Africa’s development conversation is increasingly centred on a practical question: how can governments and businesses finance essential long-term investments without relying so heavily on expensive borrowing, unpredictable aid or foreign capital vulnerable to global shocks? As global financing conditions tighten and development assistance faces growing uncertainty, Africa’s domestic financial resources are becoming increasingly important. The challenge is no longer simply how to mobilise capital, but how to direct it towards productive investment that supports economic transformation.
The Africa Finance Corporation’s State of Africa’s Infrastructure Report 2026 highlights the scale of this opportunity. The report estimates that Africa’s non-bank domestic capital pools exceed $2 trillion, surpassing approximately $1.7 trillion in cumulative external flows to the continent between 2014 and 2024. Domestic pension and insurance assets have also crossed the $1 trillion threshold for the first time. These figures suggest that Africa possesses substantial financial resources that could support its infrastructure and industrial development. However, the availability of capital does not automatically translate into investment.
READ ALSO: Abidjan Metro: Advancing Africa’s Urban Mobility and Economic Growth
The Boston Consulting Group’s October 2026 analysis reinforces this point. It estimates that African pension and insurance assets are worth approximately $1 trillion and are growing at 8 per cent annually. Yet, less than 2 per cent of institutional capital is allocated to alternative investments. This presents an opportunity to expand investment in infrastructure, private equity and other productive sectors, provided that appropriate financial structures and safeguards are established.
Africa’s capital markets, however, remain underdeveloped relative to the continent’s financing needs. The OECD’s Africa Capital Markets Report 2025, published on 17 November 2025, notes that African companies accounted for only 1 per cent of global equity capital raised since 2000. The report also highlights the limited role of pension funds and insurance companies as institutional investors in many African economies. Their relatively small asset bases and substantial allocations to government securities constrain their ability to provide stable, long-term capital to the real economy.
The implications are significant. When pension funds invest predominantly in government securities, their resources may support public borrowing without necessarily expanding productive capacity. Government borrowing can contribute to development when it finances infrastructure, industry and essential services. However, when borrowed funds are directed towards recurrent expenditure rather than productive investment, the potential for long-term economic returns is weakened. A stronger relationship between public borrowing and productive investment is therefore essential.
Infrastructure investment also requires specialised knowledge that many African pension funds lack. Alternative investments, including infrastructure and private equity, often involve complex financial structures, long investment horizons and risks that require careful assessment. Some institutional investors remain reluctant to enter these markets because of limited technical expertise, uncertainty about returns and concerns about illiquidity.
Collaborative investment models can help address these challenges. Kenya’s Pension Funds Investment Consortium (KEPFIC), launched in 2020, brings pension funds together to explore infrastructure investment opportunities. Similar initiatives can help institutional investors pool resources, share expertise and improve their capacity to evaluate projects. Such arrangements could become increasingly important as African countries seek to expand investment beyond traditional government securities.
Economic dialogue can deliver measurable value only when it focuses on decisions rather than declarations. Governments, institutional investors, development finance institutions and private businesses need a practical framework for identifying and financing viable projects. This includes publishing project pipelines with clear costs, timelines and financing requirements; establishing investment rules that protect pension beneficiaries; improving transparency around public guarantees; reducing remittance costs; and tracking employment, service delivery and financial returns after investment.
A meeting alone does not create investable projects. Its value depends on whether participants have reliable information, whether projects are properly prepared and whether decisions are followed by transparent action.
Diaspora finance also presents an opportunity, although it requires careful consideration. Remittances to Africa reached approximately $92 billion in 2024, according to a United Nations policy brief, while the World Bank’s estimates for Sub-Saharan Africa stood at $55 billion. These figures reflect differences in geographical coverage and measurement. Nigeria alone received more than $20 billion in remittances in 2024, highlighting the importance of diaspora transfers to household incomes and the wider economy.
However, remittances primarily support immediate household needs, including food, housing, healthcare and education. They should not automatically be treated as investment capital. Governments seeking to attract diaspora savings into longer-term projects can consider diaspora bonds and other voluntary investment products. Nigeria and Ethiopia have issued diaspora bonds, while South Africa has explored diaspora investment products.
For such instruments to attract investors, their terms must be clear. Investors need to understand the issuing institution, currency, interest rate, maturity, repayment arrangements, fees and protections available to them. Trust remains central. Credible financial reporting, transparent use of proceeds and clear repayment mechanisms can help strengthen investor confidence. Remittances should not be described as patient capital unless households or diaspora investors voluntarily choose investment products for that purpose and accept the associated risks.
Mobilising domestic resources can also become a means of transferring public or project risks to ordinary savers if adequate safeguards are absent. A sound financing structure must answer four questions: What is being financed, including its scope, cost and development purpose? How will it generate repayment or deliver value? Who bears the risks, including construction delays, currency movements, demand shortfalls and policy changes? How will the public know whether the investment has worked?
These questions are particularly important when pension funds are involved. Pension contributors depend on their savings to support them in retirement, and investment decisions must protect their long-term interests. Development objectives should not override the fiduciary responsibilities of pension fund managers.
For small and medium-sized enterprises, access to finance may matter as much as headline infrastructure funding. Local businesses need working capital, equipment finance and predictable payment terms to participate in construction, maintenance, food supply, digital services and other value chains. Banks, insurers, investment funds and capital markets can connect savings to businesses, but this requires reliable financial information, strong governance, predictable regulation and projects capable of generating repayment.
Developing domestic capital markets, stock exchanges and corporate bond markets is therefore essential to expanding investment opportunities for institutional investors. Stronger markets can provide businesses with alternatives to bank lending, broaden the investor base and improve the allocation of capital across productive sectors.
Africa’s domestic capital represents a significant opportunity, but its value depends on how effectively it is deployed. Pension funds have obligations to contributors, remittances help households meet immediate needs, and investors require credible terms. The opportunity lies in building a durable relationship between savings and productive investment through well-prepared projects, stronger financial regulation, lower remittance costs and transparent public investment decisions.
Economic dialogue can help align these interests, but its purpose is not to persuade citizens to finance development at any cost. It is to create transparent institutions, credible projects and fair financial products that make investment both useful to society and responsible to savers. Africa’s development will depend not only on the capital it possesses, but also on the institutions, policies and partnerships that turn that capital into lasting economic value.
