National Development Banks Research Articles

National and Multilateral Development Banks during the COVID-19 Pandemic: The Role of the IADB and CDC-BII during the Second Phase

ABSTRACT This article focuses on the strategic role played by a multilateral development bank, the Inter-American Development Bank (IADB), and a bilateral development bank, the UK BII (formerly the CDC Group), during the COVID-19 pandemic. In detail, we will compare the initial activity of these two development banks (DBs) during the first phase, in 2020, with their actions in the following period. The analysis will also reflect on the role of safeguard policies in ensuring that the activities of DBs are in line with the fulfilment of their public purpose mandates and whether these rules were sufficiently broad and flexible enough to respond to an unexpected event such as the COVID-19 pandemic.

The Italian Development Bank: A Dynamic View of CDP’s Public Mission

ABSTRACT The traditional public purpose of development banks is to promote economic development by mitigating market failures in the provision of finance to public and private initiatives. However, the dynamic theory of public banks suggests that development banks functions and actions are not predetermined, but rather depend on the dynamic economic, social and political context in which they are embedded. In this paper, we focus on the case of Cassa Depositi e Prestiti (CDP), and analyse how its mission expanded since its privatization in 2003, till and further its recognition as the Italian National Development Bank in 2015. We find that CDP range of action expanded rapidly under political, economic and institutional pressures (especially from European institutions), sometimes beyond what is traditionally expected of public banks. We also analyse how CDP corporate governance evolved, highlighting strengths and weaknesses with respect to other European Development banks.

Are Brazilian water auction prices affordable for vulnerable families?

A recent regulatory framework reform implemented in Brazil aims to universalize water and sanitation services by 2033. For financing and speeding up the construction of infrastructure, the new law encourages private sector participation through auctions promoted with the support of the Brazilian National Development Bank. However, the first auctions, with billions of dollars in price and investment effects, have raised concerns among practitioners over the impact on vulnerable families. We analyze the concessions in Alagoas and Rio de Janeiro states in Brazil to demonstrate how low-income families will struggle to pay their bills based on auction prices via the tariff, which may invite discontent. This research can inform subsequent water and sanitation auctions by highlighting that awards should not be based exclusively on auction prices, and affordability assessments should be mandatory.

On support from National Development Banks for the internationalisation of public Brazilian companies: it’s hard to say goodbye (to good companies)

ABSTRACT This article examines the relevance of National Development Banks (NDBs), taking as a reference the activity of Brazil’s BNDES (Banco Nacional de Desenvolvimento Econômico e Social) and its role in the internationalisation of State-Owned Enterprises (SOEs). NDBs cover market failures in access to financing for companies, and they promote the development of nascent industries. Within the business cycle, the key determination to be made is at what point NDBs should withdraw their support and reallocate resources to other developing industries and companies. Using operations databases from BNDES, this process is analysed by considering the different strategies followed by flagship Brazilian companies, including Vale, Embraer, and Petrobras.

MERCADO DE DEBÊNTURES E FONTES ALTERNATIVAS DE FINANCIAMENTO NO BRASIL: UMA ANÁLISE COMPARATIVA (2004-2014)

ABSTRACT: This study investigates the relation between the corporate bond market and the main debt financing alternatives available to firms in Brazil from 2004 to 2014. In this period, three main sources of debt financing were available: loans from commercial banks, loans from the National Development Bank, and the issuance of international bonds. We analyze the characteristics of each alternative, as well as their advantages and disadvantages in relation to corporate bond issuance, considering three main aspects: i) total cost, which includes the interest rate, taxes and fixed costs; ii) maturity; and iii) contracting speed. The results corroborate the initial hypothesis that, although the alternative debt sources competed with corporate bonds, there was also a complementary relation among them.

Assessing the Impact of Dividend Policies on the Market Valuation of Development Banks in Nepal

This research delved into the assessing the impact of dividend policies on the market valuation of development banks in Nepal. Employing a cross-survey methodology, the study utilized data from secondary sources, specifically the annual reports of various development banks. The sample for the study included four national development banks, covering the time span from 2014/15 to 2020/21. Both descriptive and inferential statistical techniques were applied in analyzing the data. The dependent variable in this research was the market price, with independent variables including the price-earnings ratio, dividends, and earnings. The results indicated that price-to-earnings ratios and earnings per share exerted a positive and significant influence on the market price. Conversely, dividends per share showed no impact. Consequently, the market price movement is not consistently determined by the dividends paid out by the company.

