Development Banks Impact on Economic Development

3189 Words Apr 30th, 2011 13 Pages




APRIL 3, 2011

Financial Sector

An economy’s financial markets are critical to its overall growth and development. Banking systems and stock markets enhance growth and are considered the main factor in poverty reduction. Strong financial systems provide reliable and accessible information that lowers transaction costs, which in turn bolsters resource allocation and economic growth. Development Banks are one such member of the financial institutions that can affect growth and development of a country and the regions within its sphere of influence if it provides the accessibility, stability, and efficiency in financial resource allocation to deficit
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2. It is a specialized financial institution which provides medium term and long-term lending facilities. 3. It is a multipurpose financial institution. Besides providing financial help it undertakes promotional activities also. It helps an enterprise from its planning to operational level. 4. The objective of these banks is to serve public interest rather than earning profits. 5. Development banks react to the socio-economic needs of development 6. The role of a development Bank is of a Gap Filler. When assistance from other sources is not sufficient then this channel helps. It does not compete with normal channel of finance. 7. Development banks primarily aim to accelerate the rate of growth. It helps industrialization specific and economic development in general
Principal Source of Funds for Development Banks (Resources Available) Most Development Banks including the Caribbean Development Banks source of funds are of two kinds: ordinary operations and special operations. Ordinary operations are financed from share capital, the proceeds of loans raised in capital markets or borrowed or otherwise acquired by e.g. CDB for inclusion in its Ordinary Capital Resources (OCR) and its ordinary reserves.

Regionally, CDB special operations are financed from the Special Development Fund (SDF) (see Appendix C) and
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