Development Of Financial Institutions Research Articles

Systems of monitoring and evaluation of the financial development institution’s projects: an analytical review

In modern conditions, one of the most important issues in cooperation’ development with International financial institutions is an increasing the effectiveness of joint projects and programs. An urgent problem is the development and improvement of national norms and rules and their harmonization with European and world approaches (taking into account the chosen development vector) to prevent or reduce risks in the process of preparing, implementing, monitoring, managing and evaluating the effectiveness of such projects and programs. The paper explores approaches to monitoring and evaluating the effectiveness of financial development institutions’ projects, which actively contribute to the advance of society, including the achievement of Sustainable Development Goals, which were approved at the 2015 UN Summit. A critical analysis of the existing methodological and theoretical approaches proved the absence of a unified methodology for multi-criteria evaluation of the effectiveness of projects, implemented with the participation of financial development institutions. In particular, the authors focused attention and examined the following international methodologies, used in monitoring and evaluating the effectiveness of financial development institutions’ projects, namely: the Corporate-Policy Project Rating (CPR); Development Effectiveness Rating (DERa); the Dutch Impact Model Methodology (IMM), Success Criteria Model, Development Impact Model (DIM), the International Finance Corporation's valuation systems: Development Outcome Tracking System (DOTS) and The Anticipated Impact Measurement and Monitoring System (AIMM). It is noted, that approaches to monitoring and evaluating the financial development institutions’ participation in projects, devoted to improve the effectiveness of the countries’ economies, in which investments are directed, should take into account the implementation of the following four components: 1) governance, 2) development impact, 3) effectiveness and 4) financial additionality. It was emphasized that regarding further cooperation of Ukraine with financial development institutions on the issues of development and improvement of its efficiency, there should be found or developed an approach, which would take into consideration the accumulated experience and various aspects, related to the project effectiveness: both from the financial side and the achievement of certain social, quantitative, qualitative and other parameters and indicators, reflecting the degree of achievement of particular Sustainable Development Goals.

China's Role in Global Development Finance: China Challenge or Business as Usual?

AbstractChina's economic success has prompted both academic political economists and applied policy analysts to speculate about the implications of a new ‘China model’ of economic development and global economic governance. A particular issue is the degree to which the China model involves developing in opposition to or in cooperation with the pre‐existing norms of global economic governance. Recognizing the ambiguity of the China model, we consider two alternative interpretations of China's role in global economic governance: China Challenge (CC) and Business as Usual (BaU). We flesh out these contrasting interpretations using evidence from the lending behavior of four major development finance institutions in which China plays a leading or determinative role: the Asian Infrastructure Investment Bank (AIIB), the New Development Bank (NDB), the Silk Road Fund (SRF), and the China‐Africa Development Fund (CADF) of the China Development Bank. We find that (at least in the restricted domain of international development finance) China's role in global economic governance is largely characterized by BaU behavior, and although on a regional level this does represent a challenge to the historical role of Japan, it nonetheless suggests that the China model is not so revolutionary as many analysts suppose.

