• logo linkedin
  • logo email
matching-risks-instruments-development-banks

This paper explores how development banks should deploy appropriate financial instruments to encourage real economic risk-taking while minimizing financial engineering risks. We distinguish real economic risks from financial engineering or intermediary risks and argue that using complex financial instruments to leverage additional private financing may undermine policy steer and lead to too much risk being taken by development banks. We then explore comparative advantages of different financial instruments such as loans, guarantees, equity, and insurance in tackling risks in normal times. Then we synthesize common features of development banks’ responses to the COVID-19 crisis. Finally, we propose future research directions.

This Research Paper is published in the framework of the International Research Initiative on Public Development Banks working groups and released for the occasion of the 14th AFD International Research Conference on Development

It is part of the pilot research program “Realizing the Potential of Public Development Banks for Achieving Sustainable Development Goals”. This program was launched, along with the International Research Initiative on Public Development Banks (PDBs), by the Institute of New Structural Economics (INSE) at Peking University, and sponsored by the Agence française de développement (AFD), Ford Foundation and International Development Finance Club (IDFC).

Have a look on the key findings for a quick overview of the research results

See the video pitch

 

author(s) :
Stephany GRIFFITH-JONES
Shari SPIEGEL
Jiajun XU
Marco CARRERAS
Natalya NAQVI
coordinator :
Jiajun XU, Stephany GRIFFITH-JONES, Régis MARODON
collection :
Research Papers
issn :
2492 - 2846
pages :
39
number :
170
available also in : fr en