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National development banks

The Addis Agenda notes the role that well-functioning national development banks can play in financing sustainable development, with a countercyclical role, especially during crises. Specifically, the Addis Agenda calls on national banks to expand their contributions in relevant areas.

Trends and growth

National Development Banks (NDBs), as outlined by Povel et al (2015), usually limit their activities to the territory of their owners. They tend to concentrate on the promotion of the domestic economy, environmental protection, communal infrastructure, housing and education. Loans, sometimes with a targeted concessional element, are their main promotional instrument, though they also use equity, grants and other instruments in some cases.

A global survey of development banks carried out by the World Bank in 2012, which defined development banks as at least 30 percent state-owned, and with a legal mandate to reach socioeconomic goals, found that National Development Banks were the main source of long-term credit in many middle income economies, and also played an active role in strategic sectors in some developed economies.

As shown in the chart, between 2007 and 2009, the combined loan portfolio of development banks increased from $1.16 trillion to $1.58 trillion dollars. In nominal terms, this 36 per cent increase, in just three years, is well above the 10 per cent increase in commercial bank credit for the countries surveyed during the same period. Regionally, the loan portfolios of NDBs in Asia experienced the highest growth rate (72 per cent) in this period, followed by Americas (70 per cent), Africa (60 per cent), and Europe (12 per cent), during 2007-2009.

More recent data from a study of Gallagher and Sklar in 2016 which covers well over 250 national development banks, estimate these banks held approximately $5 trillion in assets, considerably more than the just over $1 trillion held by the MDBs. According to the same study, the renewed interested and growth of NDBs is for at least three reasons. First, there was increasing evidence that part of the successful development experiences in the 1970s and 1980s, and the Chinese growth miracle in recent decades has had a lot to do with the existence and expansion of NDBs. Second, the commodity boom from 2003 to 2013 increased the reserve assets of many developing countries. These countries sought to re-capitalize the MDBs but were only successful in doing so at the margins because of resistance from the industrialized countries. Finally, some countries feel not fully represented by the MDBs and have sought to reinvigorate their own national and multilateral developmental institutions.

In comparison to the national banking systems, most individual NDBs tend to be relatively small institutions, holding a small share of the market in terms of assets. The World Bank survey found out, that individual NDBs account usually for less than 3% of the assets of the banking systems of the countries in which they operate. A well-known exception is Brazil National Development Bank (BNDES), which accounts for about 10% of the market.

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The table zooms in to a couple of the larger markets for NDBs, for comparison, the International Bank for Reconstruction and Development (IBRD) had in 2016 total loans outstanding of USD 170 billion. In a few large economies, some individual NDBs also have a significant share of the market. For instance, the National Development Bank of Brazil (BNDES) accounts for 10% of the total assets in their banking systems. It must be noted that BNDES recently scaled back its lending activities following economic recession and a change of government in Brazil.

Assets and loan portfolio of selected NDBs (United States dollar billions)



Total Assets

Total Loans


China Development Bank








National Development Bank of Brazil




IFCI Limited



Industrial Credit and Investment Corporation of India



Industrial Development Bank of India



Infrastructure Development Finance Company



India Infrastructure Finance Company Limited



Subtotal India NDBs



South Africa

Industrial Development Corporation



Development Bank of Southern Africa



Total NDBs



Source: Gallagher and Sklar (2016)



Some other National Development Banks have become large players in their banking systems as well, particularly in small economies. For example, the Development Bank of the Cook Islands accounts for 11 per cent of total assets in the banking system, Fiji Development Bank for 11 per cent, and Rwanda Development Bank for 12 per cent.

Market share of selected NDBs, 2009 (percentage of total assets of their banking systems)

Development bank Market share
Agricultural Bank of Turkey 15%
Rwanda Development Bank 12%
Fiji Development Bank 11%
Brazil National Development Bank 10%
Land Bank of Philippines 9%

Source: World Bank Global Survey of Development Banks, 2012

NDB green finance

The International Development Finance Club (IDFC), consisting of 23 national, bilateral and regional development banks, monitors its members’ commitments for climate and other environmental financing. In 2014, IDFC members committed $98 billion to climate change mitigation, adaption and other environmental projects, similar to financing levels in 2013. Two-thirds of this financing was dedicated to green energy and climate change mitigation, with the vast majority provided as either concessional or non-concessional loans.

Challenges and next steps

For the NDBs who answered the World Bank survey in 2012 the most important challenge was the need to improve their risk management capacity. This reflects the difficulties they face throughout the entire lending cycle, which includes the assessment of their prospective clients’ creditworthiness, the way they assess risks, the type of credit policies they follow, and the capability they have to collect on loans or execute collateral, whenever applicable.

Another key challenge, indicated by NDBs, was the need to become a financially self-sustainable organization, reflecting perhaps a need to reduce their reliance on governmental budget transfers and to improve their own profitability.  The need to improve corporate governance and transparency was mentioned in the Survey, as well as reducing undue political interference.

For the future the role of National DBs as instrument of governments to promote economic growth by providing credit, loan guarantees, other financial instruments (e.g. revolving funds) are set to become important. The World Bank Survey, 2012 has shown that in most countries in Asia, Latin America, Africa, and Europe, NDBs assumed a countercyclical role during the financial crisis by scaling up their lending operations exactly when commercial banks experienced temporary difficulties in granting credit to the private sector.

Ahluwalia et al, 2016 made recommendations for development banks, with emphasis on infrastructure lending devoted exclusively to developing and financing green investment. Furthermore, they stress the effective use of the full range of financial instruments and policy conditions and the crowding in of private investment. This involves more targeted and flexible financing, stronger emphasis on catalyzing private domestic and foreign investment, and greater use of and support for countries’ domestic capital markets.