Designing a New Development Finance Institution for Infrastructure

India faces a massive challenge in its infrastructure mobilisation. Unfortunately, the conventional wisdom that PPPs and private investments will be able to do the heavy lifting in this effort is not borne out by experience of other countries. Designing policies in this pursuit, oblivious of the reality, is unlikely to get us much far in mobilising infrastructure to power the country’s economic growth. Accordingly, this paper has documented some important takeaways from the global experience of private participation in infrastructure and its financing from both developed and developing countries. One, only certain types of infrastructure assets are commercially viable and attractive enough for private investors. Two, many categories of infrastructure assets need public finance to de-risk and make them commercially attractive. Three, infrastructure projects in general are characterised by significant delays and cost overruns as well as renegotiations which end up generally benefiting private providers. Four, there is no evidence that, in general, private sector delivers greater value for money than public sector in the construction and management of infrastructure assets. Five, long-term infrastructure contracts are characterised by several problems – cutting corners on quality, skimping on investment obligations, asset-stripping, excessive dividend pay-outs etc. Six, infrastructure finance is increasingly characterised by the separation of asset ownership and its management, and constant changes in ownership, both of which pose problems of accountability and perverse incentives. Seven, the pool of long-term finance available, from both domestic and foreign sources, to invest in infrastructure is much limited than what is widely believed. Finally, the endeavour of public policy should be not to expand the envelope of available finance, but the envelope of infrastructure assets which can be de-risked and made commercially viable enough. Taken together, this means that public finance, direct and indirect, will have to be the major source of infrastructure financing, governments should bear a large share of the project risks for many categories of assets, and the private sector should be leveraged only as an instrumentality to deliver public goods. Further, given the widespread incentive distortions and problems associated with infrastructure contracts, public policy has an important role to play in setting the standards and benchmarks, as well as encouraging good practices in contract management. The DFIs have an important role to play in achieving both these objectives, as an instrument of indirect public finance. In simple terms, the objective of DFIs should be efficient mobilisation of infrastructure. However, the challenge is to perform this role effectively. The evidence of effectiveness of development banking in the Indian conditions is at best mixed. In fact, it is fair to say that the different models of DFIs that India has experimented with have played a limited role in efficient crowding-in of infrastructure. Instead of confining their role to addressing market failures, most DFIs, public and private, have mostly sought to compete with private investors to invest in commercially viable and de-risked categories of infrastructure assets. This requires DFIs which are publicly owned, and with access to both significant budgetary support as well as cheaper sources of capital. The DFIs should focus their efforts on efficient crowding-in of infrastructure itself, rather than be confined to crowding-in of just private capital. In certain types of commercially viable projects, it should confine its investments to play a strategic role in reinforcing standards and promoting good practices within the infrastructure markets. Its priority should be on the other categories of projects which need de-risking to be made commercially viable. It should focus on efficient deployment of scarce concessional capital to achieve this objective. It should refrain from competing with private investors and instead seek to alleviate market failures. Finally, as experience from previous efforts show, the biggest challenge in realizing this objective will come from governance issues. Good governance is not seen, just as bad governance becomes easily evident. The success of the DFI in achieving its objectives depends on how it manages its relationships with the government, markets, and the regulator. The onus is on the government to support the DFI with enabling regulations.

Financing large-scale renewable-energy projects in Kenya: investor types, international connections, and financialization

ABSTRACTAs energy transitions are progressing and economies of scale are kicking in, renewable-electricity generation begins to include, and be dominated by, large-scale operations. This shift is accompanied by far-reaching changes in the ownership and financing structures of renewable-energy projects, involving connections and (inter)dependencies between international and domestic investors and policies. With growing sizes and maturity, renewable-energy projects are also increasingly taken to capital markets and have become subject to financialization. Until recently these processes have only been observed in the Global North but not in the Global South. So far there has been little research on renewable-energy financialization in the Global South, especially in Sub-Saharan Africa. In our paper we address this gap by exploring the international connections and (possible) financialization of two large-scale renewable-energy projects in Kenya. Based on case-study analyses of geothermal and wind projects in Kenya, we argue that due to their complex risk structure, public investment and support, both from domestic sources and development finance institutions (DFIs), are and will remain key to facilitate or even enable such projects. In contrast to Baker’s (2015) case study on South Africa, we neither see nor expect financialization of large-scale renewable-energy projects in Kenya and most other Sub-Saharan African countries any time soon.

In-country DFIs: Profitability under state ownership

The credit landscape in commercial private finance is fast evolving as available funds continue to chase for enhanced returns, for optimised risk acceptance. On the other hand, developing countries, and economies in transition continue to grapple with factors such as public debt, widening fiscal gaps often exacerbated by persistent budget deficits. As a result, governments prioritise provisioning of critical public goods, which then leaves a gap in the financing of less urgent, yet developmentally important investments. This gap is often left to state-owned Development Finance Institutions, or DFIs to fill (UNCTAD, 2019), yet success for these institutions has been generally dismissed (Xu, Ren, & Wu, 2019). This paper appraises the continuing importance of DFIs and analyses factors that drive their sustainability, with the state ownership dynamic in mind. A secondary research approach is taken, predominantly applying the document analysis method, i.e., extant literature from reputable sources on the subjects of state-owned enterprises, development finance, profitability of financial institutions, and firm financial structure. The paper concludes that DFIs are still relevant, and that the type and cost of carefully blended capital available to them is a fundamental determinant of effectiveness in the context of the two-pronged objectives SOEs are known to have. A practical framework by which this can be achieved is proposed.

