Role of African Development Bank In Promoting/Financing International Business in Countries
Introduction to International Business
International business can be defined as an economical activity that is being done across the borders in the whole wide world for achieving the goals of the individual or business. As the name shows the international business deals with many different countries and cultures. The companies that do have interests in performing business operations in different countries are said to be involved in the international business. International business binds together different cultures of the world. Different types of goods and services are exchanged through the international business between individuals and businesses and countries also get in to touch with each other. It would be appropriate to say that the economy has became global and the trend of international business is also expanding time by time. Almost all of the biggest and major companies of the world are engaged in doing business internationally. International business is a way to expand the business and increase the output of the company. The companies exchange their goods and services to the other countries and gain profit and position. International business is now becoming a trend and also a way to enter in to the competition. International business is not a narrow topic rather it is very much diverse field to study. International business encompasses almost all the fields like industry, textile, automobile, agriculture, arboriculture, medical, computers, Information Technology, food and beverages, bio medical and almost every other field. This paper discusses the role of African development bank in promoting and financing the international business in African countries and also in other countries of the world. The paper is going to observe that what financial help or role is played by the African Development Bank for the progression of international business. (Cindy, n.d)
Five Important Factors for Developing the Businesses into International Business
Every business wants to flourish and it would not be wrong to say that the aims of businesses are to expand and develop. Obviously every business would like to have clients all over the world but for this their business strategy should be proper and string enough so that they can attract clients from all over the world. In order to expand the business outside the country and to collide with different cultures it is necessary that following five factors should be considered:
When we talk about culture, there are different cultures all over the world which vary from each another. When companies aim to expand their business the most important phenomena they should be aiming at is the culture. They have to target each culture in its own way by establishing websites for each specific culture. This is due to the variation of cultures of the society which can have a major effect in expanding business activities. Each country should have its separate website which should be set up in such a way that their cultures should be visible. In this way the online companies can by targeting cultures aim for higher goals and achievements. This will help the companies and will act as a base to expand their business activities in a country and gradually all over the world. Hence a business can by targeting a culture will gradually increase its business activities and will become an international business, helping them to expand all over the world.
When the companies have set up their targeted websites, they will start receiving responses from the customers which will vary from country to country and even person to person as well. In that case the company should be ready to make any change whatsoever that will enable them to cover whole of the society in a country. The approach of the company then plays a vital role which can attract different cultural individuals and expand from person to person. In this process the business by being flexible will act as a critical phenomenon which will not only strengthen their policies but also give them more experience in a specified field. Communication plays an important role in any business so a business should always be ready to better their communication skills which will have a positive effect for the business to expand into an international one.
After targeting specific cultures of countries world wide and establishing better communication skills, that is customer relation, enabling a business to learn all the pros and cons of a country. The businesses main task is to cover the foreign market which will bring awareness to not only the people but also the business personnel’s. By getting awareness of the foreign market a business can evaluate the opportunities from country to country and can more specifically work to achieve their tasks. Thus a business by being aware of all the factors concerning a country will act in a more systematic way to achieve their tasks as well as to satisfy the customer needs. Hence enabling them to grab the entire foreign market and approaching it in a detailed way, which will enable them to expand their business to different countries.
When a company is done with targeting people and their culture, making their business flexible enough, becoming more aware of the foreign market a business will have to work on the opportunities they have become aware of and to work on such opportunities they have communicate to the people of a country and understand the differences from one culture to the other. Then you have to approach specific cultures the way they understand it which can different from what the companies would understand. So they need to communicate to the people living in the country to acquire better knowledge of understanding of the people. After interacting with the local people they can more effectively control their operations and work on the opportunities which are available for them in a society, having different cultures. Even sometimes the businesses have to communicate with other business partners in order to effectively work on their opportunities, enabling them to develop and expand their business in foreign market and will become an international business, covering countries of different culture all over the world by understanding and making adjustments, which will help them to adapt to the change.
When businesses expand internationally they will have to make themselves flexible and react to all the changes that a country is going through. They for the expansion of their business and to grab the opportunities that different countries have provided them will have to react in such a way that they cover culture of a country. All the countries are different from one another and their markets differ as well. For a business to cover all the markets of a country have to be responsive enough to make changes in their products and services in such a way that the people of a country can adopt without any difficulty. The expansion of a business depends in all these reactive changes which will enable business to grab opportunities of a country and become an international business identity.
