Economics » Financial Institutions » Types and Functions of Financial Institutions

Development Banks

Development banks or Development Financial Institutions (DFIs) are specialized financial institutions established to contribute to the development of specific sectors of the economy e.g. industrial, commerce, agricultural, rural, urban and housing sectors. The role of development banks, especially in low-income countries (LICs) include:

  1. Provision of medium and long-term loans for investment in various sectors like agriculture, manufacturing and commerce.
  2. Identification, promotion and development of viable projects for the private sector.
  3. Advice and assistance to indigenous businesses. This includes financial, technical and managerial advice to ensure profitable outcomes.
  4. Directly investing in agriculture, housing, and mining sectors of the economy.
  5. Supervising the implementation of projects they finance but requesting progress reports and visiting the project sites.
  6. They commission and/or carry out studies into the social and economic needs of the economy with a view to making policy recommendations to the government.
  7. They develop in the citizens, entrepreneurial ability, and support their efforts with take-off loans.
  8. They serve as a channel for bringing into the local economy, investible funds, from international organisations.
  9. Nominating technical and managerial partners to both local and, especially, foreign investors thereby, promoting foreign direct investments (FDIs).

Examples of DFIs in Nigeria include the Nigeria Agricultural Cooperative and Rural Development Bank (NACRDB), Bank of Industry (BOI) and Urban Development Bank (UDB)

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