Development banks: Distinctiveness and heterogeneity of financial performance

This paper offers a comprehensive analysis of financial performance of development banks encompassing profitability, cost efficiency, liquidity, loan quality, loan loss provisioning and capital adequacy. We examine differences in financial performance between development banks and commercial financial institutions and extend the analysis to study the relationship between financial performance and heterogeneity within the development banking sector. Heterogeneity in bank size, operational focus, level of ownership and geographical scope of operation are shown to be associated with financial performance of development banks. Moreover, there are notable differences based on their specific mandates. Development banks following narrow mandates tend to have lower cost efficiency indicators and experience lower loan quality, provisioning adequacy and capital adequacy compared to their broadly mandated counterparts.