All the above five factors are beneficial for a business to expand their activities enabling them to work all over the country in a foreign market and providing them with product and services which will help them in their daily life needs. (Cindy, 2008)
Introduction to African Development Bank
African Development Bank a leading finance institution which aims to help the developing countries of the world. Their prime vision is to free Africans from poverty and to help them in their daily life needs by improving their life standard. It was established underneath the patronage of Economic Commission of Africa in the year 1964 and then started its operations in the year 1966 providing finance to the developing countries of the world. The prime sources of its funds are being provided by its regional members and even from the non-regional members which helps them carry out their operations. It had it’s headquarter in Abidjan, Cote d’Ivoire which was later shifted to due to the instable political circumstances to Tunis, Tunisia in the year 2003. The main members of the African Development Bank are government, private sector, non government organizations, development agencies, and foundations. All these act collectively to support the bank in its operations through out the world. The regional members of African development bank subscribe two third of the financial support so that the bank’s character can be retained by them. The bank has frame worked a new long term strategy which was adopted by the bank in 2008. The new strategy agendas which the bank is following are inclusive growth, environmentally sustainable growth and regional integration. AFDB provides developing countries with loans, technical assistance, advices and grants. The bank provides such features to the government institutions or the public sector, but they also provide support to the private sector organizations by guarantees, equity and loans. Majorly, African Development Bank is engaged with activities such as:
Provisioning the guarantees.
Providing finance to the public as well as private sectors.
Facilitating the private sector with lending and equity investment for projects that are being done in the member countries.
This financial body is putting hard efforts in improving the economic and social conditions of African countries so that the businesses can grow and international business can get promoted. The aim of African Development Bank is to unveil the potential opportunities of establishing a bright business in the African countries. The African Development Bank has also revised its policies under the liberal policies of the United States which has also helped in improving the conditions. The support of the United States has helped the African countries in the areas of technology. Hence it can be said that this financial body is playing a great role in promoting the international business. (African Development Bank, 2009)
Analysis of Africa Development Bank Policies
With reference to its Accounting Records and Control policies it has been mentioned that all type of transaction should be mentioned on papers as well as they borrowers has to make this thing sure that he would maintain a proper and track – to – track accounting system. This was done because in the recent era most of the African countries and organization who have taken the loans on the name of developing themselves has failed to manage that loan due to the discrepancy and transactional frauds in their accounting system. That’s why the bank has adopted the policy that it will monitor by itself the status of their accounting record if the bank is offering some funds to any country or the organization. After the current financial crisis in which not only developmental countries but developed country also find themselves striving and fighting from their economy. The African nations who suppose to have the weakest economies of the world cannot afforded to lose their precious fund on the account of frauds and forgeries, so it is now the strategy of the African Development Bank that it supervise the process of accounting and financial systems of the organization or the country. Even now it has been also ordered by the banks that if a country or the organization does not have any proper system of accounting and budgeting than African Development Bank also offer its consultancy in the management of their proper system of accounts and infrastructure. In terms of financial reporting the bank has now adopted the strict policy that everything should be reflected in terms of fair financial reporting. There are several reasons behind that strictness. The main important reason behind that strictness is the ratio of bank corruption in the African countries and organizations because when they got funds them usually spend it on their non developmental expenditures or forged them. Now the bank is strictly observing the projects as well as the organizations and marking their level of successfulness in terms of proper financial reporting. Another main reason is because African development bank does not possess that sort of mega financial resources like Asian Development bank so their policies and procedure are relatively quite hard and time taking. SO the progress of the African developmental Bank is much slower than Asian development Bank or any other international business development bank. If we critically analyze the performance of African development bank than we may find that the banks financial profile is not having that mass amount as to be returned to the bank in term of loan debts but after the implementation of the current banking policies regarding efficient Account monitoring and tracking system and in the process of powerful financial reporting now the bank has taken full measure to the protection of the economy of the borrowers as well as the Bank. The major resource of earning is the service fee, commission and the markup of the loan. In that policy phase now the bank has adopted the strict policy that now bank is not offering any type of relaxation to the borrowers in terms of long term financing. Now the African development Bank has adopted the strategies of modern European banks that now the banks is just offering short term loans in term of developmental financing. Due to the fact that the recovery ration of short terms loans is much more higher than long term that’s why the bank has earning more in terms of debts recovery. Giving loans to private organizations is another policy turning factor in African development bank. It happens due to the fact that these organizations are headed by private owners who have nothing in their mind than to gain and extend their profit. At this stage they will not allow anyone to create hurdles in their way that’s why they give less resistance in paying off their dues. So the banking policy regarding short term financing in medium or some countries based organization has becoming much more feasible for the bank to maintain. Infect after the restructuring the bank has exercising more power and financial stability in term of less governmental restrictions. If we take a macro look on the current financial policies of African Development bank than this thing is quite obvious that the bank is now adopting developmental strategies in term of transparent procedure for loan and their re imbursement from the countries as well as from the organization. The new credit policy clearly defines the goal and objective of the bank financial goals to achieve economic feasibility. Now the bank has really adopted the policy that the bank is now only investing in those projects which are feasible for the countries as well as for the banks in terms of economic feasibility and prosperity. (Guidelines for financial reporting and auditing of projects, n.d)
