting local businesses and ensuring that the socio-economic interests of citizens are protected.

“Our citizens must not feel economically alienated in their own country,” he said.

However, Hon. Masisi admitted that DFIs are faced with challenges, some of which emanate from their constitutions and original mandates. By their very nature, he said, DFIs make long-term investments at subsidised rates in enterprises that are often shunned by private capital because they are viewed as too risky. At the same time, DFIs are expected to generate profits from their investments for the benefit of future generations.

“It goes without saying that the role of DFIs is somewhat contradictory. While pursuing profit, they must also absorb high risk at subsidised interest rates for the benefit of citizen enterprise development,” said Hon. Masisi.

In closing, Hon. Masisi pled with DFIs not to lose sight of their vital role of advancing economic and social development.

“By sharing the financial risk, providing subsidised loans, taking minority equity investments and providing training and mentoring to budding entrepreneurs, DFIs have played a major role in boosting the economy of African countries,” he said.