Development finance institution

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A development finance institution (DFI) or development bank is a financial institution that provides risk capital for economic development projects. They are often established by governments or charitable institutions to provide funds to 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.

DFIs can include multilateral development banks, bilateral development banks, microfinance institutions, community development financial institution and revolving loan funds.[1] 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.[2] 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).[2] 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.[2]

Development banks include:

References[edit]

  1. ^ Andrea Levere, Bill Schweke, and Beadsie Woo, Development Finance and Regional Economnic Development, Washington, DC: CFED, July 2006
  2. ^ a b c Dirk Willem te Velde and Michael Warner (2007) Use of subsidies by Development Finance Institutions in the infrastructure sector Overseas Development Institute