The Life-Cycle of National Development Banks: The Experience of Brazil's BNDES

8 Pages Posted: 16 Dec 2016

Date Written: 2016


We posit a life-cycle hypothesis for the evolving role of National Development Banks (NDBs) using the case of one of the largest such institutions in the world, the Brazilian Development Bank (BNDES). NDBs are a particularly important institution for channeling long-term credit in less developed financial markets. However, we argue that as countries develop their financial markets, NDBs should share this role with other local banks and specialize their focus, eventually disappearing altogether. In the Brazilian case, we show how the BNDES evolved from a purveyor of long-term credit to a more complex financial institution. The BNDES was the most important tool used by the Brazilian government as a countercyclical response to the financial crisis. For many developing countries, institutions like the BNDES may be a tenable solution for building long-term local financial institutions and markets, and developing specialized human capital. However, they also pose potential risks centered on issues of scalability, crowding out, graft and inefficiency.

Keywords: Development Banks; Financial Crisis; Institutional Void; Long-term Credit

JEL Classification: H81; H54; O14; O16

Suggested Citation

Torres Filho, Ernani and Zeidan, Rodrigo M., The Life-Cycle of National Development Banks: The Experience of Brazil's BNDES (2016). Quarterly Review of Economics and Finance, Vol. 62, 2016. Available at SSRN:

Ernani Torres Filho

Instituto de Economia ( email )

Av. Pasteur, 250
Terreo - Urca
Rio de Janeiro, Rio de Janeiro 22290-902

Rodrigo M. Zeidan (Contact Author)

NYU Shanghai ( email )

1555 Century Ave
Shanghai, Shanghai 200122


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