INSTITUTE OF EDUCATION & REASEARCH
Assignment Name: Economics Assignment on Development
Finance
Dr. Aparna Rani Dey GROUP-2
Assistant Professor ,
Institute of Education & Shornali Akter(23-236)
Research,
University of Dhaka Maria Farjana(23-241)
Md. Ali Zinnah(23-247)
Date of Submission: February 18,2024
Group Members Content Names Page No.
1. Md. Ali Zinnah • Development Finance 1,2
• History of Development
Finance
• Development Finance
institutions & Examples
2. Maria Farjana Eti • Internal Resources 3,4,5
Mobilization (from
Bangladesh perspective)
• Ways of domestic
resources mobilization
• Internal resources
mobilization perception
of Bangladesh
3. Shornali Akter • Resource Mobilization 5,6,7
• External resources
mobilization
• External resources
mobilization perception
of Bangladesh
Introduction: In this present fast growing world every country has been developing
rapidly. In order to develop every country regardless developed or less developed countries
take various initiatives towards developing life standards of citizens, communication,
technology and every sector of the country. But for this every country needs financing,
that's why a country needs to collect money from internal and external resources. This
criteria of collecting resources for development projects is called development finance.
Today's topic of discussion is Development Finance. As in the present world money
management is mandatory for all the countries, in this way proper development financing
is the core concept of the development of a country.
Development Finance: Development finance refers to the various financial mechanisms and
instruments used to find projects and initiatives aimed at promoting economic growth, reducing poverty
and improving living standards in developing countries. The term “Development” in this context refers to
the process of economic and social progress which involves various activities such as building
infrastructures, expanding access to education and healthcare promoting entrepreneurship.
The term “Finance” denotes the provision and management of funds or resources necessary to support this
development endeavors.
So Development Finance encompasses a wide range of financial mechanisms and instruments including
grants, loans, foreign aid, private investment, microfinance etc. It reflects the focus on financing activities
that are direct towards the cherished goals of development.
History of Development Finance: The history of Development Finance is closely interconnected
with the broader history of economic development and international relations. The sequence goes like-
1. Post World War-2 Era(1940s-1950s) : The devastation of World War-2 highlighted the need of
international cooperation and assistance to rebuild wor-torn countries and promote global economic
stability. Then the Bretton Wood conference in 1944 led to establishment of International Monetary
Fund (IMF) and the World bank to provide financial assistance for reconstruction and development
projects.
By this way, for the first time development Financial Institutions formed and started its journey
2. Decolonization and cold war Era 1950 to 1980: In this phrase, many newly independent countries
in Asia, Africa and Latin America sought for assistance for economic development as they faced
challenges such as poverty, lack of infrastructures and weak institutions.Then development Financial
Institutions like the World Bank and region of the Development Banks expanded their leading
activities to support infrastructure projects, agriculture, education and health care in developing
countries.
In the 1970s rising oil prices and high levels of borrowing by developing countries lead to a Debt crisis
particularly among countries in Latin America and Africa.So International Financial Institutions such
as the IMS and World Bank imposed Structural Adjustment Policies(SAPs) as condition for providing
loan and other assistance.
3. 1990 and beyond: The United Nations adopted the Millennium Development Goals(MDGs) in
2000, setting targets for reducing poverty, improving education and addressing other development
challenges. Besides,the rise of globalization facilitated greater flows of trade, investment and capital
between developed and developing countries but also raised concerns about economic inequality and
environmental sustainability.
So, we can say, throughout the history Development Finance has evolved in response to changing Global
economic conditions, political dynamics and development priorities.
Development Finance institutions: In the history of Development Finance evaluation we have
already come to see Development Finance institutions.
Development finance institutions are specialized Financial Institutions that provide long term financing
for development projects in emerging and developing economies. This Institutions play a question roll in
mobilizing fans for project that might be considered too risky for traditional commercial banks and
investors. DFIs typically operate at national, regional or global level and can be government, private or a
combination of both.
Distinct characteristics of DFIs institutions are given below-
Focus on Development Impact: DFIs prioritize investments that have a positive impact on economic
growth, poverty reduction, job creation, infrastructure development, and social welfare. They often target
sectors such as energy, transportation, healthcare, education, agriculture, and small and medium-sized
enterprises (SMEs).
Long-Term Financing: Unlike commercial banks that primarily offer short to medium-term loans, DFIs
provide long-term financing with flexible repayment terms to match the needs of development projects.
