Two key ideas buttressed the inception of BOAD using step-by-step approach: (1) it had been noted that benefits drawn by member countries from their membership of the monetary Union remained limited to the monetary field, without reflecting adequately on development, and (2) the fact that, without prejudice to other resources that would be needed, the operating profits of BCEAO could constitute substantial resources for funding common development activities.
A study submitted in December 1970 to the WAMU Council of Ministers, at its request, noted that the idea to allocate part of the net income generated by BCEAO to activities of common interest met two requirements oftentimes expressed by the member countries: (1) making the monetary Union more consistent going beyond the simple monetary framework in order to develop a zone of common economic interests and development, (2) making the Union’s institutions promotional instruments without getting the Central Bank out of its monetary responsibilities.
At the same period, a study conducted by Prof. Tremblay, Director, Center for Research in Economic Development, University of Montreal, at the request of the President of the Republic of Niger, concluded that the WAMU institutions were primarily focused on monetary management and maintaining external reserves, and that it was advisable to reallocate them to support a development process.
Various possible forms of intervention were suggested:
- contributing to the creation and operation of a West African capital market; the special fund to be established, a cut above the banking system, may be asked to absorb directly or indirectly offers and to possibly serve requests for Government securities;
- discharging some development banks from funding futures transactions tying up part of their resources, such as contracts with deferred payments;
- establishing a fund or a long-term credit institution of the Union which could compensate for the lack of adequate resources to finance regional projects or projects of common interest to the Union;
- contributing to the incorporation of one or several UCITS which would mobilize domestic savings for equity participations in African companies in order to facilitate inception or expansion thereof;
- creating for the West African countries an industrial development bank which would operate under BCEAO and with its active participation so as to enable it to ensure conciliation of monetary management and developmental issues.
Other possible interventions were also mentioned: interest rate subsidy, guarantee of domestic loans, and reinsurance by guarantee funds of loans granted to African small and medium-sized companies.
During the meeting of the Council of Ministers of March 1973, the Chairperson of the Ministerial Committee in charge of reforming the WAMU, introduced the draft of the new treaty of the West African Monetary Union, which envisaged alongside BCEAO the inception of common development finance institutions to be placed under the authority of the Council of Ministers of the Union. The Committee Chairperson also introduced the draft Agreement establishing a West African Development Bank and a draft memorandum and articles of association pertaining to the incorporation and operation of such institution.
The Council of Ministers decided that development actions would be carried out by an organization separate from the Central Bank, but which would be closely related to this latter. It further gave its opinion regarding the long-debated option between incepting a merchant bank devoted to the promotion of highly profitable operations likely to be financed under normal market conditions, and establishing a development bank, more especially directed towards the financing of infrastructure or long-term and low return operations.
The Council of Ministers decided to adopt, in a first step, the second formula and to incorporate a development bank likely to intervene, as needed, with a subsidiary in the field of merchant banking.
Detailed studies relating to the implementation of these decisions were conducted by the Central Bank with the support of development partners (World Bank, European Commission,…). All instruments governing the Bank were adopted by the WAMU Heads of State on 14 November 1973 in Dakar, as well as the new articles of association of the Central Bank and the new treaty incorporating the monetary union.
BOAD’s initial missions
BOAD’s objectives, scope of application and intervention priorities as provided under its articles of association and policy statement focus on a key idea, which is that of solidarity.
Its purpose is to promote the balanced development of its member countries and foster economic integration within West Africa. The articles of association provide that in choosing activities to be supported, a special attention should be given to those activities likely to (1) facilitate development of the member countries of the Union, mostly disadvantaged by natural conditions, and (2) contribute to the integration of the economies of the Union. Collecting domestic financial resources for funding development activities, promoting the regional capital market as well as channeling external resources towards the region, were also key missions assigned to the Bank.
Designed as a bank to promote regional integration and solidarity, BOAD supports (1) the construction or improvement of infrastructure needed for development, mainly in the area of communication, hydraulic equipment, electricity, … (2) the improvement, creation or transfer of ownership of production and distribution machinery in the rural and industrial sectors, (3) project preparation studies.
BOAD provides direct support or through subsidiaries, special funds established by the Bank itself or national financial institutions. Its support can take the following forms: equity investments, medium and long-term loans, guarantees and interest rate subsidy. Member countries, communities and public institutions, financial institutions, agencies, businesses and individuals can be beneficiaries of the Bank’s financing.
For increased efficiency of its interventions, adjusting its action and better adapting it, special funds have been established within the Bank: interest subsidy fund, guarantee funds, buyout guarantee funds, research fund.
BOAD’s role within the WAEMU region
The transformation of the monetary union into an economic and monetary union completed in 1994, shows the determination of member countries to extend to the economic field, the solidarity bringing them together at monetary level and use the monetary base to speed up regional integration. It is the true expression of awareness as regards mutual advantages drawn from their membership of the monetary union as well as the need to preserve and strengthen its cohesion.
The objectives of the WAEMU (Article 4 of the Treaty) consist of:
- increasing competitiveness of economic and financial activities in member countries within the context of an open and competitive market and a streamlined and harmonized legal environment;
- ensuring convergence of member countries’ economic policies by establishing a multilateral monitoring procedure;
- creating a common market among member countries based on free movement of people, goods, services and capital, and the right to settle permanent residence for people carrying out private or paid activity, as well as a common external tariff and a common commercial policy;
- establishing a coordination of national sectoral policies through the implementation of common actions and eventually common policies, mainly in the following areas: human resources, town planning, transports and telecommunications, environment, agriculture, energy, industry and mining;
- harmonizing as much as required by member countries’ laws, and especially the tax system for the smooth running of the common market.
BOAD is considered as an essential component of the WAEMU, whose mission remains topical, as being specifically the common organization in charge of funding priority development and economic integration activities. That is how it became a specialized self-governing institution of the WAEMU, which without prejudice to the objectives assigned to it by the WAMU