A Development bank is a polygonal development finance institution.
A Development Bank, also known as a Development Finance Institution (DFI), is a specialized financial institution that provides long-term capital to support economic development and growth in developing countries or regions. These institutions are usually set up by governments or international organizations, such as the World Bank, to address the lack of access to funding for investment projects that contribute to the socio-economic development of a country or region.
It is primarily devoted to improve the social and monetary development of its associate nations.
Its main emphasis is the welfare of the people. For example, the Asian Development Bank’s overarching goal is to decrease poverty in Asia and the Pacific region.
It helps improve the value of people’s lives by providing loans and scientific support for a broad variety of development activities
DFIs provide a range of financial services, including loans, guarantees, equity investments, and technical assistance, to support private sector companies, public sector entities, and other financial institutions. They typically focus on financing infrastructure projects, such as energy, transportation, water supply, and telecommunications, as well as small and medium-sized enterprises (SMEs).
DFIs also play an important role in promoting sustainable development by supporting projects that have positive environmental, social, and governance impacts. They often have strict social and environmental standards that companies must meet before they can receive financing.
DFIs play a crucial role in supporting economic development and addressing the financing gap in many developing countries, helping to catalyze private sector investment, create jobs, and promote sustainable growth.
The phrase development bank or DFI may refer to:
Community development banks (CDBs)
Community Development Banks (CDBs) are specialized financial institutions that provide financial services, such as loans and investments, to underserved and economically disadvantaged communities. They are often established by community organizations or local governments to address the lack of access to credit and banking services in low-income areas.
CDBs operate on a community development model, which means they prioritize community development and social impact over profit maximization. They typically offer loans and other financial products to support affordable housing, small businesses, and other community development projects.
In addition to traditional banking services, CDBs often offer financial education and other support services to help individuals and small businesses improve their financial literacy and capacity. CDB fund low-income areas in India.
International financial institutions (IFIs)
International Financial Institutions (IFIs) are organizations that provide financial assistance and support to countries, typically in the form of loans, grants, technical assistance, and other financial products. These institutions are often established by a group of countries or by the international community to promote economic growth, alleviate poverty, and address other economic and social challenges faced by developing countries.
There are several types of IFIs, including:
- Multilateral Development Banks (MDBs) – These are financial institutions owned and operated by multiple countries, including the World Bank, Asian Development Bank, African Development Bank, Inter-American Development Bank, and European Bank for Reconstruction and Development.
- Regional Development Banks – These institutions focus on providing financial support to specific regions, such as the Caribbean Development Bank, Islamic Development Bank, and the New Development Bank (formerly the BRICS Development Bank).
- International Monetary Fund (IMF) – The IMF is a global organization that provides loans and other financial assistance to countries facing economic challenges.
- Export Credit Agencies (ECAs) – These institutions provide financing and insurance services to support international trade and investment, such as the Export-Import Bank of the United States and Export Development Canada.
IFIs play a crucial role in supporting economic development and poverty reduction in developing countries, promoting sustainable growth, and providing financial stability in times of economic crisis. They often require borrowers to meet certain economic, social, and environmental standards to ensure the projects they support are sustainable and inclusive.
National development banks (NDBs)
• government-owned financial institution that provides financing for economic development.
National Development Banks (NDBs) are specialized financial institutions that operate at the national level and provide financial services and support to promote economic development in a specific country or region. They are often established by governments or central banks to address the lack of access to funding for investment projects that contribute to the socio-economic development of a country or region.
NDBs provide a range of financial services, including loans, guarantees, equity investments, and technical assistance, to support public sector entities, private sector companies, and other financial institutions. They typically focus on financing infrastructure projects, such as energy, transportation, water supply, and telecommunications, as well as small and medium-sized enterprises (SMEs).
NDBs often prioritize national development goals and social impact over profit maximization. They also play an important role in promoting sustainable development by supporting projects that have positive environmental, social, and governance impacts. They may require borrowers to meet certain social and environmental standards before they can receive financing.
NDBs often work in collaboration with international financial institutions, such as multilateral development banks and export credit agencies, to leverage funding and expertise. They also work closely with local communities and stakeholders to ensure that the projects they support are inclusive and responsive to local needs.
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