Understanding the residential energy efficiency financing coverage gap and market potential

Access to upfront capital remains a primary barrier in residential energy efficiency adoption. Government-sponsored programs exist for low-income households while traditional financing serves creditworthy households. However, there remains a coverage gap for those with moderate incomes too high to qualify for low- income programs, but without access to friendly capital. With limited research in this space, this study aims to: (1) develop a model to estimate the number of households in the coverage gap; and (2) explore their spatial distribution. For the state of Michigan, we used data from the US Census Bureau and approximately 12,000 green bank loans to estimate the energy efficiency financing coverage gap across the state's 83 counties using a binomial mixed model. We found that credit score and income interacted to largely determine whether an applicant was approved. Households in the highest income quintile achieved a 50% chance of approval with a moderate credit score (662) while those in the lowest needed a very high credit score (715) for the same odds. Overall, this created an estimated 12% energy efficiency financing coverage gap of households statewide, with individual county levels between 0% and 24%. Broadly, understanding the market potential and spatial distribution of this coverage gap could allow impact-driven financiers such as green banks or community development financial institutions to expand programs that may offer alternative underwriting criteria. Expanding loan access to this underserved market can promote energy system improvements, policy goals, household living conditions, and an equitable clean energy transition.

Study on the Efficiency Measurements and Influence Factors of Development Financial Institutions

ABSTRACTIn this article, the efficiency of 12 development financial institutions (DFIs) is measured from 2009 to 2015 using the DEA–Malmquist method from dynamic and static aspects. Empirical analysis is performed on the influence factors of the DFIs using the Tobit model. Studies have shown that a multilateral DFI is more efficient than the other two types of DFIs and that efficiency growth is mainly driven by technical changes. Additionally, differences can be observed between the DFIs and multilateral institutions in low- and middle-income countries and the DFIs in the high-income countries. Addressing profit and policy targets is the key factor in improving the efficiency of all DFIs. The positions of the DFIs should be well defined, and market and competitive mechanisms should be properly introduced to increase the overall operational efficiency of the DFIs.

Community Development Financial Institutions: Invaluable Capital Partners in Low-income Rural Areas

Community Development Financial Institutions: Invaluable Capital Partners in Low-income Rural Areas

“ECONOMIC BELT OF THE SILK ROAD”: NEW OPPORTUNITIES AND PROSPECTS FOR MONGOLIA


 
 
 
 Earth is continents, seas, the developing countries, the developed countries, the centers and the borders is the One Belt-One Road initiative. On the other hand, the Sea “Silk Road” is called the “Economic Belt of the Silk Road” as a way of “New Belt and Road” for China's new long-term development strategy. "Silk Road" refers to the ancient land-based commercial trade route that originated in ancient China and connected to Asia, Africa and Europe.In order to benefit from the “Economic Belt of the Silk Road” initiative, China has partnered with other Asian countries and created two important financial development institutions, the Asian Infrastructure Investment Bank and the Silk Road Fund.The main objective of the initiative is to create an Eurasian trade economic integration space and cross-border transport corridors, that is, to strengthen the links between government policies and national development strategies along the route, promote international cooperation, and promote the development of joint ventures. For this purpose, the following tasks have been set: 1. Development of regional economic integration method; 2. Create an integrated transportation design for Asian transportation, connect communication networks, and develop pipeline systems; 3. Switch back to investment and trade barriers and create a good investment environment; 4.Strengthen national currency; 5.Deepening cooperation in the humanitarian field; 6.Expanding China's exports and domestic power growth will be concentrated in the western provinces (steel, lead, photovoltaic equipment, wind turbines).The “One Belt and One Road” is a new starting point for China-global relations and human development. Utilize the geographical advantages of Mongolia, China and Russia to increase cross-border trade between Mongolia, Russia and China, creating opportunities for logistics and transportation. China is one of the Mongolia's largest sources of foreign direct investment and is seen as a huge market for Mongolia to provide services and products.Mongolia hopes to unite its “Steppe Road” initiative with China’s “One Belt and One Road” initiative. The goal of the “Steppe Road” initiative aims to expand the Mongolian economy through cross-border transportation, strengthen the road line connecting Russia and China, transform and extend the current railway line in Mongolia, and build oil and gas between Russia and China. The pipeline improves the infrastructure of Mongolia. Mongolia and other Asian countries are actively participating in the “One Belt and One Road” initiative implemented in China to reduce risks and threats and gain new opportunities and advantages in regional cooperation.
 