This helps to mitigate the risk associated with projects that require substantial upfront investment and have
a longer payback period.
Risk Mitigation: DFIs often assume a higher level of risk compared to traditional financial institutions
by investing in projects or regions with perceived political, economic, or social uncertainties. They may
offer risk-sharing mechanisms, guarantees, and technical assistance to encourage private sector
participation and mobilize additional financing from commercial investors.
Catalytic Role: DFIs play a catalytic role in leveraging private sector investment by providing financing,
technical expertise, and policy support to create an enabling environment for sustainable development.
They help to bridge the gap between public and private sectors and facilitate partnerships between
governments, businesses, and civil society organizations.
Examples of Development Finance Institutions:
World Bank Group: Comprising the International Bank for Reconstruction and Development (IBRD)
and the International Development Association (IDA), the World Bank provides financial and technical
assistance to developing countries for a wide range of development projects.
African Development Bank (AfDB): The AfDB is a regional development bank focused on promoting
economic and social development in Africa through loans, grants, and technical assistance.
Asian Development Bank (ADB): The ADB provides financing for infrastructure, poverty reduction,
and sustainable development initiatives in Asia and the Pacific region.
European Investment Bank (EIB): The EIB is the lending arm of the European Union and supports
projects that contribute to EU policy objectives, including infrastructure development, climate action, and
innovation.
National DFIs: Many countries have their own DFIs, such as the Development Bank of Southern Africa
(DBSA), KfW Development Bank in Germany, and Banco Nacional de Desenvolvimento Econômico e
Social (BNDES) in Brazil, which provide financing for domestic development priorities.Focus on
Development Impact: DFIs prioritize investments that have a positive impact on economic growth,
poverty reduction, job creation, infrastructure development, and social welfare. They often target sectors
such as energy, transportation, healthcare, education, agriculture, and small and medium-sized enterprises
(SMEs).
Actually, for Development Finance this DFIs have created and their most Vital role is mobilizing
resources, fostering economic growth and advance sustainable development goals in emerging and
developing countries. This buzzword “Resource Mobilization” is classified into two different sectors.
These are-
1. External Resource mobilization
2. Internal Resource mobilization
•What is resource mobilization?
Resource mobilization: Resource mobilization refers to all activities involved in securing new and
additional resources for your organization. it also involves making better use of and maximizing existing
resources. Resource mobilization is often referred to as "New Business Development."
Thus, we can say "Resource Mobilization" is when a business or organization secures new or additional
resources to meet needs. This process can also include strategies that maximize the efficiency of existing
resources. In some cases, organizations may take count of what's currently available and develop a plan
to use those resources as efficiently as possible. If necessary, the business can acquire new or enhanced
resources to supplement any existing options. Especially in times of great business need or demand, it can
be important to understand what an organization has and needs to successfully cover expenses and
maintain standard quality.
Internal Resources Mobilization (from Bangladesh perspective):
A developing country like Bangladesh needs a lot of resources to implement its development plan. These
necessary resources can be raised in two ways- (a) internal sources and (b) foreign sources.
So, raising resources from the internal part of the country to meet the expenditure of the development plan
is called domestic resource mobilization. Domestic resource mobilization is done in Bangladesh's
development plan from sources such as deficit spending, revenue surplus, additional taxation, private
savings etc. But actually, the amount of internal resources in the total expenditure of development plan of
Bangladesh is very less. A major part of the cost of the development plan is met by foreign loans and aid.
However, the government in recent years has been very active and earnest in mobilizing resources from
domestic sources in the country.
Some ways of domestic resources mobilization are given below:
1. Revenue surplus: An important source of financing for the development plan of Bangladesh is the
revenue surplus. When the revenue budget is less than the expenditure of the government, the revenue
surplus is created. The expenditure of the development plan can be executed by this revenue surplus.
Analyzing the different five-year plans of Bangladesh, it can be seen that all the plan is to finance some
of the development through revenue surpluses. The Daily Star says, "according to finance ministers'
national budget report (fy 2023- 2024), The government saw a budget surplus of Tk 11,865 crore in the
first quarter of the current fiscal year (FY) as its spending was lower than its revenue collection."
2. Additional Taxes: Additional taxes are levied by the government to finance or finance development
plans. It is a natural and self-evident way to collect money for economic development. One of the
examples of additional taxation is income tax. As the majority of the people of Bangladesh are middle
class,, so the opportunity to impose additional taxes is limited here. However, this money is collected in
various five-year plans of this country.
