Members Craft “The Colombo Consensus”

Led by Chairman Amb. Jesus P. Tambunting, attending ADFIAP member-institutions at the conclusion of the conference have prepared and adopted the Colombo Consensus on Sustainability of DFIs in realization of their role amidst the working environment they are operating at present. The pronouncements also aim to guide member-DFIs as they move forward into the future.

“THE COLOMBO CONSENSUS”

(Agreed and subscribed to by the Delegates to the 29th ADFIAP Annual Meetings held on May 8 to 11, 2006 at the Cinnamon Grand Hotel in Colombo, Sri Lanka)

PREAMBLE

WHEREAS the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP), the focal point of all development banks and financial institutions engaged in the financing of development in the region, recognizes that the Association and its member-DFIs have to have a long-term view of the future and the sustainability of their institutions as they face new challenges in an ever-changing environment, do hereby consent to the following declarations:

Consensus No. 1
Role of DFIs in the Financial System

RECOGNIZING that while each country’s financial system is unique and appropriate to its own economic development, and that there is now less clear distinction on the role and function between DFIs and commercial banks, ADFIAP member-institutions agree that there is ‘room’ for both types of financial institutions to co-exist in the ‘market’ and that they should complement with each other in meeting the sustainable development needs of the country.

Consensus No. 2
DFIs and the Regulatory Environment

CONSIDERING that DFIs in most countries have a specific mandate from the State to play a prominent role in the economic development of the nation, especially in providing funds for long-term projects and strategic sectors where no commercial financial institution may venture into, ADFIAP member-banks agree that there is need to dialogue with regulatory agencies and to develop, in addition to existing financial and prudential regulations applicable to general banking activities, a definitive supervisory framework for DFIs.

Consensus No. 3
DFIs and Funding Sources

REALIZING that there is a dearth in funding sources, particularly long-term finance, for DFIs in many developing countries in view of their governments’ ‘arms-length’ posture with them and own financial difficulties, DFIs agree that they have to be resilient and adaptive to this situation by convincing their governments to change their charters, if applicable, for them to go into business areas where they can have a competitive advantage based on their inherent strengths. The DFIs also agree that they can survive without concessionary finance if only States can provide them support mechanisms and enabling policies to allow them to sustainably operate in this kind of environment.

Consensus No. 4
DFIs and Profitability

EMPHASIZING the need for DFIs to be effective and sustainable institutions, there is no doubt in the minds of DFI-members that they have to be profitable and show financial strength and stability. Profitability, however, in the context of DFIs means balancing the attainment of their development mandate vis-à-vis their financial performance. In essence, profit maximization may not only be the overarching objective of the DFI.

Consensus No. 5
DFIs and Sustainable Investments

COMMITTING to its objective of being a mainstream institution in the sustainable development arena, ADFIAP and its members will continue to explore sustainable investments and other business opportunities such as those dealing with the environment, small and medium enterprises (SMEs), infrastructure, housing development, etc., as well as to relate and partner with like-minded development institutions around the world that will contribute to the attainment of this goal.