Borrowing Costs and The Role of Multilateral Development Banks: Evidence from Cross-Border Syndicated Bank Lending
IMF Working Papers, December 7, 2018
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- Borrowing Costs and The Role of Multilateral Development Banks: Evidence from Cross-Border Syndicated Bank Lending
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Bibliographic details
- Authors: Daniel Gurara, Andrea F Presbitero, Miguel Sarmiento
- Published: December 7, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484386200.001
Core summary
- Cross-border bank lending is a growing source of external finance in developing countries and could play a key role for infrastructure financing.
- This paper examines the role of multilateral development banks (MDBs) on the terms of syndicated loan deals, with a focus on loan pricing.
- Key overall conclusion: MDBs' participation is associated with higher borrowing costs and longer maturities, but also with lower spreads for riskier borrowers; findings suggest MDBs could crowd in private investment in developing countries through risk mitigation.
Empirical findings
- MDB participation is associated with higher borrowing costs.
- MDB participation is associated with longer maturities.
- MDB participation is associated with lower spreads for riskier borrowers.
- Interpretation offered: higher costs and longer maturities signal MDBs’ greater willingness to finance high risk projects which may not be financed by the private sector; MDBs can mitigate risk and thereby crowd in private investment.
Policy-relevant implications
- MDBs can play a role in mobilizing private finance for developing-country infrastructure by mitigating risks that deter private lenders.
- MDB involvement may allow projects with higher perceived risk to obtain financing, albeit at higher borrowing costs and with longer maturities.
- For riskier borrowers, MDB participation is linked to lower spreads, indicating potential targeted benefits for those borrowers.
Publication and metadata
- Authors: Daniel Gurara, Andrea F Presbitero, Miguel Sarmiento
- Publication date: December 7, 2018
- Series: Working Paper No. 2018/263
- Issue: 263
- Volume: 2018
- Pages: 44
- DOI: https://doi.org/10.5089/9781484386200.001
- Stock No: WPIEA2018263
- ISBN: 9781484386200
- ISSN: 1018-5941
- Subject keywords: Bank credit, Economic sectors, Financial institutions, Loans, Money, Multilateral development institutions, Public sector, Syndicated loans
- Additional keywords: Bank credit, credit reference bureau, Financial inclusion, Global, loan expansion program, loan maturity, loan pricing, loan term, Loans, MDBs' participation, microfinance, Multilateral development institutions, Public sector, Syndicated loans, term loan, WP
Source: IMF Working Paper No. 2018/263 by Daniel Gurara, Andrea F Presbitero, Miguel Sarmiento (December 7, 2018).