The COVID-19 Response of BRICS and Multilateral Development Banks

This article conducts an analysis of the BRICS member countries in terms of their national and international institutions, with a special emphasis on how these institutions affect the stability of the global financial system and the promotion of development. To this end, the work was guided by the attributions of national central banks and the role played by the G20 in maintaining international financial stabilization. Additionally, the analysis examines the activities of national development banks and their institutions established within the BRICS nations, such as the Contingent Reserve Arrangement and the New Development Bank. The descriptive method was used to interpret the dynamics of international political and legal relations. The article concludes by recognizing the decreasing significance of multilateral solutions and highlighting the need for the national central and development banks of the BRICS countries to engage in communication with international organizations of financial cooperation.

Os Bancos de Desenvolvimento multilaterais, nacionais e subnacionais: os países emergentes e o financiamento ao desenvolvimento

Development Banks are financial institutions designed to promote socioeconomic development, infrastructure, reduce inequalities and provide working capital to increase the country’s economic activity. Brazil stands out for the presence of three national development banks: (i) National Bank for Economic and Social Development (BNDES); (ii) Bank of the Northeast of Brazil (BNB); and (iii) Bank of the Amazon (BASA). In addition, there are three subnational banks: (i) Minas Gerais Development Bank (BDMG); (ii) Regional Development Bank of the Far South (BRDE), and the Espírito Santo Development Bank S.A. (BANDES). At the international level, two major groups of multilateral development banks are recognized: (i) the traditional banks that were created in the second half of the 20th century, such as the World Bank, the Inter-American Development Bank (IDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB); and (ii) the new multilateral banks, created in the 21st century at the initiative of emerging countries, such as the New Development Bank (NDB) or Bank of the BRICS, the Latin American Development Bank or Andean Development Cooperation (CAF) and the Asian Infrastructure and Investment Bank (AIIB). Emerging countries, either by creating national and subnational banks or by taking the initiative to establish new multilateral banks, represent an important group of states to contribute to increasing of investment availability for development and infrastructure.

Brazil’s national champions strategy (2007–13): A critical appraisal

The recent multiple crises have led to a renaissance of the role of the state in the economy throughout the world. Hence, industrial policy is once again back at the agenda of academic and policy debates in advanced as well as emerging economies. We want to contribute to this debate by discussing the controversial results of a recent case of industrial policy—the “national champions” strategy of the Brazilian National Development Bank (BNDES) between 2007 and 2013. Being the centerpiece of Brazil’s move toward a more state-led economic model in the late 2000s, its successes and failures should be of great importance to the ongoing debate about industrial policy, state capitalism, and development. The national champions strategy has become an integral part of contemporary state capitalist models, with China being the most outstanding example. By looking at the Brazilian case, an upper-middle income democracy, and therefore a more representative case for countries with similar political settings, the paper aims to provide a critical appraisal of revived industrial policies in the early 21stcentury as a separate policy tool of the newly emerging variety of state capitalism. We apply a political economy approach to highlight the context-sensitivity and institutional embeddedness of firms and the complementarities between several institutional spheres as resources and constraints for companies’ competitiveness and internationalization. The paper aims to contribute to the current debate about state-financed firm internationalization in general and the viability of a national champions strategy in particular.

