Development Bank
IntermediateA development bank is a financial institution, usually owned by governments, that provides loans, grants, guarantees and investment to support economic development, often in areas where private finance is limited.
Development banks finance projects such as infrastructure, energy, water, healthcare, education, small businesses and climate action, particularly in developing countries or underserved regions.
There are several types. Multilateral development banks are owned by many countries, such as the World Bank, the Asian Development Bank, the African Development Bank, the Inter-American Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank and the Asian Infrastructure Investment Bank. National development banks are owned by a single government and mainly invest at home, such as Germany’s KfW and Brazil’s BNDES. Bilateral development finance institutions invest in private companies in developing countries.
For example, a multilateral development bank might lend to a government to build a power grid, often at lower interest rates and for longer periods than commercial lenders would offer.
Development banks can borrow cheaply in international bond markets because of their strong credit ratings and government backing. They often attract private investment alongside their own lending. They play an increasing role in financing climate action.
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