FINDINGS OF THE 2017 GLOBAL SURVEY ON DEVELOPMENT BANKS September - - PowerPoint PPT Presentation

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 historically important through lending, TA, capacity building, etc.

Development Banks

4

• What is a good example of an SME development

bank, agriculture bank, infrastructure bank, etc.?

• Should DBs provide lending at subsidized interest

rates? If so, how can a DB become financially self- sustainable?

• Should DBs be regulated in the same way that

private banks are?

• As government-owned institutions, how can DBs be

protected from undue political interference?

• What are the best tools to monitor and assess

performance and economic impact of DBs?

Typical Queries Received by the WBG

Topics Covered in the 2017 Survey (12 topics with 150 questions)

Policy mandates Ownership Composition

• f loan

portfolio Funding Business models Pricing of products Regulation Corporate 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

• f 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% to 99% State owns less than 50%

Most DBs are Owned by the State

Boards

• f

DFIs are dominated by government representatives:

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

government representatives (Ministries

• f

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

• bjectives
• 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

• r 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