Boosting the private sector has become an increasingly important part of development work over the last few years. Tools like loans to entrepreneurs are an impulse for economic growth on a broad scale.
Targeted support for the private sector
Development work in the public sector is important, but not a cure-all. That is why targeted support for the private sector is now given an equally important role in emerging markets and developing countries. Mag. Michael Wancata, member of the management board at OeEB, explains, "The basic idea is to increase people's incomes and thus, indirectly, their quality of life, health, education, and nutrition as well."
Makes developmental and economic sense
Development banks like the OeEB do this work. The most significant difference to classic development work: The projects are supposed to make economic sense for both the lender and borrower in addition to being sustainable. The development banks help with non-subsidised loans or make equity available – not with the goal of making a large profit, but rather with intention of achieving positive results from developmental, political, and economic perspectives.
OeEB: Long-term loans with risk
The local banks that can evaluate the risk in the area well do not have the money for mid-term and long-term loans. Many international banks have the money but lack experience – they are unwilling and unable to take on such uncertain risks. When a development bank teams up with local banks to offer corresponding products, this shows banks in industrial countries that it is possible to do business profitably in the concerned country.
Infrastructure – the foundation of the economy
The second main focus of development banks with empirically proven effectiveness is the financing of infrastructure projects in the private sector: Reliable energy and water supplies and good transportation networks are the foundation of a thriving economy.