Development Banking in East Africa: The Case of the East African Development Bank

Abstract

The East Africa Development Bank (EADB) was established by the East African countries in pursuit of their common development aspirations and motivated by the need to address the long-term financing shortfall. The need for a common development financing agency is premised on the region’s economic integration journey spanning over a century. The rising funding needs in line with the integration agenda has put the EADB’s ability to deliver on its mandate in the spotlight. The EADB’s lack of scale is an obvious constraint to its ability to meaningfully contribute to the funding needs of East African countries. The EADB’s limited scale stems from the inability of its member states to inject more capital as they seek to address competing needs for their resources. Simultaneously, the EADB member states started the pursuit of a common development agenda that runs counter to the fact that the economies have competing development interests as revealed in their respective keenness to strengthen their national development banks. Under the circumstances, it is imperative for the EADB to be on the forefront of creativity in response to the dynamic environment under which it operates. With constrained scale, the EADB’s comparative advantage is evidently not in the provision of long-term finance. Leading commercial banks in the East Africa region are attracting long-term finance from international financial institutions (IFIs). In the process, the boundaries distinguishing development banks from commercial banks are increasingly getting blurred.