3. Net Capital Income: Development plan finances are also raised from net capital income. The
development plan is financed from the proceeds from the sale of various bonds and debentures by the
local government to the public within the country, savings and reserved funds of government and
autonomous institutions, provident funds of government employees, etc. Collected money from such
sources is called net capital income. However, in the socio-economic context of Bangladesh, the net capital
income opportunities are very less.
4. Private Savings: Another important source of financing development plans is private savings. Due to
the poverty and low per capita income of the people of Bangladesh, however, the amount of financial
resources is very low. Various banks and economic institutions of the country have brought the savings
that people make in institutions and insurance companies are pooled and used for development purposes.
This is private savings.
5. Deficit Expenditure: Deficit Expenditure or Deficit Budget is often formulated to finance development
plans in developing countries like Bangladesh. Deficit spending is an excellent strategy for financing
development plans. If the government adopts a deficit spending policy, there is often a risk of inflation in
the country. However, cautious implementation of the deficit spending policy leads to significant
investment and employment growth in the country.
6. Public Borrowing: In developing countries, public borrowing is a significant method by which
planning is financed. The government can carry out development work by taking loans from the public
and the central bank. However, the success of this method is limited as the currency market is not
developed on the developing side. However, if the money market can be improved, this method of
financing is possible. According to the Bonik Barta , " In 2021, the amount of debt received by the
government from internal sources stands at 6 lakh 15 thousand 718 crores."
7. Disguised Unemployment: In a developing country like Bangladesh, capital formation can be
attempted by mobilizing the savings potential in the case of latent unemployment. Agricultural surplus
manpower in developing countries is used for building roads, canals, health centers etc. Thus capital can
be formed by doing public welfare work.
A developing country like Bangladesh lacks enough domestic resources. As a result, the pace of
development is also slow. Therefore, in order to accelerate the pace of development, internal resources
must be extracted in the above way.
Internal resources mobilization perception of Bangladesh: An increase in domestic wealth
essentially requires an increase in production and savings. However, an appropriate tax system can be
implemented in addition to increasing income and savings in order to accelerate domestic wealth
accumulation in Bangladesh. The following steps can be taken for this purpose.
1. Restructuring of Tariffs and Taxation System: An important step to increase domestic resource
mobilization is the restructuring of the country's tax system and expansion of the tax base. For this the
following initiatives can be processed:
(a) Increase in customs duty and sales tax: Increase in net import and sales tax on less essential and luxury
imported goods.
(b) Restructuring of the taxation system: Goods used by the relatively rich community, which are
currently free of excise duty, can be taxed at a reasonable level.
(c) Direct Taxes: Direct taxes can be raised on the idle savings created among the rich population.
2.Increasing Savings: Attractive savings schemes should be formulated to increase private savings.
Banks need to be more action oriented. People should be encouraged through effective campaigns to
develop saving habits by reducing unnecessary expenditure.
3. Reduction of unproductive expenditure: A significant portion of government expenditure in
Bangladesh is invested in unproductive sectors. If this unproductive expenditure is strictly curbed, the
finance for development will be increased.
4. Ban on unnecessary imports: A significant portion of Bangladesh's imported consumer goods are
absolutely unnecessary to the majority of the people in the country. If the import of these non-essential
goods is banned, the money saved can be used for development.
5. Subsidy reduction: Subsidy withdrawal can save domestic resources. But withdrawal of subsidy
requires careful consideration. There is no policy difficulty in withdrawing subsidy from ration. But in the
case of electricity, gas, water etc. without withdrawing the subsidy, a lot of money can be saved if the
inefficiency and wastage of the concerned agencies are eliminated.
6. Increase in production and income: Increase in production in Bangladesh requires efficient use of
untapped resources of the country, increase in efficiency of agro-industrial sector, etc. Increase in income
requires an increase in exports, an increase in employment opportunities and prevention of wastage.
7. Improving public sector efficiency: Government or state-owned industries in Bangladesh are losing
billions of takas. If profit can be made by increasing the efficiency here, the development plan can be
implemented by the profit earned.
8. Reduction of administrative expenses and stop corruption: If the administrative expenses of the
country can be reduced and corruption is stopped for the development plan, the internal resource
mobilization of the country will increase.
If all these measures are taken, domestic resources will increase in the implementation of the country's
development plan and development will be accelerated.
