September 19, 2017

José de Luna Martínez

Lead Financial Sector Specialist

FINDINGS OF THE 2017

GLOBAL SURVEY ON

DEVELOPMENT BANKS

Contents

1

2

3

Background Information

Main Findings

Challenges for DFIs

KfW(Germany)

China Development

Bank

Brazil National Development

Bank

Malaysia Development

Bank

NABARD (India)

Vietnam Bank for Social Policies

Development Bank of

Southern Africa

Agriculture Bank of Turkey

Banobras(Mexico)

• WBG is also DB

• Our collaboration with DBs has been historicallyimportant through lending, TA, capacity building, etc.

Development Banks

4

- What is a good example of an SME developmentbank, agriculture bank, infrastructure bank, etc.?

- Should DBs provide lending at subsidized interestrates? If so, how can a DB become financially self-sustainable?

- Should DBs be regulated in the same way thatprivate banks are?

- As government-owned institutions, how can DBs beprotected from undue political interference?

- What are the best tools to monitor and assessperformance and economic impact of DBs?

Typical Queries Received by the WBG

Topics Covered in the 2017 Survey

(12 topics with 150 questions)

Policy

mandatesOwnership

Composition

of loan

portfolio

FundingBusiness

models

Pricing of

products

RegulationCorporate

governance

Financial

performance

Monitoring

and evaluation

practices

Restructuring Challenges

Survey Coverage (2011 and 2017) 135 DBs from 76 Countries

Africa Asia Europe and

Central Asia

Americas Middle East and

North Africa

1. Angola

2. Cote d’Ivoire

3. Democratic

Republic of

Congo

4. Gabon

5. Ghana

6. Kenya

7. Mauritanie

8. Nigeria

9. Rwanda

10. Senegal

11. South Africa

12. Sudan

13. Swaziland

14. Tanzania

15. Uganda

16. Zimbabwe

17. Bangladesh

18. Bhutan

19. Cambodia

20. China

21. Cook Islands

22. Micronesia

23. Fiji

24. India

25. Malaysia

26. Mongolia

27. Nepal

28. Niue Island

29. Pakistan

30. Palau

31. Philippines

32. Republic of

Vanuatu

33. Samoa

34. Sri Lanka

35. Thailand

36. Tonga

37. Vanuatu

38. Vietnam

39. Austria

40. Bulgaria

41. Croatia

42. Finland

43. Germany

44. Hungary

45. Latvia

46. Norway

47. North Cyprus

48. Poland

49. Russia

50. Slovakia

51. Slovenia

52. Switzerland

53. Turkey

54. Antigua and

Barbuda

55. Argentina

56. Bolivia

57. Brazil

58. Canada

59. Chile

60. Colombia

61. Costa Rica

62. Curacao

63. Dominican

Republic

64. Ecuador

65. El Salvador

66. Guatemala

67. Mexico

68. Paraguay

69. Peru

70. Uruguay

71. Venezuela

72. Egypt

73. Kuwait

74. Morocco

75. Oman

76. Tunisia

13%

33% 33%

20%

0%

5%

10%

15%

20%

25%

30%

35%

Before 1945 1945 to 1979 1980 to 1999 Since 2000

DBs by Year of Establishment

• New national institutions: Development Bank of Austria, PT Sarana

Multi Infrastruktur (Persero), SFIL (France) and Development Bank

of Nigeria.

• New institutions at regional level: Asian Infrastructure Investment

Bank and New Development Bank (BRICs Development Bank).

After the Global Financial Crisis (2010-2015)

• As a group, DBs experienced 64% growth in their lending portfolios

for the period 2010 to 2015 or 13% per year.

• 82% of all DBs in the survey had positive growth and only 18%

negative growth in their loan portfolios.

The Countercyclical Role of DBs

Policy Mandates of DBs

DBs by Type of

Mandate

Market niche Percent of

DBs in the

survey

1. Specific 50%

Agriculture 5%

SMEs 13%

International trade 11%

Housing 2%

Infrastructure 8%

Local governments 3%

Savings and microfinance 8%

2. Broad 50%

Total 100%

Target Market % of DBs

SMEs 83%

Large private corporations 78%

Other financial institutions 58%

State-owned enterprises 49%

Individuals and households 41%

Local governments 36%

• Among DBs, there is a strong orientation to serve the private

sector (SMEs and large private corporations)

• Also,there is a strong orientation to provide financing to private

financial institutions in order to reach out end-customers

What are the target markets of DBs?

Regulation and Supervision of DBs Yes No

Is the DB supervised by the same institution that supervises

private commercial banks? 72% 28%

If you follow the Basel Capital Accord, do you apply:

Basel 1

Basel 2

Basel 3

24%

44%

31%

Is your institution rated by an international rating agency? 54% 46%

Regulation and Supervision of DBs

• 73% of DBs are fully owned by the State.

• Private sector is a minority shareholder in 24% of DBs.

• In 3% of cases, the State is a minority shareholder.

Percentage of State Ownership in DBs

73%

24%

3%State owns 100%

State owns 50% to99%

State owns lessthan 50%

Most DBs are Owned by the State

Boards of DFIs are dominated by government

representatives:

• Average board size is 9 members with a wide range of

government representatives (Ministries of Finance, Labor,

Social Affairs, Housing, Trade, Industry, etc.)

• Although 83% of boards in DBs have independent members,

they are usually a minority in the board.

• By large, the government appoints all board members and

CEOs of the DBs.

Corporate Governance of DBs

14

Main Challenges Faced by DBs

•1. Strengthen risk-management capacity

•2. Become financially self-sustainable

•3. Improve corporate governance and transparency

•4. Acquire more flexibility to hire and retain highly qualified staff

•5. Reduce undue political interference

Category 1

Poorly prepared

Category 2

Satisfactorily

prepared

Category 3

Well prepared

• High dependence on

government funds

• Recurrent financial

losses

• Conflicting social

and economic

objectives

• Limited economic

impact

• Vulnerable to undue

political interference

• Profitable institutions

• Well-administered

Fbut there is room to

improve:

• Policy mandates

• Corporate governance

• Risk management

• Financial strength

• High innovation

capability (financial

products, outreach

target market in

collaboration with

private financial

institutions)

• Right combination of

financial and advisory

services

• High standards of

corporate governance

and accountability

Are DBs Ready to Fulfill

their Developmental Mandates?

16

Conclusions

• DBs remain an important policy tool to foster economic

development around the world.

• More than ever, DBs can play a catalytic role by crowding in

private sector institutions into strategic sectors of the economy

or serving specific niches of the market.

• Although some DBs perform well, others underperform.

• Strengthening DBs requires revising their policy mandates,

upgrading governance structures, enhancing regulation and

supervision, enhancing business models, and strengthening risk

management.

THANK YOU