What does it take for a Development Bank to succeed?
By João Carlos Ferraz, Instituto de Economia, Universidade Federal do Rio de Janeiro, Brazil
This blog is part of an ongoing series evaluating various facets
of Development in Transition. The 2019 “Perspectives on Global Development” on “Rethinking Development Strategies” will add to this discussion
Public finance institutions, or development banks, have “development DNA”. But, can they effectively engage in financing “development in transition” or the call to rethink international co-operation to help countries at all levels of income sustain their development gains? What would it take for such institutions to succeed? How can they anticipate and effectively respond to societal and market needs and aspirations?
Political space for this does exist. A consensus exists that development banks must have at least four priorities: infrastructure, innovation, sustainable environment and firms of smaller size. That’s the easy part! No policy maker or analyst in their right mind would be against these priorities. But, consider the nature of these priorities: each one is time- and place-specific but evolving permanently; they are moving targets. More importantly, they are risk-intensive, given the duration and unpredictability of associated projects and/or the potentially low credit worthiness of economic agents pursuing these priorities.
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