Open Access

Reinhard H. Schmidt

• It appears astonishing to me that none of the papers and discussions at this conference on "Financial Flows to Developing Countries" have even touched upon an important category of international financial relationships which involves direct flows and links to the so-called developing countries. Specifically, none of the contributions have dealt with “development finance”, which is a broad term covering various kinds of activities carried out in the framework of development assistance. This is a particularly striking omission, given that until fairly recently the volume of official aid exceeded the volume of private capital flows to the developing and transition economies (IMF, 1998, p. 60). Moreover, it is conceivable that, in terms of both their developmental impact and their contribution to the alleviation of social problems, the flows financed by official aid may be more important than private capital flows. Thus, I felt that, at the very least, my fellow conference participants should be made aware of this gap in the range of topics addressed by the conference, and it was with this goal in mind that I prepared the present paper as a contribution to the concluding session of the conference. The first section of the present paper defines the concept of “development finance” and seeks to show how its content and meaning has changed over time. In the second section, I discusses a broad trend in banking regulation which has recently emerged in many developing and transition countries and which has, in my view, highly problematic implications for the potential to create financially sound and developmentally relevant “microfinance institutions”.