 
 

Impact of Bank Closings on Credit Extension to Businesses in Low-Income and Minority Neighborhoods

New research is surfacing since the last financial crisis, not only to help predict risks associated with bank failures but also to assess the impact of bank failures on the economy and local geographies. However, although bank failures occurred mostly among small (community) banks, much less is understood regarding how the closing of mission-oriented community banks, or minority-owned banks, affect traditionally underserved markets, areas such failed banks were designed to serve. We conduct an empirical investigation testing the effects of bank closings on local areas. We find that, as a result of bank closings, there are significant frictions with small businesses obtaining credit, which appear to be potent enough to cause cumulative declines in aggregate small business lending in neighborhoods, lasting up to 3 years. We also find evidence that such lending shocks have repercussions on small business growth. We find that the closing of large banks also has an impact on small business lending, consistent with previous research, which has shown that as small businesses lose credit from large banks, they are not able to switch easily to other banks, leading to a decline in aggregate lending in local areas. We find this to be true for low- or moderate-income (LMI) and minority businesses/neighborhoods. We also find that the failure of community development financial institutions (CDFIs) and minority depository institutions (MDIs) leaves a credit void that may not automatically be filled in LMI and minority neighborhoods.

Do bankruptcy profiles of Islamic banks differ across organizational structure? evidence from Malaysia

Malaysian Islamic banks operate in different organizational structures, namely domestic, locally foreign incorporated, and development financial institutions which may have an influence on their stability. This research evaluates the bankruptcy profiles of 19 selected Malaysian Islamic banks from 2010 to 2017 and analyses the insolvency risk associated with the three different organizational structures. Using the Altman’s Z-Score Model (2000), a stability test was conducted. Finding s /Originality: the paper finds that, on average, the development financial institutions were the most stable banks, followed by foreign Islamic banks. It also finds that bigger domestic Islamic banks were situated in the safe zone as they had high Z-score values. Furthermore, asset quality ratio contributed to higher Z-score values. An appropriate asset-liability management therefore helps ensure the stability of Islamic banks in Malaysia. An effective macroprudential supervisory regime must also be in place to increase the resilience of the financial system.

Transnational land investment web: land grabs, TNCs, and the challenge of global governance

ABSTRACTDespite international media’s waning attention, research and political debates on global land grabbing have not subsided. We argue the importance of understanding the ‘transnational land investment web’ of corporate and state actors and institutions, which are not always immediately visible. Focusing on transnational corporations (TNCs) based in the European Union (EU), we examine five sets of actors and institutional spheres through which these actors are able to grab lands beyond Europe. It is crucial to understand these not as individual sets of actors or institutions, but as interconnected sets, comprising a web. These are EU-based: (1) Private companies using regular institutional platforms; (2) Finance capital companies; (3) Public–private partnerships; (4) Development Finance Institutions; and (5) Companies using EU policies to gain control of land through the supply chain. One implication of this complex web is that democratic governance in the context of land grabs becomes an even more daunting challenge.

Актуальні питання діяльності фінансових інституцій розвитку: загальна оцінка та українська практика

Актуальні питання діяльності фінансових інституцій розвитку: загальна оцінка та українська практика

OECD DAC 개발재원 관련 논의에 따른 공여국 대응 전략: 개발금융기관(DFIs)을 중심으로

This paper summarizes the recent discussions led by the OECD DAC focusing on the partnership with the private sector for financing development, and looks at the corresponding institutional changes in the donor countries, focusing on development financial institutions (DFIs). The purpose of the paper is to help the readers in the field of Korean development cooperation understand the overall landscape of OECD DAC discussions on financing development in the last three to four years and to capture how donor countries have responded to the discussions with their development financial institutions (DFIs). In this paper, the OECD DAC discussions summarized are as follows: △ blended finance, △ social impact investing, △ measuring the donor efforts in the use of private financial instrument (PSI), △ the amounts of private finance mobilized by donor efforts. In regards, the development financial institutions (DFIs) in US, Canada, UK and Denmark are selected to study how they use their DFIs in correspond to the OECD DAC discussions on financing development.

