The Role and Importance of External Donor-Funded DFI’s

Vaibhav Mishra ()
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Vaibhav Mishra: SOAS University of London

Chapter Chapter 15 in The Palgrave Handbook of Development Finance, 2025, pp 285-305 from Springer

Abstract: Abstract Development Finance Institutions (DFIs) have demonstrated their effectiveness in responding to global economic shocks by playing a countercyclical role. This chapter explores the role of external donors in mobilizing development-focused capital through DFIs. It provides empirical evidence on how large international DFIs contribute to local capital market development in developing countries, particularly by supporting newly established national development banks—such as those in Nigeria and Ghana—through equity participation, institutional development, improved governance mechanisms, and reduced political interference. These measures enhance the sustainability and effectiveness of national DFIs. The chapter argues that donor-funded DFIs can facilitate domestic currency lending, thereby easing balance of payments constraints and mobilizing long-term patient capital essential for sustainable development. Moreover, they can help national DFIs address market failures, support structural economic transformation, and promote green development.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-77422-5_15

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DOI: 10.1007/978-3-031-77422-5_15

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