Many economists consider the global financial crisis (GFC) that erupted in the United States in 2007-08 as the worst financial crisis since the Great Depression of the 1930s. The crisis initially began in the subprime mortgage markets in the US but soon grew into a full-blown global financial crisis as financial shocks were transmitted globally due to the financial interconnectedness. The distressed banking system caused significant damage to the real economy. The global financial crisis has critically exposed the vulnerabilities of a liberalized, privately focused financial system. In a bank-based financial system, banks are the key financial intermediaries as they allocate funds from savers to borrowers. A sound, well-regulated banking system is a sine qua non for macroeconomic stability and sustained economic development. As governments around the world pledged trillions of dollars in loans, guarantees, capital injections, and other forms of assistance to rescue some of the world’s biggest banks and financial institutions facing an imminent collapse, the financial crisis has reignited an intense debate on the ownership structures of the banking sector and the desirability of direct state interventions in the financial sector. In many meaningful ways, the global financial crisis has challenged conventional thinking on state ownership of financial institutions and forced policymakers to reconsider the role of the state in the financial sector, especially state ownership of banks and other forms of financial institutions. Besides, the adoption of the United Nation’s Sustainable Development Goals (SDGs) in 2015 has given new impetus to governments’ efforts to channelize financial resources towards the implementation of the 17 goals of the 2030 Agenda for Sustainable Development. The development banks (DBs) and development finance institutions (DFIs) can significantly contribute directly and indirectly to the achievement of the SDGs at national, regional and international levels. In sum, both these recent developments have opened up enormous opportunities to explore the potential role of state-owned financial institutions as a catalyst in achieving truly sustainable development in the coming decades.
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