Global Financial Development Report

The third Global Financial Development Report contributes to the ongoing debate on the role of long-term finance in sustaining economic development and ensuring shared prosperity. This report provides a nuanced, practical, and evidence-based approach to financial sector policy. It offers new research and data that help fill gaps in the knowledge on long-term finance. Read More ?

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Chapter 1

Conceptual Framework, Stylized Facts, and the Role of the Government

Long-term finance can contribute to economic growth and shared prosperity and is at the core of sustainable financial development Read More ?

Chapter 1 | |

Chapter 2

The Use of Long-term Finance by Firms and Households: Determinants and Impact

long-term finance reduces firms’ exposure to rollover risks and allow households to smooth income over their life cycle Read More ?

Chapter 2 | | |

Chapter 3

The Use of Markets for Long-Term Finance

Long-term finance from equity, bond and syndicated loans has grown significantly since the early 1990s Read More ?

Chapter 3 | |

Chapter 4

Banks and Nonbank Financial Institutions as Providers of Long-term Finance

banks are the main providers of long-term finance Read More ?

Chapter 4 | | |

Main Messages

Use of long-term finance—frequently defined as all financing for a time frame exceeding one year—is more limited in developing countries, particularly among smaller firms and poorer individuals.
Where it exists, the bulk of long-term finance is provided by banks; use of equity, including private equity, is limited for firms of all sizes.
The global financial crisis of 2008 has also led to a reduction in leverage and use of long-term debt for developing country firms.
Market failures and policy distortions have a disproportionate effect on long-term finance, suggesting an important role for policies that address these failures and distortions.
Sustainably extending the maturity structure of finance is a key policy challenge since long-term finance can be an important contributor to economic growth and shared prosperity.

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Leveraging Long-Term Finance for Development

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Facts

Small Firms, Big Firms

Small firms in developing countries (resp. high income countries) finance 1 percent (resp. 7 percent) of their assets with long-term debt

Institutional Reforms

45 percent [50 percent] of policy makers responding to the barometer consider institutional reforms [macroeconomic stability] as the most important to promote long-term finance

SMEs

In developing countries, SME’s use of long-term debt as a ratio of their assets fell by more than 50 percent since the global financial crisis

Loans and GDP

In high income countries, loans with maturity >1 year account for 59 percent of GDP on average, and in developing countries only 22 percent of GDP

Loan Issuances

In high income countries, annual syndicated loan issuances are on average 6.2 percent of GDP, and only 1.8 percent of GDP in lower middle and low income countries.

Institutional Investors

Institutional investors’ assets are on average 99 percent of GDP in high income countries but only 11 percent of GDP in lower middle and low income countries.

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