Explain the case for and against development financial institutions.

CPA-Financial-Management-Section-3 Revision kit

Advantages/functions/case for development financial institutions
1. They provide venture capital
2. They provide facilities for large lending
3. They provide technical expertise and support emerging projects transferable from other sectors of development economies.
4. They are risk capital providers in areas which are not attractive to commercial banks and other major lenders due to risk involved.
5. They carry out feasibility study to evaluate viability of projects.

Case against specialized institutions and development banks
1. They are being phased out by globalization and liberalization where needy sectors can easily get expertise from outside.
2. Commercial banks have now matured up to provide capital for all sectors.
3. They were only useful during periods of foreign exchange restriction.
4. Their performance has been wanting and they have largely failed to achieve the goal/purpose they were intended for.
5. Hey increase government spending.

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