September 24, 2012

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.