2.3.Funding sources go beyond periodic budgetary transfers

Furthermore, concessionality may not necessarily rely on budgetary transfers. For instance, some DAC donors, such as France, Germany, and the European Investment Bank, have raised money on financial markets at extremely low rates, using implicit or explicit state guarantees, and then relent to developing countries without any tangible and explicit fiscal effort. Such financial flows are still qualified as ODA in the sense that they are concessional, but they do not require tangible budgetary transfers. In these cases, the line between aid agencies and DFIs seems to be blurred, because both use the market-based fundraising approach to provide development financing to developing countries. Given the trend of blended finance, this might be an artificial dividing line between aid agencies and DFIs, because not all selfidentified DFIs are fiscally self-sustaining, and some aid agencies innovate new financial products and search for market-based funding sources by relying on sovereign guarantee.

2.3. Funding sources go beyond periodic budgetary transfers

One important point in assessing the identity of PDBs and DFIs is to distinguish them from aid agencies. One salient feature of aid agencies is that they primarily rely on periodic budgetary transfers from governments to sustain their operations. By contrast, PDBs and DFIs rely on government support to use market means to mobilize resources, such as issuing bonds on capital markets or lines-of-credit mobilization from other banking sources. A proper financial institution must have diversified sources of funds in its liabilities. The constitution of a capital base and regular government budgetary transfers can be one of these sources. However, governments usually expect PDBs and DFIs to leverage the balance sheet by relying on various other sources of financing. Otherwise, it is hard to

qualify an institutional arrangement as a financial institution if there is no financial

liability on its own balance sheet. .

Even though PDBs and DFIs may sometimes claim to be financially sustainable, financial sustainability is not a characteristic that helps distinguish PDBs and DFIs from aid

agencies. Even though some PDBs and DFIs may not receive any fiscal transfers from governments, such as the IBRD and the China Development Bank, governments play an indispensable role in mobilizing funds to support their operations. PDBs and DFIs often rely on sovereign creditworthiness to issue bonds from capital markets. If we take into account the cost of risk that taxpayers and the general public bear in their role as equity holders, PDBs and DFIs cannot be financially sustainable because they are mandated to provide high-risk and long-term capital that private banks are unwilling to offer (Lucas 2012; 2014). Owing to different financing structures, some PDBs and DFIs may rely less on governments than others. Hence, financial sustainability is more of a modality than an identity.