Benin Secures Historic €117 Million to Transform 77 Municipalities into Investment Hubs

The African Development Bank Group has approved a landmark €117 million financing package to fundamentally transform Benin’s 77 municipalities into thriving centers of private investment and job creation. The Support Programme for the Economic Development of Local Authorities (PADECT), approved on October 24, 2025, represents the Bank’s first-ever sub-national financing initiative in the West African nation—a groundbreaking shift in development strategy that decentralizes economic empowerment to the local level.

The ambitious programme, scheduled to run from 2026 through 2031, aims to strengthen municipal capacity, facilitate small and medium enterprise access to financing, and deploy critical digital infrastructure across the country. With Benin’s economy recording robust growth of 7.5% in 2024, this initiative positions local authorities as key drivers of the nation’s continued economic transformation.

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A Strategic Investment in Municipal Empowerment

The financing comprises two distinct loans: €110 million from the African Development Bank and €7 million from the African Development Fund, the concessional window of the Bank Group. Benin’s Ministry of the Economy and Finance will implement the programme through its Economic and Financial Programme Monitoring Unit, ensuring coordination with existing government initiatives.

“This project is the Bank’s very first sub-national financing in Benin. We congratulate the national authorities for this remarkable innovation. The Bank is proud to have responded to support Benin in its development,” said Robert Masumbuko, Country Manager of the African Development Bank Group in Benin.

The programme comes at a critical juncture for Benin. As of January 2025, the Bank Group’s active portfolio in Benin comprised 16 operations worth $1.2 billion, positioning the institution as one of the country’s main technical and financial partners. PADECT represents a strategic evolution in this partnership, moving resources directly to municipal authorities rather than channeling them exclusively through central government structures.

Addressing the SME Financing Gap

At the heart of PADECT lies a commitment to unlocking capital for Benin’s small and medium-sized enterprises—the backbone of the national economy. The programme will facilitate access to financing through the Small and Medium-sized Enterprise Development Agency and the Investment and Guarantee Fund for Small and Medium-sized Enterprises.

This focus addresses a critical challenge facing African economies. Across emerging markets and developing economies, the MSME finance gap now stands at $5.7 trillion—equivalent to 19 percent of GDP and 20 percent of total private sector credit. In sub-Saharan Africa, SMEs provide an estimated 80 percent of jobs, making them indispensable engines of economic growth and poverty reduction.

Yet these vital businesses face severe credit constraints. Without reliable sources of working capital, SMEs cannot make the investments needed for expansion, leading to stagnation precisely when their growth could generate the most employment opportunities. PADECT’s financing mechanisms aim to break this cycle by improving SMEs’ access to affordable capital through local financial intermediaries and guarantee schemes.

The African Development Bank’s Africa SME Programme provides a proven model. Through lines of credit to financial institutions and technical assistance for both banks and SME clients, similar initiatives have successfully expanded SME lending across the continent. PADECT will adapt these strategies to Benin’s municipal context, ensuring that local businesses in all 77 municipalities—not just those in major urban centers—can access growth capital.

Digital Transformation as a Central Pillar

Perhaps the most visible component of PADECT will be its comprehensive digital infrastructure rollout. The programme plans to deploy telecommunications infrastructure in 89 public facilities, including town halls, schools, universities, and hospitals across Benin’s municipalities.

Mobile network coverage will be extended to 114 localities currently without service—a critical intervention in a nation where connectivity remains uneven despite overall progress. Additionally, 65 community digital points will provide affordable internet access and digital services in municipal centers, democratizing access to information technology and online services.

This digital transformation agenda recognizes that in the 21st century, economic competitiveness requires robust digital infrastructure. Municipalities without reliable internet access cannot attract technology-enabled businesses, process administrative services efficiently, or provide citizens with modern public services. By ensuring that all 77 municipalities have adequate digital connectivity, PADECT levels the playing field between urban and rural areas.

The initiative aligns with broader continental trends. African nations increasingly recognize digital infrastructure as foundational to economic development, not merely as a luxury or secondary concern. For Benin’s municipalities, improved connectivity will facilitate e-governance, enable digital financial services, support distance education and telemedicine, and create opportunities for technology-based entrepreneurship.

