In my view, a DFI can be deemed to be successful when its participation addresses market failures and brings high value addition by: (a) Influencing project design and delivery in a way that will generate employment, increase income levels and welfare of targeted sectors, expand tax revenues and multiply economic spillovers; (b) Crowding in or attracting private investments or financing in new growth sectors/markets through innovative financial structures; and (c) Creating an enabling environment for economic segments to flourish by actively contributing to the sound design and implementation of public policies. The difference in measuring the success of the DFIs means that it is important to have a structured and comprehensive performance measurement framework. This framework must be anchored on developmental outcomes to create strong incentives for strategic alignment to achieve greater development impact. For example, the BancoEstado of Chile has for the past 4 years published integrated reports which are called the “Social Footprint of BancoEstado”. They showcase the achievements of the Bank’s development impact in terms of meeting the SDG agenda. BancoEstado embeds relevant SDGs and developmental KPIs in their performance measurement framework. They are then hardwired into key decision making processes to ensure productive and effective allocation and distribution of resources aimed at meeting the development objectives. Similarly, performance measurement of development impact is the backbone of FinDev Canada, where their success is not only measured by financial sustainability but whether they also improve the lives of those impacted by the businesses they support.

Thus, the focus on building resilience, creating building blocks to address financial instability, boosting national competitiveness, strengthening human capital, inculcating sustainable consumption and increasing productivity, will be paramount in shaping our success ahead. With all these in mind, I will put forward three points in my remarks today, relating to the business models, performance and regulatory framework for DFIs. 1/5  BIS central bankers' speeches  Key Message 1 – Re-engineer business models of DFIs First and foremost, for DFIs to contribute effectively to the development priorities of the nation, it is important for each DFI to ensure their long term financial sustainability. Without this foundation of continued financial health and strength, DFIs will not be able to contribute meaningfully as there will be constraints and limitations in executing their objectives. As policymakers, Bank Negara Malaysia envisions an environment where DFIs are financially independent from the Government with enduring business models that can continue to deliver positive benefits to the economy and broader society. Over the long-term, DFIs should not be dependent on fiscal support to deliver their mandates and hence, will need to diversify their sources of funding to be sustainable in the long run. What we should seek is not short-term fixes but enduring business models that will deliver positive impacts to the economy and society as the economic landscape changes. At the same time, business models for DFIs should be firmly grounded on strong governance and a culture of professional management.