Banking for development: private banks and aid donors in developing countries

Over the past decade, aid donors have shown interest for the private financial sector while, at the same time, private banks have shown increasing concern for corporate social responsibility. Private banks are actively involved in developing countries where they generate employment and introduce best practices.

Against this background, this paper explores the considerable potential synergies which could be generated by an intensifying dialogue between private banks and aid donors. Based on a survey of private bank lending to developing countries, the paper finds that:

• there is an international division of labour in bank lending: banks from OECD countries tend to focus their credit on specific regions (e.g. Latin America for Spanish banks)
• identifying banks operating overseas would be an important step towards a dialogue with those emerging countries that are becoming donors
• partnerships could go well beyond the banking sector
• Basel II rules enhancing the use of risk sensitive models might have a negative impact on development finance - collaboration with private banks might reduce this negative impact
• a Prize in Development Finance hosted by the OECD Global Forum to reward best practices in public private partnerships could be helpful in making use of the strength of newcomers to development finance