Climate Resilience and Environmental Protection

PADECT incorporates a significant climate action component, recognizing that sustainable development must address environmental challenges. The programme will strengthen climate action through two key mechanisms: the National Disaster Response Fund and the National Environment and Climate Fund.

These funds will finance municipal climate prevention projects and environmental protection initiatives, with particular focus on activities led by women. This gender-sensitive approach acknowledges research showing that women often reinvest a higher proportion of their earnings into their families and communities, creating multiplier effects that amplify development impact.

Benin faces real climate vulnerabilities. Like many West African nations, the country must contend with changing rainfall patterns, increased flooding risk in coastal areas, and the broader impacts of climate change on agricultural productivity. Municipal-level climate adaptation projects can address these challenges more effectively than top-down national programs because local authorities understand the specific vulnerabilities and needs of their communities.

The programme’s climate finance aligns with the African Development Bank’s broader commitments. In 2024, the Bank Group dedicated $5.5 billion to climate finance, underscoring its pivotal role in building resilience across Africa. PADECT extends this commitment to Benin’s local level, ensuring that climate action permeates from national policy to community-level implementation.

Promoting Gender Equality and Inclusion

PADECT demonstrates strong commitment to gender equality, targeting at least 30 percent female representation across its various components. This isn’t merely a quota—it represents a strategic recognition that inclusive development requires women’s meaningful participation in economic and political life.

In Benin, women face persistent barriers to economic participation despite high labor force engagement. Research on decentralization in Benin shows that while women are heavily engaged in the labor market—with female participation at 68.8% compared to 73.0% for men—they remain underrepresented in management positions and political office. In the May 2020 municipal elections, only 4.3% of councilors were women, and there were just four women mayors among the 77 elected.

By explicitly targeting female representation and prioritizing women-led initiatives within its climate and SME components, PADECT aims to shift these dynamics. When women gain access to capital, training, and leadership opportunities, the benefits extend beyond individual empowerment to broader community development.

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Results-Based Financing: A Performance-Driven Approach

PADECT will be implemented using a results-based financing approach with nine disbursement-linked indicators. This represents a significant methodological shift from traditional development finance.

“This programme marks a strategic upgrade in the Bank’s support to Benin by moving from an activity financing approach to a performance-based financing approach,” emphasized Ammar Kessab, Principal Programme Officer at the African Development Bank.

Results-based financing ties disbursements to achievement of specific, measurable outcomes rather than simply rewarding the completion of planned activities. This approach creates strong incentives for effective implementation, ensures accountability, and focuses attention on actual development impact rather than inputs or process compliance.

The nine disbursement-linked indicators will measure concrete achievements across PADECT’s various components—from the number of SMEs receiving financing to the kilometers of fiber optic cable deployed, from municipal climate projects implemented to women’s participation rates. This performance framework ensures that the €117 million investment delivers tangible, measurable results for Benin’s citizens.

Aligning with National Development Priorities

PADECT aligns closely with two key national frameworks that guide Benin’s development trajectory.

First, it supports the National Decentralisation and Devolution Policy 2024-2033, which aims to strengthen local governance and transfer greater authority and resources to municipal authorities. Decentralization in Benin began formally in 2003, when the country’s 77 municipalities became responsible for delivering key services including water supply and sanitation.

However, research has shown that the effectiveness of decentralization depends critically on municipalities having adequate financial resources and technical capacity. By strengthening municipal capacity to implement annual investment plans and providing financing mechanisms that municipalities can access, PADECT addresses these foundational requirements.

Second, the programme aligns with “Benin 2060 ALAFIA,” the country’s long-term vision adopted by parliament in July 2025. This vision, titled “Benin 2060 ALAFIA, a World of Splendeurs,” aims to make Benin a nation of peace, shared prosperity, good governance, and cultural and international prominence by 2060—marking the centenary of the country’s independence.

The vision rests on nine strategic orientations and fifteen objectives, all developed through a participatory process that collected aspirations from citizens across Benin’s entire territory. PADECT’s focus on municipal economic development, digital transformation, and climate resilience directly supports this long-term national vision by building the local capacity needed to achieve ambitious national goals.