• What is external resource mobilization?
•External resources mobilization perception of Bangladesh
External resources mobilization: External resources refer to any kind of resource that the team
has to secure from outside their organization to complete their project or task. For example, if you need
to bring in an independent professional to help you design a new website, they would be considered an
external resource.
Here are some characteristics:
1. Diversity: External resources can come from various sources such as financial institutions, donors,
government grants, or partnerships with other organizations.
2. Flexibility: External resources can be flexible in nature, allowing organizations to adapt to changing
needs and circumstances. This flexibility can include financial resources, expertise, or access to networks.
3. Strategic Alignment: Mobilizing external resources often involves aligning them with the
organization's strategic goals and objectives. This ensures that the resources contribute effectively to the
organization's mission.
4. Networking: Mobilization of external resources often requires building and maintaining relationships
with stakeholders, including donors, investors, and partners. Networking skills are crucial for accessing
these resources.
5. Accountability: Organizations must demonstrate accountability and transparency in how they utilize
external resources. This involves proper documentation, reporting, and compliance with regulations and
agreements.
6. Risk Management: Mobilizing external resources may involve risks such as dependence on specific
donors or partners, fluctuating funding levels, or changes in external regulations. Organizations need to
assess and manage these risks effectively.
7. Innovation: Accessing external resources can foster innovation by bringing in new ideas, technologies,
or approaches from outside the organization. This can enhance the organization's capacity to address
challenges and achieve its goals.
Overall, the effective mobilization of external resources requires strategic planning, relationship-building,
accountability, and a willingness to adapt to changing circumstances.
External resources mobilization perception of Bangladesh: The external resources
mobilization perception of Bangladesh generally focuses on its efforts to attract foreign investment,
development assistance, and loans to support its economic growth, and infrastructure development.
Bangladesh has actively sought partnerships with international organizations, bilateral donors, and
investors to fund various projects aimed at poverty reduction, industrialization and infrastructure
improvement. The flow of external resources in Bangladesh includes:
1. Foreign aid: Bangladesh receives foreign aid from various bilateral and multilateral donors
including governments, international organizations, and non-governmental organizations (NGOs).
The data reached an all-time high of 10.969 USD bn in 2022 and a record low of 271.000 USD mn
in 1972. Bangladesh Foreign Aid: Disbursement data remains active status in CEIC and is reported
by Bangladesh Bank. The data is categorized under Global Database's Bangladesh – Table BD.
2. Remittances: Remittance from Bangladeshi expatriates working abroad particularly in countries
like the Middle East, Southeast Asia, North America and Europe are significant source of external
income for Bangladesh. Remittances contribute to household incomes, consumptions and savings
there by supporting the economy. It is more significant than foreign aid and thus help in lessening
dependence on foreign aid. Remittance gets momentum in recent times in Bangladesh and the
second largest sector of a foreign currency earnings after the garments sector. If the cost of
important raw materials is deducted from the foreign currency earnings of the garments sector then
it becomes the largest sector of a foreign currency earnings. Remittance earning is increasing daily
but at a lower rate than the increase in immigration from Bangladesh due to the increasing share of
unskilled or semi skilled labours than the professionals in international migration. The percentage
of remittance in GNI is increasing daily. Remittance affects almost all the macroeconomic
indicators of a country positively. Though there are also opposite sides to remittance earnings, its
overall contribution to Bangladesh's economy is very effective.
The report said that Bangladesh is projected to be the seventh highest recipient of remittance will
estimated total of USD 23 billion, followed by Nigeria (USD 21 billion), Guatemala (USD 20
billion) and Uzbekistan (USD 16 billion).
3. Foreign Direct Investment (FDI): Bangladesh attracts FDI from foreign companies and investors
interested in various sectors such as textiles and garments, manufacturing, telecommunications and
energy. FDI plays a crucial role in stimulating economic growth, creating employment
opportunities and transferring technology and expertise. So, it is vital for a developing country like
Bangladesh to carry out effective measures in protecting the prospective foreign investors so that
they can get a congenial atmosphere to invest their capital. Overall, we can say the importance of
attracting higher levels of foreign direct investment for Bangladesh is paramount especially when
the country aims to achieve the status of an upper middle-income country by 2031 and development
country by 2041. To achieve these targets, attracting FDI in the private sector is crucial as it
accounts for more than 75% of all investments in Bangladesh. To streamline the regulatory in
environment for attracting FDI in the private sector, the government of Bangladesh initiated a
deregulations process that mainly took place between the 1980s and 1990 is and continue to during
the 6 FYP and 7 FYP but at a slower pace.
