Multi-stakeholder Consultation on Financing for Development in the Asia-Pacific Region.
Organised byThe United Nations - Department of Economic and Social Affair
in collaboration withAssociation of Development Financing Institutions in Asia & the Pacific
“Development Financial Institutions at Cross-roadsRethinking their Role & Systemic Reforms”
Presented by
Dr. Sailendra Narain
ChairmanCentre for SME Growth & Development Finance (CESMED)
( E:mail - [email protected] )
CESMED
DFIs and Economic Development
* DFIs: Systemic and institutional importance
* DFIs’ contributions in the last 5 decades
* Millennium Goals :
- Financing for Development (FfD)and role of DFIs
DFIs at Cross- Roads
Development Financial System going out of focus
DFIs’ sagging financial health made them uncompetitive DFIs: Obstacles & Limitations
Resources Cost Legal Restrictions Rigid EnvironmentBanks’ Competition
Development Financing : An Overview
• Regional Economic Contributions by DFIs
• Asia - Africa - Latin America
• Greater Mekong Sub-region (GMS) – Economic Corridors
• India- DFIs Performance & FICCI Survey results
GMS – Economic Corridors
Indian DFIs PerformancePerformance of DFIS - India
0
2000
4000
6000
8000
10000
12000
14000
1998-99 1999-00 2000-01 2001-02 2002-03
Sanctioned
Disbursed
(Rs. Million)
Year Sanctioned Disbursed
1998-99 8103 5905
1999-00 10197 7097
2000-01 11908 7650
2001-02 7969 6389
2002-03 3629 3072
Indian DFIs - FICCI Survey Results
RESPONDANTS’ REPLIES- GRAPHIC PRESENTATION( Source : FICCI Research Paper )
PLANS FOR FRESH INVESTMENTS IN NEAR FUTURE
Yes89%
No11%
Yes
No
PROPORTION OF PROJECT COST TO BE MET FROM DEBT FINANCE
1
10
7
20
22
24
7
9
0
5
10
15
20
25
30
Less than 20 20-40 40-50 50-60 60-70 70-80 80-90 90-100
PROPORTION OF DEBT FINANCE
PRO
POR
TIO
N O
F R
ESPO
ND
ENT
DFIs NOT ACTIVE IN THE LAST FIVE YEARS
Yes73%
No8%
Can's say19%
Yes
No
Can's say
ARE DFIs USEFUL FOR RAISING LOW COST LONG TERM DEBT FUNDS
Yes31%
No44%
Can's say25%
Yes
No
Can's say
EMERGENCE OF ALTERNATE FUNDING STRUCTURES IN THE LAST FIVE YEARS
Yes52%
No48%
Yes
No
SIZE DISTRIBUTION OF RESPONDENTS WHO FEEL THAT ALTERNATE FUNDING STRUCTURES FOR RAISING DEBT FINANCE
HAVE NOT EMERGED IN THE LAST FIVE YEARS
Less than 1000 million50%
1000-2000 million14%
2000-3000 million10%
3000-4000 million7%
4000-5000 millon5%
5000 million & above14%
SIZE DISTRIBUTION OF RESPONDENTS WHO FEEL THAT ALTERNATE FUNDING STRUCTURES FOR RAISING DEBT FINANCE HAVE EMERGED
IN THE LAST FIVE YEARS
Less than 1000 million25%
1000-2000 million13%
2000-3000 million6%3000-4000 million
8%4000-5000 millon
2%
5000 million & above46%
ARE UNIVERSAL BANKS OF ADEQUATE HELP IN RASING LONG-TERM PROJECT FINANCE?
Yes20%
No40%
Cannot Evaluate 40%
Yes
No
Cannot Evaluate
SHOULD DFIs BE REVIVED
Yes80%
No10%
Can't say10%
Yes
No
Can't say
Whether Development Finance Still Relevant ?
• The Premise:- Development financing as a system and DFIs as an institution are central & essential for development
- DFIs & commercial banks should co-exist rather than compete
- Given this premise:= DFIs need to be made competitive & viable= DFIs’ traditional role must change with systemic reforms
Suggested Road-Map
• DFIs to be brought back in sharp focus• Policies of Governments’ & Central Banks’ to be re-oriented• Friendly enabling environment, level-playing field, restructuring
and setting up special fund for resource support• Linking Micro Finance Institutions (MFIs) with formal DFIs
Issues for Discussion
• Are DFIs still relevant? Whether they should perish or survive ?
• If DFIs are central to the development process, how can they be made viable, relevant and competitive?
• If a three-tier development financial system is suggested:
(i) Apex DFI (ii) Regional DFIs and (iii) Local DFIs (MFIs) will the system be viable and effective?
• To tackle “Cost of Resources” problem,,how about creating “DFIs Development Fund” at Regional levels by federating DFIs of a few countries (such as all DFIs of Mekong Region six countries) with sovereign guarantee, political risk cover from MIGA / World Bank, and better rating.This Regional Fund with strong rating and can attract resources at affordable rates and on-lend to member DFIs for operations.
• Perhaps ADFIAP can take a lead in setting up a DFIs Development Fund for the Greater Mekong Region as a pilot project, in which Governments, financial institutions, multilateral institutions and private sector could become stakeholders.
THANK YOU