Shortage of long-term financing is hurting growth of companies, World Bank warns

The World Bank (WB) has warned that a shortage of long-term financing since the 2008 crisis is chok- ing the investment-backed growth of companies in developing countries and hampering the ability of credit-worthy families to borrow for education and housing needs and escape poverty.

At the global level, this shortage of long-term financing also means that despite appeals made by the Group of Twenty (G-20) and other key international groups, developing countries are struggling to mobilize the billions of dollars in financing they need to build badly-needed infrastructure in order to grow their national and regional economies.

According to the new report: “Global Financial Development Report 2015-2016: Long-term Financing,” extending the maturity structure of finance is considered to be at the core of sustainable financial development.

Securing long-term financing, defined as investment funding that matures in a year or more, depends on the same fundamentals essential to tackling the current volatility in global capital markets.

The WB report stressed that policy makers need to focus on institutional reforms, such as promoting macroeconomic stability, establishing a regulated and legally enforceable banking and investment system that protects creditors and borrowers, and setting a framework for capital markets and institutional investors.

In a statement, World Bank Group President Jim Yong Kim said: "It would be a challenge to achieve high and sustainable rates of economic growth if countries fail to invest in schools, roads, power generation, electricity distribution, railways and other modes of transport, and communications."

"Private sector construction of plants and investment in machinery and equipment are also important. Without long-term financing, households face great hurdles to raising income over their lives – for example by investing in housing or education – and may not benefit from higher long-term returns on their savings," Kim added.