4. Loans and Grants: Bangladesh obtains loans and grants from international financial institutions
such as the World Bank, the Asian Development Bank and other bilateral lenders. These funds are
often utilized for infrastructure projects, for poverty alleviation programs, disaster management and
other development initiatives. Grants often support education and healthcare initiatives such as
building schools and hospitals, training healthcare workers and providing essential services to
vulnerable populations. Loans and grants also facilitate private sector development through
initiatives like providing credit to small and medium sized enterprises, supporting entrepreneurship
and fostering innovation.
Overall, loans and grants play a vital role in supporting Bangladesh's development goals, addressing
key challenges and improving the well-being of its citizens. However effective management and
governance are crucial to ensure that funds are used efficiently and transparently to maximize their
impact.
5. Trade and export earnings: Bangladesh and external resources through exports of goods and
services particularly in the textile and garments industry. Trade agreements preferential, trade
arrangements and access to international markets contribute to the flow of foreign exchange into
the country. International trade is a so much essential for the development of any country because
at the time of globalization one country's people can buy easily or sell products to another country's
people. Study analyzed the achievements of the economy in terms of important variables as export
and import which together forms international trade and economic growth was the determined by
GDP. Study found that international trade export and import has a significant positive impact on
economic growth (GDP) in Bangladesh and international trade is strongly positively correlated with
economic growth (GDP) in Bangladesh.
6. Technology Transfer: External resources often come with expertise and technology transfer, can
help Bangladesh develop its industrial and technological capabilities, leading to increased
productivity and competitiveness in the global prone to natural disasters such as cyclones and
floods. External resources can be used to build resilience against these shocks by investing in
disaster preparedness, earlTrade and Investment**: External resources can facilitate trade and
attract foreign direct investment (FDI) by improving infrastructure
7. Debt Management: While reliance on external resources can lead to increased debt, proper
management can ensure that debt remains sustainable. This includes diversifying funding sources,
negotiating favorable terms, and using resources efficiently to generate economic returns.
Bangladesh external sector has been a key pillar of the country's impressive development narrative. This
is manifested in robust export performance and increasing amount of remittance flows, comfortable
balance of payment position, high foreign exchange reserves, exchange rate stability and import capacity
that serviced both consumer demands and development needs.
In summary, external resources mobilization plays a vital role in Bangladesh's development by
providing the necessary funds, expertise, and technology to support economic growth, improve living
standards, build resilience, and enhance competitiveness in the global economy.
Conclusion: In conclusion, development finance relies on a combination of external and
internal resources mobilization to support economic growth and address development
challenges. External sources include funding from international organizations,
governments of developed countries, multilateral development banks, and philanthropic
foundations. These resources are essential for providing financial support, technical
expertise, and capacity building to developing countries. Internal resources mobilization
involves leveraging domestic revenue, such as taxes, tariffs, and natural resource revenues,
as well as promoting private sector investment and entrepreneurship. By combining
external and internal resources, countries can strengthen their financial sustainability,
promote inclusive growth, and achieve long-term development objectives.
• References:
• What is resource mobilization? (https://healthcommcapacity.org/resource-
mobilization-important/)
• what is external resource mobilization?(https://mofep.gov.gh/divisions/erm-
b/overview)
• External resources mobilization perception of Bangladesh.
• (https://sg.docworkspace.com/d/sIJCsqeCEAdOuva4G)
• (https://sg.docworkspace.com/d/sIJCsqeCEAdOuva4G
• (https://sg.docworkspace.com/d/sIJCsqeCEAdOuva4G)
• (https://sg.docworkspace.com/d/sIJCsqeCEAdOuva4G)
• RESOURCE MOBILIZATION STRATEGIES AND ACTION PLAN FOR
BANGLADESH, Monzur Hossain, PhDIndividual Consultant, K4DM)
• January 2, 2024, Rejaul Karim, Govt Sees budget surplus of Taka 11,865 Core, Daily
Star
• February 18,2024, Hasan Adnan, 4 lack Loan from Internal Sources in 5 Years,
Banik Barta
• The Economy of Bangladesh, Shoiyed Akmol Mahmud, 9th edition 2012
• বাাংলাদেদের অর্থনীতি, মাসুম আলী ও নুরুল আলম, 12th edition-2009
