Asian-African Line
119
Practice and Innovation 1. Revolutionary Innovation
Highlight The Dakar Municipal Finance
Although there is a global tradition
Program is a remarkable innovation for
of bond issuance to fund capital-intensive
sub-Saharan Africa; It signifies one of
projects, this initiative represents the first
the first instances that a city has seized
usage of bonds for a city in sub-Saharan
control of its financial destiny and directly
Africa (outside of South Africa) that
approached private investors, through
is executed without the full guarantee
the capital markets, to source funds for
of the central government. Amongst
investment projects. The program itself
its many risks, the DMFP faced initial
was fraught with a number of risks as
risks (including the selection of an
identified above, and many skeptics in
appropriate project balancing investor
the international development community
and developmental expectations and
had doubts as to its likelihood of success.
the attraction of a sufficient number
These skeptical views are predominantly
of investors through demonstrating
linked to the pioneering nature of the
creditworthiness) and ongoing operational
program and the fact that it had not been
risks (including the fulfillment of its debt
attempted by any other city without
service obligations to avoid default).
the full faith and credit of the central government as an explicit guarantee of
2. Characteristics
payment to investors.
The DMFP involved innovations
Because of the success of the DMFP,
on several fronts, such as in financing
other cities across the continent will face
(testing a new fund-raising tool), social
lower barriers to entry (including lower
aspects (constructing a new marketplace
transaction costs, less skepticism from
for street vendors in a strategic location
investors and central governments, etc.)
in accordance with the city’s long-term
and will be able to pursue bond finance
development strategy), planning (it is part
as a means for funding capital-intensive
of a long-term strategic plan named 2025
projects. This program has created untold
Vision) and governmental and administrative
opportunities for other cities, and has
aspects (building capacity in city staff to
changed the face of development finance
enhance creditworthiness through good
in the global South.
governance, financial management and public participatory processes).