National development banks are back in vogue published by The Economist (3/2019).
“TONY OKPANACHI could be a dealmaker in the City of London or on Wall Street. Smart tie, winning smile, he recounts his 28-year career as a high-flying financier, from his MBA to his last private-sector job as an executive at Ecobank, a pan-African lender. He says profits are important and dismisses handouts to small businesses as “government largesse”. Yet appearances can deceive. “I’m an economist by training, and a commercial banker by profession,” he says. “Now I’m a development banker.”
Mr Okpanachi is the boss of Development Bank of Nigeria (DBN), a wholesale lender to small firms that started operating in 2017. His institution is part of a proliferation of national development banks (NDBs) worldwide. Kevin Gallagher, of Boston University, and Rogerio Studart, of the Federal University of Rio de Janeiro, believe there are more than 250, with total assets of $4.9trn, four times those of multilateral peers. Poor countries account for over three-quarters of the tally, but NDBs are also popular in the rich world. France and Canada have recently opened three between them. Myanmar and Ghana are rolling out new ones. Britain unusually, has no NDB—but some politicians want one.
NDBs are a unique species. Generally state-owned, they lend in pursuit of missions set out by the government. They cater to those often neglected by commercial bankers, lending to small firms, farmers or exporters, or funding infrastructure projects. Many banks, such as Mr Okpanachi’s, seek to marry purpose with profitability. But achieving this in practice is not easy.
The revival of NDBs follows decades of decline. After the second world war, states enlisted them to fund reconstruction (eg, Germany’s KfW) or to aid industrialisation (Brazil’s BNDES). But they soon found themselves at the centre of ideological battles. Proponents of state intervention saw them as plugging financing gaps. Opponents thought they distorted markets. As the free-market “Washington Consensus” gained ground in the 1980s, many banks shrank or were privatised…”
