Growth of Development Banks

Although development banks attracted great attention after World War II but there one insurances or such institutions even much earlier, First development bank was found in Belgium in 1822. The purpose of financing and promoting industry. It was a joint stock bank which nursed funds through the sale of shares and bonds in order to finance; commercial and industrial enterprises. This new technique of banking got impetus only in 1852 when ‘Credit Mobilize of France’ was set up. It mobilized resources through the sale of bonds and promissory notes and made long-term investments particularly in public utility undertakings, railways, insurance companies and banks. It set a model for similar investment banks established in Germany, Austria, Belgium, Netherlands, Italy, Spain and Switzerland. Throughout the 19th century, the Credit Mobilize provided a great appeal to all countries which wanted to develop industries on a fast pace. In 1902, Industrial Bank of Japan was established for the purpose of financing her industrial development. This bank undertook functions of an issue, a Commercial Bank and mortgage institutions. Though the bank was helpful in

Financing industrialization but it could not strictly be called a development bank. World War I, European countries developed specialized institutions to provide industrial finance for reconstruction, modernization and development of war regard industries. These banks were mainly mortgage banks which extended long-term loans to industrial undertakings upon first mortgage of industrial property. Among the important institutions were Bank of Finland Ltd., National Hungarian Industrial Mortgage Institute Ltd., and National Economic Bank of Poland. These banks were helpful in reviving the war shattered economies of these countries. In the second phase of development banking a need for financing small scale sector was recognized. The institutes created after great depression carried out the functions of capital under writing and direct subscription along with lending activities. The Industrial credit Company of Ireland and Netherlands, company for Industrial Financing participated in share capital of industrial undertakings in addition to granting term loans.

In the next phase of development banking after World War II there was a trend to combine montage lending with underwriting and equity participation.

Some institutions developed during this period were Industrial Development Bank of Canada (1944), France Corporation for Industry Ltd. and industrial and Commercial Finance Corporation Ltd., England (1945), Industrial Finance Department of Common wealth Bank of Australia (1945). These institutions not only provided term loans to industry but also participated in the share capital of companies. The institutions in England even have the option to convert their loans into preference or equity shares. Though English and Canadian institutions could at best be described as finance corporations but that of Australia could be called a development bank because it could assist in the establishment and development of industrial undertakings. Despite the differences in the organization, Scope and methods of various institutions the main thrust of all of them was to access, those enterprises where sufficient help was not forthcoming from traditional sources. They acted essentially as gap fillers in peculiar circumstances of the pest-war years.

In the last 50 years developing countries have promoted many development thanks. These banks have been developed with special purpose in mind. They differ in ownership, organization, scope etc. Some’ are exclusively owned by government (Industrial Development Bank of Nepal, 1959, National Development Bank of Brazil, 1965) others by private interests (Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of Thailand, etc.) Some other Banks (Summer Bank of Turkey) are meant to promote and finance government ‘ undertakings only, some exclusively for private enterprises while some for both. Some banks can only lend while some can lend and take equities besides underwriting. Some are concerned with entire economy while some are for specific sectors only. Some banks are regional, some are national while a few are inter-regional (Asian Development Bank) or international such as World Bank, International Finance Corporation, International Development Association etc. Some banks provide only local currency while some deal in both local and foreign currencies, etc.

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