Mazzucato, Mariana; Macfarlane, Laurie; (2023) Mission-oriented development banks: the case of KfW and BNDES. (Working Paper Series: IIPP WP 2023-13 13). UCL Institute for Innovation and Public Purpose (IIPP): London, UK.

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Abstract

There is an urgent need for channelling long-term finance towards addressing major social, environmental, and economic challenges. The paper argues that state investment banks (SIBs) can play a crucial role in mobilizing the needed capital, and that they can most effectively do so when structured and governed to play a ‘mission-oriented’ role. We provide an empirical account of two SIBs that have played an active mission-oriented role in their respective economies: Germany’s KfW and Brazil’s BNDES. We reflect on these empirical findings and identify key institutional characteristics that have enabled them to play this role, including challenge-led mandates, use of progressive conditionalities, stable sources of finance, diverse in-house expertise, and robust governance structures. The paper concludes with a discussion on how mission-oriented SIBs can be complemented by wider reforms to the global financial system.

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