Improving financial oversight of development finance institutions

Abstract

Effective financial oversight is an integral part in ensuring that Development Finance Institutions deliver on their mandate and also to hold the executive to account for the use of public funds and resources. This article investigates the use of supervision tools by the National Treasury of South Africa in its oversight of the Land and Agricultural Bank of South Africa (Land Bank). Of the variety of tools in use globally, it identifies the CAMELS assessment framework as well as the Subsidy Dependence Index (SDI) and explores their benefits and drawbacks in the South African context. In addition, the article gains the perception regarding financial oversight by means of interviews from National Treasury and Land Bank stakeholders. Taking the financial information from the Land Bank audit report and performing a quantitative analysis of the bank’s performance, as well as measuring the social cost of the subsidies, the findings show that the adoption of the CAMELS rating could assist the Land Bank in determining a bank’s overall condition and identifying its strengths and weaknesses in terms of finances, operations and management.