What Have We Learned about National Development Banks? Evidence from Brazil

Abstract

There are 553 development banks in the world: 18% of these institutions have emerged since the 2008 financial crisis. There is a large theoretical literature on such institutions, but the evidence on their effectiveness is scattered. This paper provides a systematic review of causal effect studies of one of the largest and most representative development banks in the world, the Brazilian Development Bank (BNDES). We review 48 academic papers that estimate BNDES loans and credit programs impact in several policy dimensions. In general, the evidence indicates that development banks can be an effective instrument to increase investment, exports, employment and GDP, particularly when borrowers are micro, small and medium-sized companies. The Brazilian experience also suggests that development banks can be an important tool to fight against climate change, reducing deforestation. On the other hand, evidence indicates that the greatest difficulty for these institutions is to generate positive impacts on productivity, an essential variable for economic growth. Finally, the evidence is inconclusive on political influence on development bank’s loans.