The Broader Context of Municipal Development

Benin’s commitment to municipal development through PADECT must be understood within the broader context of African decentralization and local governance reform. Across the continent, nations increasingly recognize that effective local government is essential for delivering services, promoting economic development, and ensuring that citizens can participate meaningfully in decisions affecting their lives.

The success of decentralization, however, depends on more than constitutional provisions or administrative structures. It requires adequate financing, technical capacity, and clear delineation of responsibilities between national and local authorities. Studies of Benin’s decentralization experience have found that while the process has improved access to some services, challenges remain in terms of inequality among municipalities and the capacity to deliver consistently high-quality services.

PADECT addresses these challenges directly. By providing dedicated financing for all 77 municipalities, the programme reduces inequality in resource availability. By strengthening municipal capacity to plan and implement investments, it builds the technical capabilities needed for effective local governance. And by creating financing mechanisms for local SMEs, it enables municipalities to foster economic development within their jurisdictions rather than simply depending on central government initiatives or private investment decisions made elsewhere.

Implementation Challenges and Success Factors

While PADECT’s design is ambitious and comprehensive, successful implementation will require careful attention to several factors.

First, coordination among multiple actors—the Ministry of Economy and Finance, municipal authorities, SME development agencies, telecommunications providers, and civil society organizations—will be essential. The Economic and Financial Programme Monitoring Unit will need to establish clear implementation protocols and ensure regular communication among all stakeholders.

Second, capacity building at the municipal level will be critical. Many of Benin’s 77 municipalities have limited experience managing large investment programmes or implementing performance-based financing arrangements. PADECT will need to provide substantial technical assistance to ensure that municipal authorities can effectively plan investments, manage procurement, monitor implementation, and report on results.

Third, ensuring genuine participation by women and marginalized groups will require more than targets. It will necessitate deliberate outreach, removal of practical barriers to participation, and creation of enabling environments where women feel comfortable and empowered to engage in programme activities.

Fourth, the climate component will need careful design to ensure that projects genuinely build resilience rather than implementing generic interventions. This requires understanding local vulnerabilities and involving communities in identifying appropriate adaptation measures.

A Model for Sub-National Development Finance

PADECT’s significance extends beyond Benin. As the African Development Bank’s first sub-national financing initiative in the country, it represents a model that could be replicated across Africa. Many African nations face similar challenges: centralized development finance that doesn’t reach local communities effectively, municipalities with insufficient resources to drive local economic development, and difficulty coordinating national development priorities with local needs and capacities.

By demonstrating that development finance can work effectively at the municipal level—strengthening local capacity, supporting local enterprises, and delivering tangible improvements in infrastructure and services—PADECT may influence how development banks approach financing across the continent.

The programme’s results-based financing approach, with its emphasis on measurable outcomes and performance accountability, also offers lessons for development finance more broadly. If PADECT successfully delivers its ambitious targets, it will strengthen the case for performance-based approaches over traditional input-focused development programmes.

Conclusion: Building Benin’s Future from the Ground Up

The African Development Bank’s €117 million investment in Benin’s municipalities represents more than financial support. It represents confidence in decentralized development, recognition that economic transformation must reach all parts of a country rather than concentrating in capital cities, and commitment to building local capacity as the foundation for sustainable growth.

Over the next six years, as PADECT rolls out telecommunications infrastructure, facilitates SME financing, and supports climate resilience projects across all 77 municipalities, Benin will be conducting a crucial experiment in locally-driven development. The success or failure of this approach will carry implications far beyond Benin’s borders, potentially influencing how development finance institutions support municipal development across Africa.

For Benin’s citizens, PADECT offers the prospect of more responsive local government, better digital connectivity, improved access to capital for small businesses, and greater resilience to climate shocks. For the 77 municipalities, it provides resources and capacity to fulfill their mandate to promote local development and deliver quality services.

And for Africa’s development finance community, PADECT represents an important test of whether empowering local authorities with direct financing, technical support, and performance incentives can generate more effective and sustainable development outcomes than traditional centrally-managed programmes.

The next six years will tell whether this bold experiment in municipal empowerment succeeds in transforming Benin’s 77 municipalities into genuine hubs of private investment and job creation—building the country’s future from the ground up, one municipality at a time.

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By: Montel Kamau

Serrari Financial Analyst

28th October, 2025