Strategic Framework of African Development Bank
Recently there are different strategic framework which is being adopted by the bank which includes different framework strategies; Economic growth, and inclusive social development. Poverty either depending on the social conditions, living conditions or income demands the poor should work to and fro and participate actively in the economic growth of a country. All the framework strategies are being discussed as below:
Pro- Poor Sustainable Economic Growth
AFDB for the reduction in poverty made a strategy for sustaining economic growth. In order to reduce the poverty in a country it requires its poor people to be participating, contributing, and benefiting from the economic growth. This enables the poor to work with the environment, which helps in reduction of the poverty level. For the pro poor sustainable growth of the economy the poor will work in accordance with the environment has enabling employment and generating income for the poor. By the poor working in the environment it will enable them to enhance and potential performance in them and their productivity will be enhanced by actively participating and providing facilities and services to social and economic infrastructure. This will also enable the private sector to strongly participate in the environmental success of a country, which will also help the business sector. From active participation of the poor, it will help to strengthen the regional cooperation. Hence by pro poor sustainable growth of the economy the businesses will develop and expand internationally. The relationship between the countries globally is increased by active participation of poor, which seeks to strengthen the cross border development. Private sector plays a major role in promoting international business, when poor will work in a country’s private sector it will enable the private sector to expand giving new ideas and opportunities to the companies to expand not only domestically but internationally.
Inclusive Social Development
The second most important framework which will help the business in expansion is social development, which also acts to reduce the poverty level and achieve MDG’s of AFDB.
MDG is a Medium Term Strategy which has main areas to focus on problems and features concerning pro-poor growth and inclusive development, which includes the infrastructure of the economy and development of the private sector as well as cooperation from the regional side. This strategy has a prime task to increase the investments in the infrastructure so that there is a decrease in poverty and also the private sector should be developed which will help in growth. Inclusive social development plays a vital role in improving the standard of life of the people. Also helps individuals, and communities in managing their risks by assisting them in their daily life requirements. Social development helps to protect people which are poor because it impacts the economy of the country. So there is a need to give equal importance to all specially women, to improve their status in the society. Hence social development contributes to bring people together from different culture from different countries together and helps in improving the relations of countries, which will help in future business amongst the countries. (AfDBmedium term strategy, n.d)
Corporate Social Responsibility
The major aim of the bank is to fight against poverty which is possible by financing different development projects. AFDB supports the government activities to a maximum but apart from this they also support private sectors which help in reduction of poverty through employment. AFDB gives them financial assistance through loans and help them accomplish their mission in eradicating poverty from the country. The bank has recently launched a new paid internship program in which all the students from the poor homes can undergo training in their training camps and seek information regarding their related studies. This program will help them master their related studies and help their families, which will result in the reduction of poverty. Also not only helping in reducing the poverty rate of the country AFDB is concerned about the environment of a country. They want to a responsible institution for the environment thus they have signed a deal with a Tunisian company to recycle all the paper that has been used by the institution. Apart from this Bank also provides necessary assistance to the individuals suffering or affected by the projects which are being financed by the bank, due to the global recession. In short the bank is trying utmost to reduce the poverty rate of a country which will help private sector as well as the businesses to expand enabling them to do business with foreign countries and the their business will expand globally. (Responsibility – African Development bank, 2009)
External Relations & Communication
To prepare, plan, and implement relations with the public and corporate level are the main principal activities of the bank’s External Relations and Communication Unit. The unit is managed and controlled by the senior management. There are prime aim is to improve the public dealing of the bank and to promote, establish and maintain the reputation of the bank not only domestically but also internationally. This will enable the bank to do public dealings not just domestically but also internationally helping them establish better communication from different countries of the world. Also by good relationship with the other countries of the world there is a good opportunity for the bank to expand their business dealings making it known globally. Apart from this the bank by making good reputation in different parts of the world will have maintain and improve its credibility by getting funds from different parts of the world, which will not only enable them to be publicly known but also the financial support to institutions will increase helping them decrease the poverty rate and also in the other requirements of a country to maintain a smooth economy. Also the units task include to provide services that the bank is providing internally to the entire world which will help institutions to satisfy their needs and requirements. The feedback from the institutions to the unit will enable the bank to improve dealings with the institutions. Due to the services offered to the institution, the institution can benefit from this by producing products which help the general public in their daily needs.
