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Published in:
The Marketization of Development Finance Read chapter Read first chapter

2021 | Chapter

3. 1970 to 1990: Development Finance in Crisis and the Search for a New Paradigm

Author : Peter Volberding

Published in: Leveraging Financial Markets for Development

Publisher: Springer International Publishing

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Abstract

This chapter explores the challenges to early development finance strategies that relied on project loans and development finance corporations (DFCs). Using recently declassified archival documents, the chapter analyzes how a lack of standardized implementation and assessment procedures hampered project loans. DFCs were beset by problems of political interference, improper incentives, and financial dependency. While development institutions, led by the World Bank, sought to improve results by aligning development policy with the discipline of financial markets, reforms were limited. A mix of strict World Bank regulations, internal disagreement, and a lack of political will from stakeholders circumscribed efforts to leverage private markets for development. Instead, the stage was set for another development institution to experiment with marketized development financial instruments.

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previous chapter 1950–1970: The World Bank, DFCs, and the Foundations of Private Investment Mobilization
next chapter KfW and the Early Stages of Marketized Development Financial Instruments
Footnotes
1
The survey also concluded that privately-owned and privately-operated DFCs performed slightly better than the government ones, with an average profit rate of 10.4%. In both cases, unprofitable DFCs were the exception. However, when they were unprofitable, DFCs were also likely to fail spectacularly. The worst disaster was the Uganda Development Bank, which in 1984 had net losses of 114.3% of the value of its own funds.
 
2
The breakdown was as follows: USD 206 million from domestic public sources, USD 183 million domestic private sources, USD 178 million from foreign public sources, and USD 78 million from foreign private sources.
 
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Metadata
Title
1970 to 1990: Development Finance in Crisis and the Search for a New Paradigm
Author
Peter Volberding
Copyright Year
2021
Book
Leveraging Financial Markets for Development

Print ISBN: 978-3-030-55007-3

Electronic ISBN: 978-3-030-55008-0

Copyright Year: 2021

DOI
https://doi.org/10.1007/978-3-030-55008-0_3