There are at present approximately 550 DFIs worldwide. These are special financial institutions established and mostly owned by governments aimed at promoting and supporting national economic development agenda. Indeed, o ver the years, history has shown, and reinforced the view, that DFIs do have an important role to play in a country's socio-economic development. For instance, in Europe, the advent of development banking can be traced back to the mid-nineteenth century, and was established to meet the increased demand for medium to long-term capital by new and emerging enterprises during the industrial revolution. The years following World War II saw the establishment of DFIs in many developing countries to provide, in particular, medium and long-term financing that was identified to be so critical in supporting the economic development agenda of these countries. In a laissez-faire economy, an efficient financial intermediation system mobilises and allocates scarce resources towards activities that would optimise the rates of return. On this basis, the commercially-driven and profit-maximising banking institutions would often tend to take a short-term view and consider solely the private benefit of a project, at the expense of the potential long-term social benefit that could be derived from financing a particular project. This has, therefore, created a gap in the market place whereby certain segments of the economy have been underserved by the banking system. These include development projects which involve high potential risk and long gestation period, but yet have significant long-term benefits to the overall economic development of a country.

Similarly, there are also some sectors or groups of businesses which, due to their business characteristics and lack of track record, limited credit history and inadequate collateral, do not have adequate access to financing from the banking system. These are clearly instances of market failure, and the establishment of the DFIs is indeed an attempt to rectify this shortcoming. In this regard, in achieving national policies for economic and social development, the DFIs are established as a strategic conduit to bridge the gaps in the supply of financial services, by channelling the resources and funds in the financial system to areas and sectors that are deemed as strategic for long-term economic development purposes. In essence, the DFIs are complementing the banking institutions in meeting the financing requirements of the  1/5  economy, particularly in supporting the economic and social development of a nation. The establishment of DFIs is part of the national development plan itself. As policy-based financial institutions, the DFIs have roles and mandates which are linked closely to the country's national development objectives. This is evidenced from the establishment of DFIs with specific purposes to promote development of identified sectors, ranging from industrial and agriculture sectors to areas such as export promotion, infrastructure development as well as the small and medium enterprises (SMEs). It is notable that the roles of DFIs have evolved in the course of a country's economic development and transformation. This is important in ensuring that the DFIs remain relevant to support the changing financing needs of the economy.