NSE Development Financing Research Report No.2 Launched——“Qualifying and Classifying Public Development Banks and Development Financing Institutions”
Today the symposium on Development Financing Workshop was held at Peking University, where the second New Structural Economics(NSE) Development Financing Report titled “Qualifying and Classifying Public Development Banks (PDBs) and Development Financing Institutions (DFIs)” (Chinese version) was launched. Building on the initiative by the development finance research program from the Institute of New Structural Economics (INSE) at Peking University to build the world’s first-ever database on development financing institutions, INSE and the French Development Agency (AFD) have collaborated to refine the qualification criteria and make classification of PDBs and DFIs. The report is co-authored by Professor Jiajun Xu (the Executive Deputy Dean of INSE), Dr. Regis Marodon (senior advisor on sustainable finance at AFD) and Xinshun Ru (research director on development financing research program at INSE). The English report will be officially launched in Rome at the second Finance in Common Summit later this year.
Although PDBs and DFIs can potentially play a more and more important role in overcoming crises, tackling climate change, and promoting economic structural transformation worldwide, there is a huge gap in terms of identifying these public financial institutions and collecting relevant data. To fill this gap, the development financing research program of the INSE devoted more than two years to build the world's first development financing institution database. In May 2019, the project team released the inaugural report entitled "Mapping Development Finance Institutions Worldwide: Definitions, Rationales, and Varieties" co-authored by Professor Jiajun Xu, Dr. Xiaomeng Ren, and Ms. Xinyue Wu at the NSE. The inaugural report proposed criteria for identifying DFIs and systematically collected them globally. The inaugural report also presented relevant stylized facts based on first-hand data collection.
Build on the INSE's inaugural report on DFIs, INSE and AFD have created synergies between INSE's academic rigor and AFD's rich practical experiences to refine the qualification criteria of the PDBs and DFIs. The refined criteria are as the follows:
(1) They have legal personality, separate financial account, dedicated personnel, and were not established for accomplishing a specific short-term goal [in distinction with government credit programs, government entities, certain trust funds managed by public institutions, special purpose vehicles, etc.].
(2) Their main products and services are to deploy financial instruments such as loans, equity, guarantee rather than providing pure grants only [in distinction from grant-execution agencies and other non-financial institutions carrying out public mission].
(3) Their funding sources go beyond periodic budgetary transfers from governments [as distinguished from aid agencies that primarily receive government budgetary transfers].
(4) They proactively pursue a public policy-oriented official mandate in their charters [in distinction with profit-driven commercial banks].
(5) They have government steering in deciding on their corporate strategies, i.e., governments initiate or establish DFIs, and sit on the Board of Directors to play a steering role in pursuing the development-oriented mandate, or provide the significant support for fund-raising) [as distinguished from grass-root organizations whose goals are in line with the public policy’s objective]
Applying the above five criteria in a consistent manner, we have identified 527 PDBs and DFIs worldwide and collected their basic information, such as the establishment year, ownership structure, geographical distribution of operation, official mandate, income levels of their countries where national PDBs and DFIs are located, as well as financial indicators such as total assets, total equity, and net profit. Furthermore, we classify the identified institutions and present stylized facts on the ownership structure (who owns it), operation scope (where is the business), scale (how big in terms of total asset), official mission (what goal) and the income level of their countries, to reveal the diversity of PDBs and DFIs.
We hope that our pilot efforts to build the world’s first database of PDBs and DFIs can promote original research on their rationale, operations, performance and effects, so as to enhance our understanding of such important public institutions and realized their full potentials.
Download the report