At TICAD9, credit ratings take center stage in Africa’s financing debate

On the sidelines of the Ninth Tokyo International Conference on African Development (TICAD9), familiar conversations about aid pledges and trade deals gave way to a deeper concern: Africa’s rising cost of borrowing. In a packed thematic event co-organized by AfriCatalyst and the United Nations Development Programme (UNDP), policymakers, financiers, and experts converged to explore solutions to reducing the cost of borrowing.

The high-level dialogue, titled “Credit Rating in Africa: Building a Sustainable Investment Environment and Advancing Development Finance”, underscored how sovereign credit ratings, often dismissed as a technical exercise, has become a decisive factor in Africa’s ability to fund infrastructure, healthcare and education.

Shifting financing landscape

In the early 1990s, two-thirds of Africa’s external financing came from traditional Official Development Assistance (ODA). Today, that figure has fallen to less than a third. The decline of ODA makes the case for alternative solutions to SDG investment even stronger,” said Haoliang Xu, associate administrator at UNDP.

With concessionary flows drying up and reductions in aid, many African governments have turned to commercial debt markets to fund infrastructure development and social services. Yet even as their economies grow and resource potential expands, African countries routinely face interest rates several points higher than other continents.

According to UNDP’s 2023 study Lowering the Cost of Borrowing in Africa, distortions in credit ratings cost Africa an estimated $75 billion annually. More than 50 developing nations, it found, spend more on debt repayments than on health or education. In 2023 alone, private creditors took $33.4 billion more out of developing countries than they provided.

The panel featured high-level leaders from government, private sector, and the ratings industry, including H.E. Ismael Nabe, Guinea Minister of Planning and International Cooperation; Satoshi Nakagawa, Director of Double Feather Partners; and Soraya Diallo, Senior Vice President of Bloomfield Investment Corporation. Collectively, they described a continent caught between dwindling aid and a global ratings system that magnifies local risk perceptions. 

AfriCatalyst’s call for domestic solutions

AfriCatalyst CEO, Daouda Sembene, reiterated that Africa’s reliance on a handful of global rating agencies has left its economies vulnerable to outside misjudgments. The presence of local rating agencies, he noted, would not only diversify perspectives but also introduce greater contextual understanding into evaluations, from informal sector dynamics to governance reforms, that global agencies often overlook.

“There is a significant need for more and empowered local credit rating agencies in Africa to enhance the accuracy of credit risk assessments for African nations and companies,” said Sembene. “The high cost of borrowing in many African countries is partly driven by perceptions of elevated risk, perceptions that are directly influenced by their credit rating.”

Soraya Diallo, Senior Vice President of Bloomfield Investment Corporation, echoed the call. “African credit rating agencies can bring objectivity and proximity,” she said. “We understand the nuances of our markets, the pace of reforms, and the resilience that may not always show up in traditional data sets.”

Bloomfield Investment Corporation, a regional pioneer founded in 2007, has already reshaped West Africa’s financial architecture. It successfully pushed the West African Economic and Monetary Union (WAEMU) bloc to require credit ratings for bond issuers and financial instruments, increasing transparency in capital markets. In 2017, its “Country Risk” conference in Abidjan raised Côte d’Ivoire’s rating to A2 (short-term), in contrast to Moody’s more cautious BB grade. This marked a rare instance of an African-centered perspective countering the global consensus.

The human cost of ratings

Beyond the technical discussions, the human stakes loomed large over the discussions. Every additional percentage point on a sovereign bond translates into millions lost for social spending. For nations already juggling food security crises, climate shocks, and healthcare demands, inflated borrowing costs can be devastating.

“Credit ratings are not abstract,” Daouda Sembene stressed. “They determine whether a child in rural Africa has a school to attend, whether a clinic has medicine, whether a farmer can access irrigation. Getting this right is central to the development agenda. If Africa can secure fairer ratings and lower borrowing costs, the potential to unlock transformative investment is enormous,” he said. 

To address the imbalance, AfriCatalyst and UNDP have launched the Africa Credit Ratings Initiative (AfCRA), aimed at producing data-driven and transparent assessments that reflect realities on the ground. The goal is to close information gaps, reduce borrowing costs, and unlock capital for development. 

Toward solutions

While the obstacles are formidable, the conference highlighted several pathways forward including strengthening local rating agencies, improving data collection, encouraging regional collaboration, and pushing for fiscal policy reforms that encourage local and foreign investors.

TICAD, traditionally a forum for Japan-Africa cooperation, may have signaled a turning point. By focusing on credit ratings rather than just aid volumes, the conference spotlighted how financing architecture shapes Africa’s future. 

Although the Africa Credit Ratings Initiative is still in its early stages, it has already ignited a much-needed debate about fairness, transparency, and agency in global finance. For UNDP, AfriCatalyst, and their partners, the goal is clear: ensure credit ratings reflect reality not bias, and in doing so, give African nations a fairer shot at investing in their people and future.