The role of international financial institutions in Africa’s development: how the failures of the World Bank and the International Monetary Fund led to the creation of the African Development Bank.

Abstract

International Financial Institutions (IFIs), are all financial institutions that operate internationally they provide loans to the government for extensive projects, streamlining, and balance of payments to achieve growth and development. IFIs include institutions such as The World Bank, The International Monetary Fund (IMF), and the African Development Bank (AFDB). The study looked at the role of International Financial Institutions' role in Africa’s development, the focus is the World Bank, IMF, and The African Development Bank. The main aim of this study was to look at the correlation between IFIs and development in Africa and the reason behind the establishment of the African Development Bank. The study adopted two theories namely Dependency theory and Neoliberalism to capture the variables of the study. the dependency theory highlighted how the economic history of Africa led to the dependency on developed countries. Based on the dependency model assumption that political and economic power rests in the developed country, dependency theory argues that Africa’s dependence on IFIs and developed countries is detrimental to the continent’s development. Whilst the Neoliberal theory highlights the link between economic and political freedom. This was a qualitative study as it is mainly exploratory. A case study approach was used to help examine the data and get a better understanding of the ‘why’ and ‘how’ questions. Secondary data was sourced from books, journal articles, official reports, and websites. Secondary data provided a clear indication of the African development banks' role in the African continent. The study contributed to the existing literature by providing insight into the major challenges to Africa’s economic development, the role of the IMF and the World Bank in Africa’s economic development and how has the African development bank contributed to economic development in Africa. Although the World Bank and the IMF have good intentions in trying to develop Africa however their actions led to Africa’s underdevelopment, poor human growth, and rise in poverty. The SAPs and conditionalities imposed by the World Bank and IMF diverted African economies into free fall. The study showed how the African Development Bank made improvements in Africa such as allowing the continent to be the main players in their development. The study has also shown the challenges faced by the bank because of Africa’s context of low growth and small fragmented economies. It concluded by tracking Africa’s current development and recommending that the bank promotes economic development, provide capacity development for structuring deals, promote regional stability, private sector jobs need to meet the increasing youth population and focus on one sector at a time.