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date: 18 February 2020

Abstract and Keywords

This chapter examines the role of Development Banks (DBs) as national and regional financial institutions that provide medium- to long-term capital for investment in various sectors of the African economy, particularly those that private commercial lenders are unwilling/unable to reach. More specifically, it considers the case for and the historical roles of DBs in financing Africa’s economic development. After presenting the generic case made for DBs, the article traces the history of DBs in Africa and discusses policies and practices across the region since independence. It then analyses why the economic rationale for DBs has been apparently unsuccessful in the presence of bottlenecks such as rent-seeking and political patronage. The article also evaluates alternative sources of development financing before concluding with a summary of lessons that can be learned from Africa’s experience with DBs in terms of development economics.

Keywords: development banks, financial institutions, capital, investment, Africa, economic development, rent-seeking, political patronage, development financing, development economics

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