Кредитний портфель українських банків: аналіз впливу воєнного стану

In 2022 and at the beginning of 2023, the financial system of Ukraine proved its institutional capacity. The results of the banks' activities in 2022 confirm their significant contribution to its stabilization during the period of full-scale Russian aggression. The measures of the monetary authority were more balanced and effective compared to the events of 2014-2015. The current state of the banking system proved the integration of Ukrainian banks into the European financial space. Problem Statement. Systematization of problems and approaches to the strategic development of the banking system in the period of post-war economic recovery and its impact on the general security of money circulation in the country.The given calculations and graphs make it possible to compare the trends in the main markets of banking operations in 2014–2023. Purpose. To assess the current state of dynamics of active and passive operations of Ukrainian banks after the pandemic crisis and in the midst of full-scale Russian aggression, as well as the impact of their activities on the development of the real sector. Methods. General scientific and special methods are used: analysis, synthesis, grouping, description, comparison, theoretical generalization and abstract-logical. Results. The dynamics of changes in the resource base of banks at the expense of legal entities and individuals, as well as their credit and investment portfolios, are presented. The main macroeconomic strategies of monetary policy, which influenced the development of banks in 2014–2023, were considered. The importance of resuming the cooperation of the Government of Ukraine with international financial organizations in 2023 and further institutional development of the banking system was emphasized. Conclusions. The quality of management of the financial sector and the banking segment, in particular in 2022, is higher than in 2014. The bank-centric financial system that has developed in Ukraine should have a long-term strategy for the development of institutions along with a transparent mechanism for evaluating the quality of their management. For the development of the banking system in order to improve the resource provision of the economy, it is necessary to return to the idea of creating a national reconstruction and development bank, a bank of assets damaged and destroyed by the war.

Assessing the Impact of Liquidity Ratio Requirements on the Financial Performance of Commercial Banks in Kenya

In practice, some commercial banks in Kenya are presently facing liquidity challenges for instance the National Bank, Consolidated Bank, and Development Bank of Kenya. For instance, as of December 2017, the Development Bank of Kenya posted a negative liquidity position at 21.6% against the required legal threshold of 20%. For the National Bank of Kenya, the close of 2017 saw the total deposit liability standing at negative 5.5%, while core capital to total assets averaged negative 7.9%. As of 2018, NBK registered a drop in profit by 84% to stand at Kshs. 21.97 billion. The findings were that liquidity ratio requirements (β=0.345, p<0.05); cash reserve ratio requirement β=-0.008, p<0.05); loan deposit ratio requirement (β=-0.020, p<0.05) & capital adequacy ratio requirement (β=0.032, p<0.05) are significant predictors of financial performance of commercial banks in Kenya. The study concludes that liquidity requirements are a significant predictor of the financial performance of commercial banks in Kenya. The study recommends that finance managers of commercial banks in Kenya should strive to balance current assets and current liabilities to ensure they meet their obligations as they arise. The marketing managers of commercial banks in Kenya should invest more efforts in acquiring more customers for increased mobilisation of deposits. The loan officers and credit managers working in the commercial banks in Kenya should speed up the process of credit appraisal of customer loan application process to increase the uptake of loans which are key sources of interest income to these institutions. The shareholders of the commercial banks in Kenya should ensure that their institutions are adequately capitalised so that they are able to withstand inherent shocks occasioned by liquidity constraints likely to negatively impact financial performance. The findings are expected to shed more light on the critical role played by liquidity requirements as far as financial stability and resilience of the banking sector in Kenya are concerned

Assessing the Sustainability Development Goals on Climate and Energy Financing Policies: A Bibliographic Analysis

Financial policy and sustainability can play a critical role in reducing the harmful effects of climate change and hastening the shift to a low‐carbon, more sustainable economy. Monetary policy can be used to encourage the creation of new technologies that can lower greenhouse gas (GHG) emissions, such as research and development (R&D) tax credits, government grants, and other types of financial assistance. These include targeted lending, green bonds, loan guarantees, weather‐indexed insurance, tax credits, feed‐in tariffs (FiT), national development banks (NDBs), national climate funds, and disclosure regulations. This evidence review examines the effects of financial policy on climate change and energy transitions. Careful design and implementation are crucial for the success of loan guarantee programs. Nations have used a variety of policy tools to support climate change and sustainable energy initiatives. The success of these programs must be understood to determine the best approaches for designing and implementing loan guarantee policies. The studies reviewed classified climate finance policies into seven categories based on their functions: regulation and guidelines, market‐based incentives, financial measures, information and capacity, de‐risking, domestic and international public finance, and other. National development banks have a clear public policy mission to support low‐carbon development in a particular nation.

