Capital Markets Usage by Development Banks

Camille Belin and Diane Menville
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Camille Belin: AFD - Agence française de développement
Diane Menville: International Fund for Agricultural Development - Partenaires INRAE

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Abstract: This note analyzes the role of capital markets in development finance by identifying which Public Development Banks (PDBs) and Development Finance Institutions (DFIs) access them, how they leverage their capital, and what insights their market behavior offers. It uses comprehensive data from the PDBDatabase (2025) and Bloomberg, covering 522 institutions across 155 countries with combined assets exceeding USD 13.9 trillion as of 2025. Only around one-fifth (137 institutions) access capital markets directly, yet they hold over 88% of sector assets and USD 7.5 trillion in outstanding debt, revealing significant market asymmetries. Market engagement is notably concentrated in Asia and Europe, dominated by major issuers in China and Germany, while institutions from low-and middle-income countries face considerable structural barriers. Institutional size strongly influences market access, affecting financial leverage, measured by Asset-to-Equity ratios, and strategic currency choices: local currency for national institutions versus USD for supranational entities. Overall, the findings emphasize the potential of capital markets to significantly enhance resource mobilization for development finance, while highlighting persistent and pronounced disparities in market access and institutional capabilities across different regions and institution types. The note concludes by formulating three policy recommendations to address these gaps: expanding direct capital-market access for PDBs, encouraging prudent increases in leverage among existing issuers, and creating an independent capital-markets-dedicated "super-supranational" entity to channel investment-grade funding to smaller institutions.

Keywords: Development finance; Development institutions; Public development operations; Capital market integration (search for similar items in EconPapers)
Date: 2025-06-10
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