Need of Strong and Active Asian Development Bank
There was always a need in Africa to have a strong and active bank. African Development Bank has proved to be to one. The banks play an important role in improving the financial conditions of the country. If the banks are strong then they can not only support their own country but also support other countries as well. African Development Bank is also such a strong bank that promotes and supports the international business activities. The strong position has placed great responsibilities over the African Development Bank and the expectations have also raised to the large extent. The people want honest and transparent use of money and also want that the developed financial institutes should make efforts in developing skills. Obviously, in order to meet the needs of the people all around the world the African Development Bank also needs to have some support by other developed countries and their financially strong institutes like the United States. The African Development Bank has connected Africa to all the other countries of the world. The African Development Bank has always made efforts in developing the Africa and other countries as well. The bank has always tried to engage Africa in the international business as it realizes the fact that international business can enhance the growth of the country. Former President of the United States, President Bush has set forth the vision of “Partnership of equals”. This vision has allowed the African Development Bank to improve its economic policies. By the help of this vision America has utilized its own liberal policies of economies for providing the right path to the African Development Bank. The policies helped a lot in improving the economic conditions of Africa. The African Development Bank has developed the tools that can enhance the growth of the country and can raise the standard of international business in Africa. (Corey, 2008)
African Development Bank Group
The group of African Development Bank Group has established in the year 1964 by Africa. This group consists of total 25 countries of Africa. The aim and objective of this group is to enhance the social and economic positions of the country. The African Development Bank is not only limited to the Africa itself instead it is a bank that is connected to many countries of the world. By connecting with many countries of the world, the bank has no doubt improved the international business. The African Development Bank is combined with African Development Fund and Nigeria Trust Fund in order to form the African Development Bank Group. This group is striving hard for development and has established its head quarters in Nigeria, Abidjan, Tunis and Tunisia and so on. The bank is making efforts in developing the countries by providing the countries with financial aids. More than 2885 projects of developments are being held by this group which has utilized more than 47.5billions of dollars. The Asian Development Bank is supporting and promoting the international business and it has members from all over the world. There are 53 countries of Africa that are termed as the regional members of the bank; other 24 members include American, Asian and European countries. This involvement of the countries of the world show that how much efforts are being made by the African Development Bank for improving the level of international business. The second largest shareholder of the African Development Bank is America. The continent of Africa has faced a lot of hurdles and challenges and the aim of African Development Bank is to work along with the United States in order to improve the living conditions of the Africans. When the economic conditions of the country will be improved only then the country can progress towards the international business. The African Development Bank is considered to be the important financial institute that works hard to serve the countries that are not developed. The actions of the bank have a direct impact over the country’s economy as it has become a very developed financial institute. The African Development Bank serves as a link between the African countries and other countries of the world which definitely helps to improve international business. (Corey, 2008)
The African Development Bank has Opened the Doors to Business in Africa
Two most senior executives of African Development Bank declared that the African Development Bank is in its form and has started working again. The African Development Bank has started performing different activities in public as well as in private sector with its many different partners. The bank is moving ahead for fulfilling the social as well as economical requirements of Africa. The African Development Bank has started working again with great zest and has undertaken many projects related to development. This financial institute has undergone many changes and has renewed itself. In the year 1996, the African Development Bank has renewed and restructured itself and has emerged as a strong financial institute that can promote international business. The new framework of African Development Bank is positive and is having a lot of resources that can be provided as loan. The African Development Bank has made efforts along with the World Bank and has provided opportunities to the other countries to invest in Africa like the United States. Many of the companies of the United States whether commercial or government based; are interested in investing in Africa. The continent of Africa has got many potentials of trading and making investments. The continent is continuously working for changing its social, political and economical situations. The improvements have been seen in the economy of Africa specially since 1994. According to the careful analysis the average annual GDP of the African countries is calculated to be 3 percent. There are many countries in Africa whose annual GDP tends to be 7 or 8 percent which is quite healthy sign. This average GDP