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

In: The Palgrave Handbook of Development Finance

Author

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  • Vaibhav Mishra

    (SOAS University of London)

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.

Suggested Citation

  • Vaibhav Mishra, 2025. "The Role and Importance of External Donor-Funded DFI’s," Springer Books, in: George Kararach & Emmanuel Pinto Moreira & Victor Murinde (ed.), The Palgrave Handbook of Development Finance, chapter 0, pages 285-305, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-77422-5_15
    DOI: 10.1007/978-3-031-77422-5_15
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