Development Financial Institution (DFI) Employees’ Awareness and Perceptions of Anti-Money Laundering (AML) Practices and Cybersecurity Techniques

The purpose of this study was to assess employees’ perceptions of anti-money laundering practices at the National Development Bank in Botswana. The study used a quantitative approach. A population of 84 respondents who are employees of a development financial institution (DFI), the National Development Bank (NDB) of Botswana was sampled in this study. Out of these, 36 respondents were selected through a stratified random sampling method to ensure representation in all strata. A self-administered questionnaire was used to collect data. The study found that employees of National Development Bank understand the concept of money laundering and the stages involved in money laundering. Secondly, the study established that the main causes of money laundering were corruption, politicians and prominent person’s influence, and weak banking and financial systems. Thirdly, the study established that money laundering is harmful to the economy in different ways that include increased national crime, increased corruption, and negative effects on the economy. The study recommended that the management of NDB should adopt anti-money laundering/ combating/ counter-terrorism financing (AML/CFT) regulations laid out by regulating bodies including those of the Financial Action Task Force (FATF), Bank of Botswana and the Financial Intelligence Agency (FIA). In addition to this, the bank management should expose its employee to continuous knowledge of ML/FT through in-house training and external workshops with other industry stakeholders. The bank should also adopt a robust record management system that is able to capture all transactions taking place within it. The system should be robust enough to flag suspicious ML/FT activities taking place through transactions carried out within the bank.

Financial geography I: The state-finance nexus

In the first of my reports on financial geography, I focus on a growing body of work that engages with the state as a vital and strategic actor in financial markets and in the global economy. After the 2008 global financial crisis, austerity measures and impacts on public finance have reshaped local-central government relationships with increasing use of financial instruments and market solutions. The growing prominence of sovereign wealth funds, shifting roles of national development banks and central banks, and impacts of currency internationalisation are raising questions about new forms of financial statecraft and opportunities for changing configurations of global hegemony. Taken together, a renewed engagement with a political economic lens and focus on state-finance relations illuminate the changing positionalities of economies and financial actors in the spatial organisation of international financial and monetary relations.

Money pills: corporate political activity effect on mergers and acquisitions

PurposeThis study aims to contribute to the corporate political activities (CPAs) field by suggesting the effect of campaign contributions on the time that firms wait for regulators’ decisions.Design/methodology/approachThis paper analyzes 358 mergers and acquisitions (M&A) from 2008 to 2017 in Brazil through ordinary least squares regression with robustness control and causal operationalization in a small vote margins treatment.FindingsCampaign contributions speed up the M&A regulator’s decisions. Campaign contributions amounts proved to be effective in decreasing the waiting time for judgments of M&A deals. Besides, National Development Bank disbursements to companies in M&A deals, served as a moderator to help reduce the waiting time.Research limitations/implicationsThe main implication of this paper to the antecedents of CPA research is the estimation of time as an output of the political efforts of firms. Previous research focuses on what firms could get. Here, the authors focus on when. As a limitation, this study analyzes CPA through campaign contributions, as the only reliable source of CPA publicly available. Firms use multiple mechanisms of CPA. It would be expected for new papers to test different CPA mechanisms, such as political connections and lobbying.Practical implicationsThis study provides evidence of the use of CPA as a relevant mechanism for firms to avoid institutional risks by getting regulators’ decisions faster. This evidence is useful for firms to grant their competitive advantage in a highly volatile environment, such as an emerging market.Social implicationsWhat happens in the nonmarket environment interferes within markets. Businesses seek to finance political projects with which they are more aligned, and governments provide capital to businesses in exchange for political support. Whether to expand successfully may also depend on early entrants, who will have acquired enough leadership to dominate the market.Originality/valueWhile most of the research on nonmarket strategy focuses on what firms can get as an output for CPA efforts, this study provides here evidence on when firms can get it. As one can cite, in business, time is money.

