Measure the subsidies for financial institutions for development

Author: [USA] Schleinzer et al./Ren Changqing
Publisher:
Publish Date: 2005-01-01
Features: The term Development Finance Institutions (DFIs) refers to public or private financial intermediaries that raise funds from governments or donors to improve social welfare. As funds for social development become increasingly scarce, measuring the social costs of public development finance institutions has become increasingly important. If the social benefits of a DFI exceed its social costs, it indicates that public funds are being used effectively. The book "Measuring Subsidies for Development Finance Institutions" introduces two important methods for measuring social costs: the Subsidy Dependence Index and the Social Net Present Cost. Both methods go beyond conventional financial ratio analysis. This is because their calculations shift from the realm of reported (accounting) costs—which include a significant portion of routine subsidies—to the analysis of opportunity (economic) costs. In the long term, if the scope of policies is improved in terms of length, width, depth, and quality, and this improvement can compensate for the short-term costs borne by the target groups, then sustainability can enhance social welfare. As pointed out in the book, using the Subsidy Dependence Index and the Social Net Present Cost to calculate social costs represents a step toward more transparent and accountable use of public funds.