Designing Business Forms to Pursue Social Goals

The long-standing debate about the purpose and role of business firms has recently regained momentum. Business firms face growing pressure to pursue social goals and benefit corporation statutes proliferate across many U.S. states. This trend is largely based on the idea that firms increase long-term shareholder value when they contribute (or appear to contribute) to society. Contrary to this trend, this Article argues that the pressing issue is whether policies to create social impact actually generate value for third-party beneficiaries—rather than for shareholders. Because it is difficult to measure social impact with precision, the design of legal forms for firms that pursue social missions should incorporate organizational structures that generate both the incentives and competence to pursue such missions effectively. Specifically, firms that have a commitment to transacting with different types of disadvantaged groups demonstrate these attributes and should thus serve as the basis for designing legal forms. While firms with such a commitment may be created using a variety of control and contractual mechanisms, the related transaction costs tend to be very high. This Article develops a social enterprise legal form that draws on the legal regime for community development financial institutions (CDFIs) and European legal forms for work-integration social enterprises (WISEs). This form would certify to investors, consumers, and governments that designated firms have a commitment as social enterprises. By obviating the need for costly social impact measurement, this form would facilitate the provision of subsidy-donations to social enterprises from multiple groups, particularly investors (through below-market investment) and consumers (via premiums over market prices). Thus, this social enterprise form would be to altruistic investors and consumers what the nonprofit form is to donors. Moreover, the proposal could facilitate the flow of investments by foundations in social enterprises (known as program-related investments, “PRIs”) because it would help foundations verify the social impact of their investees. In addition, by giving subsidy-providers greater assurance that social enterprises pursue social missions effectively, the proposed legal form could facilitate public markets for social enterprises.

The role of climate finance beyond renewables: demand-side management and carbon capture, usage and storage

ABSTRACTMobilizing climate finance for climate change mitigation is a crucial part of meeting the ‘well-below’ 2°C goal of the Paris Agreement. Climate finance refers to investments specifically in climate change mitigation and adaptation activities, which involve public finance and the leveraging of private finance. A large proportion of climate finance is Official Development Assistance (ODA) from OECD countries to ODA-eligible countries. The evidence shows that the largest proportion of climate finance for climate change mitigation has been channelled to the development of renewable energy, with a much smaller proportion flowing to other crucial forms of clean energy-related measures, such as demand-side management (DSM) (particularly sustainable cooling) and carbon capture, usage and storage (CCUS). This forms the rationale and aim of this synthesis paper: to review the role of climate finance to develop clean energy beyond renewables. In doing so, the paper draws on practical policy and programme experiences of some donor countries, such as the UK, and Development Finance Institutions (DFIs). This paper argues that a greater amount of climate finance from OECD countries to ODA-eligible fossil fuel-intensive emerging economies and developing countries is required for sustainable cooling and CCUS, particularly in the form of technical assistance and clean energy innovation.Key policy insightsDemand-side management (DSM) and carbon capture, usage and storage (CCUS) are underfunded in climate finance compared with the promotion of renewables.Climate finance for sustainable cooling, in particular, represents just 0.04% of total ODA, despite cooling projected to represent 13% of global emissions by 2030.Public investment in CCUS is limited at US $28 billion since 2007, despite the costs of meeting the Paris Agreement estimated to be 40-128% more expensive without CCUS.Additional climate finance for these sectors should not come at the expense of funding for renewables but should be complementary to it.

China in Africa: Competition for traditional development finance institutions?