A theory of National Development Bank: long-term investment and the agency problem

AbstractThis paper applies the contract theory to study the role of National Development Bank (NDB) in financing infrastructure investment. We first show that to mitigate overrun issues resulting from the agency problem during the infrastructure construction, the government uses mixed financing strategy combining fiscal funding with NDB loans. We then endogenize the NDB investment strategy to study the determinants of NDB profit and use cross-country panel data to empirically test our model predictions.

Can National Development Banks Help Alleviate the Shortage of Patient Investment Capital in Africa? Evidence from Bank-Level Panel Data

ABSTRACT National development banks remain an important part of modern financial systems in developed as well as developing countries. They play an important role in providing long-term financing and countercyclical financing during financial and economic crises. In this context, this article aims to provide empirical evidence of the role of national development banks in Africa in providing medium-term and long-term credit and their performance in managing resources, using bank-level data from selected countries and the BankFocus database (maintained by Fitch and Bureau Van Dijk). The empirical results show that while national development banks do not lend more relative to commercial banks, they outperform the latter in focusing on medium-term and long-term loans, which is consistent with their mandate. The results further confirm that national development banks incur more risk, resulting in relatively higher nonperforming loan ratios. As expected, national development banks are not more profitable than commercial banks in general, but they do perform better when they are located in countries with relatively more developed financial systems. The results are similar for public banks. The evidence suggests that strengthening the lending capacity of national development banks would significantly help alleviate the shortage of patient investment capital; i.e., medium-term and long-term credit in African economies. The article discusses policy implications and proposes some avenues for further research.

The Role of National Development Banks on Economic Growth: BNDES Case

In this paper, the effect of loans from Brazilian Development Bank (BNDES) on economic growth is evaluated from different aspects: total loans, loans by maturity, sectorial distribution of loans and loans by currency. FMOLS, DOLS and CCR methods are applied for 2002q1-2022q3 periods. Then, the paper also uses OLS estimation method to check the results. The findings show that total loans have a positive effect on economic growth. Additionally, different types of loans are positively related to economic growth, as well. So, National Development Banks (NDBs) may be the most important tool to stimulate economic growth through different types of loans.

The Janus face of stateness: China's development-oriented equity investments in Africa

The post-2008 financial crisis era has witnessed a significant change in the global development landscape. Fiscal challenges have led countries that historically provided state-led, gift-like development assistance to adopt a more market-based means of development finance driven by self-interest. This allows us to reconsider the roles of the state and the market in development by focusing on the China-Africa Development Fund (CADFund), China's first official development-oriented investment fund and a subsidiary of the China Development Bank, the world's largest national development bank. This paper draws from interviews and participant observations involving CADFund, its partners, and project companies in Africa to examine how China's official finance mobilizes private investment to facilitate global development. The findings indicate that the state-led equity fund has catalyzed the start-up and expansion of Chinese overseas private enterprises by providing otherwise inaccessible equity support and channeling additional state-related resources to empower long-term business development. Meanwhile, stateness has created an adverse selection problem, preventing CADFund from choosing the most financially promising projects or withdrawing from the failing ones. The paper sheds light on the potential challenges facing development finance institutions in employing equity investment as a tool for reconciling long-term development objectives and short-term commercial objectives.

Does not having an NDB disadvantage a country in finance mobilization for the energy transition? A comparative analysis of the solar PV deployment in the United States, Germany and China

Finance is crucial for the low-carbon energy transition. This research takes the solar PV technology as an example to explore whether having state-owned financial institutions, such as national development banks (NDBs), offers advantages in a country for mobilizing finance. By focusing on three selected country cases (The United States without NDBs, Germany with a big NDBs, and China with huge NDBs), the paper first reviews the evolution of solar PV finance mobilization in the three countries from the 1990s to 2018. It then examines the financial strategies and impacts of NDBs and the alternative approaches that the three countries use to address financial challenges for solar PV deployment at different stages. The paper finds that NDBs' direct financier role in the early deployment stage is most important and irreplaceable. Alternative policies can fulfill most facilitative roles of NDBs in unlocking private finance, except NDBs' learning bank role. NDBs' role in channeling information between governments and markets is also hardly replaceable. The paper provides insights for policymakers and implementers of countries aiming to set up NDBs to scale up low-carbon energy technologies.