rate shows that the economy of African countries is improving and also shows that the value of possessions of African countries is raising internationally. The countries all over the world are highly interested in making investment in the African countries because of the good weather conditions, improving economic situations and also the strong and effective policies of the economy. The country has shown prominent changes in the area of investment and liberalization. The improvements are mainly because of the change in the policies and structure of the African Development Bank. The international business can be highly flourished in the African countries at this time. The international business can be done in the fields of agriculture, mining, industry, energy and banking sector. Still, there are some hurdles in the bright appearance of the potential opportunities that are existing in African countries. These hindrances include the lack of strong infrastructure, power facility and telecommunication facility. The African Development Bank has agreed with the United States assistance for overcoming these obstacles; as the United States is having excellence in the technology. It would not be wrong to say that African Development Bank is the most active body that is promoting the economic activities, international business and market liberalization in the African countries. This bank can also be termed as the largest investor in the African countries. Many resources have been produced by the African Development Bank for the African countries and also for the countries outside Africa. These resources are aimed to support the member countries by providing the facilities like loans, technology and technical assistance for the economic and social growth. The African Development Bank is also complemented with African Development Fund. (Herrling, 1997)
African Development Fund is also a financial institute that is subjected to provide finances over concessions. It provides financial help to the projects that are at the highest priority level. This body basically works with the under developed countries. The combination of these two financial institutes has improved the business conditions in Africa to the large extent and all kinds of countries whether developed or underdeveloped are engaged in the business. In Africa, the African Development Bank can be ranked as the second highest financial body which provides aid and help to the projects that are being carried on. In this way, the African Development Bank convinces the countries of the world to invest in Africa and give rise to international business. (Herrling, 1997)
By deep analysis of the paper we come to this conclusion that the African development bank has been trying its utmost to expand the businesses all over the world. There are different cultures living in different parts of the world which have their own taste, religion, likes and dislikes and many more. A business provides these people with goods and services to accomplish their tasks as well as provide the common public with the necessary goods for life. There are different types of businesses in the entire world which require time to time assistance from banks and institutions. African development bank came into existence to support the poor and to the organizations to reduce the poverty rate. Also the bank provided private sector with assistance in their public dealings so that they can do business internationally in different parts of the world. International business binds together different cultures of the world. There are different types of goods and services which are exchanged through the international business between individuals and businesses and countries also get in to touch with each other. African bank enabled businesses to expand by providing them with timely assistance. It would be appropriate to say that the economy has became global and the trend of international business is also expanding time by time due to the support financial institutions have been providing to the organizations all over the world. International business includes almost all the fields like industry, textile, automobile, agriculture, arboriculture, medical, computers, Information Technology, food and beverages, bio medical and almost every other field. In this paper we discussed how African development bank supports the private sector in such a way to reduce the poverty rate of a country and in promoting and financing the international business in African countries and also in other countries of the world. Also we discussed that African development bank has a separate unit for all the external affairs which include domestic as well as international organizations. The bank has been making time to time change in its strategies which mainly focus on problems and features concerning pro-poor growth, social development and inclusive development, and also the infrastructure of the economy and development of the private sector as well as cooperation from the regional side. The regional countries help AFDB by funding them so that they can carry with their operations to promote organizations to all parts of the world. There prime strategy or task is to increase the investments in the infrastructure so that there is a decrease in poverty and also the private sector should be developed in such a manner that they provide growth to their environment. In a nutshell, it can be concluded that the African Development Bank along with the African Development Fund is providing a great support to the international business. The African Development Bank has changed the conditions of economy in the African countries and prominent shift has been noticed in the annual GDP rate of the African countries. The basic reason for this improvement can be the change in the policies of economy. It is considered that the African Development Bank will also overcome the remaining hindrances soon and the businesses will expand more.
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