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Borrowing costs and the role of multilateral development banks: Evidence from cross-border syndicated bank lending

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  • Gurara, Daniel
  • Presbitero, Andrea
  • Sarmiento, Miguel

Abstract

Cross-border bank lending is a growing source of external finance in emerging and developing countries and could play a key role in infrastructure and development financing. This paper looks at the role of multilateral development banks (MDBs) on the terms of syndicated loans, focusing on loan pricing. The results show that MDBs’ participation is associated with higher borrowing costs and longer maturities—signaling a greater willingness by MDBs to finance risky projects which may not be financed by the private sector. We also show that MDBs are more likely to lend to borrowers located in countries with high credit and financial risk. Overall, our findings suggest that MDBs could play a role in easing access to credit for high risk borrowers.

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  • Gurara, Daniel & Presbitero, Andrea & Sarmiento, Miguel, 2020. "Borrowing costs and the role of multilateral development banks: Evidence from cross-border syndicated bank lending," Journal of International Money and Finance, Elsevier, vol. 100(C).
  • Handle: RePEc:eee:jimfin:v:100:y:2020:i:c:s0261560619300476
    DOI: 10.1016/j.jimonfin.2019.102090
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    6. Chiara Broccolini & Giulia Lotti & Alessandro Maffioli & Andrea F Presbitero & Rodolfo Stucchi, 2021. "Mobilization Effects of Multilateral Development Banks," The World Bank Economic Review, World Bank, vol. 35(2), pages 521-543.
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    8. Xuehui Han & Yuan Cheng, 2023. "Drivers of Bilateral Climate Finance Aid: The Roles of Paris Agreement Commitments, Public Governance, and Multilateral Institutions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(3), pages 783-821, August.
    9. Qi, Songqiao & Sun, Tianmin, 2024. "Resource curse in OPEC with varied levels of financial regulations and constraints: The role of oil price shocks and digital finance," Resources Policy, Elsevier, vol. 91(C).
    10. Victoria Kuzenkova, 2021. "Effective Development Institutions," Public administration issues, Higher School of Economics, issue 5, pages 161-175.
    11. Miguel Sarmiento, 2019. "The Impact of Exogenous Liquidity Shocks on Banks Funding Costs: Microevidence from the Unsecured Interbank Market," IHEID Working Papers 01-2019, Economics Section, The Graduate Institute of International Studies.
    12. Carter, Patrick & Van de Sijpe, Nicolas & Calel, Raphael, 2021. "The elusive quest for additionality," World Development, Elsevier, vol. 141(C).
    13. Gatti, Matteo & Gorea, Denis & Presbitero, Andrea, 2023. "The effect of EIB operations on private sector lending outside the European Union," EIB Working Papers 2023/03, European Investment Bank (EIB).
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    More about this item

    Keywords

    Cross-border lending; Syndicated loans; Multilateral development banks; Credit risk;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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