Why do development banks not understand that risk-taking is the oxygen of development?

Sir, you dedicate a Special Report on “The Future of Development Banks” September 24. 

As a former Executive Director of the World Bank (2002-2004), knowledgeable about many developing banks, and with over 30 years experience as a strategic and financial consultant for medium and small enterprises in a developing country (Venezuela), I again must reiterate that I find it extraordinary that development banks have not reacted against bank regulations which by favoring those perceived as “not risky” discriminate profoundly against those perceived as “risky”, like small businesses and entrepreneurs. 

Risk taking is in my mind the oxygen of any development, and I cannot therefore conceive a development path that goes through helping the “not-risky” to get ampler and cheaper access to bank credit than they would have without regulatory interference, and the “risky” to get scarcer and more expensive access to bank credit. 

For development banks to develop their possibilities to help in developing they need to embrace the “risky”… the “not risky” are sufficiently embraced anyhow.

The poor prospective of the Bank against the North

Sir when on your first page you announce the birth of Bank of South you state that the six signing parties aim “to challenge the influence of US-based organizations”. I would contend this is a great exaggeration. Perhaps such a thing might be in the mind of the extremist of the group but for instance a country like Brazil has no interest whatsoever in challenging the World Bank or the Inter American Development Bank, on the contrary it is quite logically doing their utmost to strengthen their voice in those institutions.

Initial funds will be placed in the Bank of South and rapidly withdrawn by each investor for their own favourite projects and thereafter,with its role reduced to paying the salaries of some bureaucrats, it will most probably linger unproductively forever and ever. Could not the south benefit from a Bank of South? Of course, but not from a Bank against the North.

Help the migrants to earn more and not to forget their mothers

Sir, the Inter-American Development Bank informed that the remittances sent home to the Latin American countries by their migrant workers in 2006 were $63bn and so, if we assume that this represents 15% of their gross earnings, we obtain that the gross migrant product (GMP) for Latin America should be around $420bn. The developing banks need to stop focusing so much on what in the corporate world would only be similar to the cash dividends paid out to the foreign investors. Since every dollar sent home by the son who works abroad has in fact the same economic (and spiritual) value than the dollar the mother receives from the son who stayed home, what they should be doing is helping both sons to earn more, instead of wasting so much time and resources on petty issues such as the transfer costs, and which are anyhow only reduced by real sustainable competition between those interested in that market. If there is one aspect though that is of utmost importance and that relates directly to the remittances, but that is basically ignored in all the projections of future remittances, that is the heart-drain that could cause someone working abroad to forget his home… and find a stepmother.