DEVELOPMENT
FINANCIAL
INSTITUTIONS
SUBMITTED TO:
RAHUL AGARWAL SIR
SUBMITTED BY:
VARUN AHUJA
JAYESH SHARMA
INTRODUCTION OF DEVELOPMENT
FINANCE INSTITUTION
A development finance institution (DFI) also known as a development bank or development
finance company (DFC) is a financial institution that provides risk capital for economic
development projects on non commercial basis. They are often established and owned by
governments or charitable institutions to provide funds for projects that would otherwise not be
able to get funds from commercial lenders. Some development banks include socially
responsible investing and impact investing criteria into their mandates. Governments often use
development banks to form part of their development aid or economic
development initiatives.
DFIs can include multilateral development banks, national development banks, bilateral
development banks, microfinance institutions, community development financial
institution and revolving loan funds.These institutions provide a crucial role in
providing credit in the form of higher risk loans, equity positions and risk guarantee
instruments to private sector investments in developing countries. DFIs are
typically backed by countries with developed economies.
As of 2005, total commitments (as loans, equity, guarantees and debt securities) of the major
regional, multilateral and bilateral DFIs totalled US$45 billion (US$21.3 billion of which went to
support the private sector).DFIs often provide finance to the private sector for investments that
promote development and to help companies to invest, especially in countries with various
restrictions on the market.
Development banks include:
Community development banks which fund low-income areas in the United States.
International financial institutions conducting development-oriented finance on a
bilateral or multilateral basis.
National development banks are government-owned financial institution that
provides financing for economic development.
Multilateral development bank are development banks set up by a group
of countries and often operate under international laws.
INTERNATIONAL FINANCIAL
INSTITUTIONS
An international financial institution (IFI) is a financial institution that has been established (or
chartered) by more than one country, and hence are subjects of international law. Its owners or
shareholders are generally national governments, although other international institutions and
other organizations occasionally figure as shareholders. The most prominent IFIs are creations of
multiple nations, although some bilateral financial institutions (created by two countries)
exist and are technically IFIs. The best known IFIs were established after
World War II to assist in the reconstruction of Europe and provide mechanisms
for international cooperation
in managing the global financial system.
Today, the world's largest IFI is the European Investment Bank, with a
balance sheet size of €573 billion in 2016.This compares to the
two components of the World Bank, the IBRD (assets of $358 billion in 2014) and
the IDA (assets of $183 billion in 2014).For comparison, the largest commercial
banks each have assets of c.$2,000-3,000 billion.
MULTILATERAL
DEVELOPMENT BANKS
A multilateral development bank (MDB) is an institution, created by a group of countries,
that provides financing and professional advising for the purpose of development. MDBs
have large memberships including both developed donor countries
and developing borrower countries. MDBs finance projects in the form of long-term loans at
market rates, very-long-term loans (also known as credits) below market rates, and through
grants.
MAIN MDBs
The following are usually classified as the main MDBs:
World Bank
European Investment Bank (EIB)
Islamic Development Bank (IsDB)
Asian Development Bank (ADB)
European Bank for Reconstruction and Development (EBRD)
CAF - Development Bank of Latin America (CAF)
Inter-American Development Bank Group (IDB, IADB)
African Development Bank (AfDB)
New Development Bank (NDB)
Asian Infrastructure Investment Bank (AIIB)
Arab Petroleum Investments Corporation (APICORP)
INTER-AMERICAN
DEVELOPMENT BANK
(IDB)
The Inter-American Development Bank (IADB or IDB or BID) is the largest source of
development financing for Latin America and the Caribbean.Established in 1959, the IDB
supports Latin American and Caribbean economic development, social development and
regional integration by lending to governments and government agencies, including State
corporations.
The IDB has four official languages: English, French, Portuguese, and Spanish. Its official
names in the other three languages are as follows:
LANGUAGE NAME
FRENCH Banque interaméricaine de
développement;
PORTUGUESE Banco Interamericano de
Desenvolvimento
SPANISH Banco Interamericano de Desarrollo
HISTORY OF IDB
At the First Pan-American Conference in 1890, the idea of a development institution for Latin
America was first suggested during the earliest efforts to create an inter-American system. The
IDB became a reality under an initiative proposed by President Juscelino Kubitshek of Brazil. The
Bank was formally created on April 8, 1959, when the Organization of American States drafted
the Articles of Agreement establishing the Inter-American Development Bank.
MEMBER STATES
The Bank is owned by 48 sovereign states, which are its shareholders and members. Only
the 26 borrowing countries are able to receive loans.
Borrowing:
Argentina, The Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa
Rica, Dominican Republic, Ecuador, El
Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua,
Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay, Venezuela
Non-borrowing:
Austria, Belgium, Canada, China, Croatia, Denmark, Finland, France,
Germany, Israel, Italy, Japan, Korea, The
Netherlands, Norway, Portugal, Slovenia, Spain, Sweden, Switzerland,
United Kingdom, United States.
OPERATIONS
The IDB is the largest multilateral source of financing for the Latin America and the Caribbean
region.The IDB makes loans to the governments of its borrowing member countries at
standard commercial rates of interest, and has preferred creditor status, meaning that borrowers
will repay loans to the IDB before repaying other obligations to other lenders such as commercial
banks.
Governance
The IDB is governed by its Board of Governors, a 48-member body who regularly meets once a
year. In March 2010, reunited in Cancun, Mexico, the Board of Governors of the Bank
agreed on a $70 billion capital increase, along with full debt forgiveness for Haiti, its
poorest member country, devastated by an earthquake that had destroyed its capital,
Port-au-Prince,
two months before.
The developing countries that borrow from the IDB are the majority shareholders,
and therefore control the majority of the decision-making bodies of the Bank.
Each member’s voting power is determined by its shareholding:
its subscription to the Bank's ordinary capital.
THANK YOU