Abstract Official development finance from China has risen tremendously in the past two decades across the globe, including in the world’s poorest continent Africa. How has this sudden increase in development resources affected the two major multilateral development banks (MDBs) in the region, the World Bank and the African Development Bank (AfDB)? One might expect that the MDBs would compete with China to maintain influence in Africa. This study uses statistical tests and interviews with government officials in three recipient countries to see if this is the case. The results indicate that total MDB finance by country change little over time in response to Chinese activity. The sectoral allocation of concessional lending to the poorer countries does not show any responsiveness either. In contrast, shifts in levels and sector allocation can be observed for non-concessional countries. Overall, the study suggests that while China’s role in African development finance is indeed substantial and growing, it has not had the “game changing” impact on traditional development finance as popular perception might lead one to believe. This may change, however, once more recipient countries develop economically and move to non-concessional lending.

Instituições financeiras de desenvolvimento regional e os desafios do Sistema Nacional de Fomento

Resumo Este artigo aborda os desafios enfrentados pelas Instituições Financeiras de Desenvolvimento Regional (IFDRs) no Brasil, sugerindo algumas condições para a melhora no financiamento de longo prazo. O artigo destaca a importância do Sistema Nacional de Fomento, traça um breve histórico das instituições financeiras de desenvolvimento brasileiras, aponta limitações a serem superadas e condições para que as IFDR assumam um papel mais efetivo no desenvolvimento nacional. As proposições de política pública voltadas ao fortalecimento das instituições regionais expressam o conteúdo dos debates mantidos no âmbito da Associação Brasileira de Desenvolvimento, o principal fórum de representação das instituições de fomento.

Microcredit for enterprise in the UK as an ‘alternative’ economic space

One response to the major societal challenge of financial exclusion in the United Kingdom (UK) is microcredit lending for enterprise. Typically delivered via Community Development Finance Institutions (CDFIs) in the UK, these lending institutions can be conceptualised as ‘alternative’ economic spaces. Yet the nature of their alterity is unclear as categorisations of alternative-oppositional or alternative-substitute institutions are possible and could also be influenced by complexities in the UK relating to the welfare system and sustainability. Alterity is rarely static, being influenced by policies and regulation, and the nature of institutions’ alterity could have consequences for wellbeing, as different values and ideals underpin different conceptions of alterity which affect how these institutions operate. In this paper, the complexities of microcredit for enterprise lending within the UK are explored through in-depth interviews with UK ‘supply-side’ stakeholders. Conceptions of alterity are then used as an analytic lens to examine these results. Results suggest that these lenders remain in opposition to the mainstream as the needs of low-income individuals are embedded within their operating model. Microcredit lending is conceptualised in terms of responsible lenders offering fair credit to financially-excluded individuals using relationship banking practices. Such a conceptualisation provides a touchstone against which to assess shifts in lenders’ alterity and a platform from which to introduce legislative and regulatory changes to protect these ‘alternative-oppositional’ economic spaces. This paper begins to outline these responses that could help to ensure and grow a more community-engaged and varied local financial infrastructure within the UK.

The Legal Construction of Sharia Capital Market in Indonesia

Capital market is one of the characteristics of developed countries, but its activities in Indonesia experience ups and downs. The Islamization of financial institutions in Indonesia was responded by the country’s capital market in 1997. Islamic capital market has developed following Islamic banking and Islamic insurance industry. The importance of asset management and liquidity management in these two industries raises the need for sharia-based funding sources and investment products, which encourages the development of sharia capital market activities. The beginning of sharia capital operations was the sale of Indosat shares using sharia system in 2012. Law number 8 of 1995 concerning capital market does not explain the dual system in the Indonesian capital market. The legal vacuum that regulates capital market activities has led to an MOU signed in 2003 between BAPEPAM and National Sharia Board-Indonesian Ulema Council (DSN-MUI), an institution established to provide solutions and fatwas on economic development and sharia financial institutions in Indonesia. This step is a good momentum for the development of the legal framework of the Indonesian capital market because several DSN-MUI fatwas have been absorbed into the financial services authority regulations issued by the OJK. This normative research uses a legal approach (statute approach). The researchers conclude that regulations regarding Islamic capital market since its operations in the Indonesian capital market have developed. But higher norms that govern Islamic capital market are needed so that the existence of the Islamic capital market in Indonesia can be maintained, and justice and legal certainty for Islamic capital market players can be achieved. Keywords: Capital market, Islamic capital market, DSN-MUI fatwas DOI : 10.7176/JLPG/82-05