SOAS Research Online

Abstract

The thesis is divided into nine chapters. The first chapter gives an overview of the external financial flows to the Less Developed Countries (LDCs) between 1970 and 1980. It explains why these countries increasingly turned to private sources of external finance and why the banks in particular were willing to provide that finance. Noting the needs of these countries for continued access to private external finance, the thesis proceeds to investigate four areas fundamental to the continuity of that access. They are:- 1) The determinants of the financial terms of bank and bond finance. 2) The impact of further lending to LDCs upon bank balance sheets. 3) The attitudes of the lending bankers to ways of increasing private financial flows. 4) The reasons for the limited role played by the eurobond market in providing such finance. As a preliminary to investigating these points chapters two and three discuss the nature of the eurocurrency market generally, reasons for its growth and the statistical sources relating to that market. Chapter three also develops a theoretical model of the eurobank lending function. Returning to the fundamental points noted above, chapter four investigates the determinants of the financial terms of private finance ie euro money-market interest rates, the spreads on syndicated loans to LDCs and the interest yield on LDC bond issues. Chapter five investigates the impact of the growth in bank lending to LDCs upon UK banks' balance sheets. Chapter six reviews the literature making suggestions for reducing the risks associated with lending to LDCs. Chapter seven reports results of a questionnaire survey of nearly two hundred London banks regarding the suggestions noted in chapter six. The presumption behind these two chapters is that reduced risk will, ceteris paribus, increase the flow of finance. The responses to the survey confirm the validity of this presumption. The reasons for the limited role of the eurobond market in providing private external finance to LDCs is investigated in chapter eight with the aid of a second questionnaire. This survey was directed at the London managers of eurobond syndicates. The last chapter gives a resume of the thesis and makes recommendations for easing the external debt problem of the borrowers and bankers.