The danger of this bank being seized by private interests

Jun 16, 2026 Features / Columnists, Peeping Tom

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(Kaieteur News) – In recent discussions about the proposed Development Bank, one worrying tendency is emerging: arguments are being stretched to the point where they lose analytical grounding and begin to undermine legitimate scrutiny. One example is the claim that the success of the bank will depend on hiring trained credit professionals.

There is considerable truth in this assertion about the need to have trained credit professionals. Even small loans require rigorous assessment of creditworthiness, sector risk, repayment capacity, fraud detection, portfolio diversification, and monitoring systems.

Indeed, micro-lending institutions across the world often fail not because loans are large, but because they underestimate the sophistication required to manage large numbers of small, unsecured loans. The administrative complexity of thousands of small lending decisions can exceed that of fewer large corporate loans.

At the same time, however, it is equally important not to allow this staffing argument to crowd out more substantive questions about policy rationale. If the intention of the Development Bank is to provide zero-interest, collateral-free loans to micro and small enterprises, then we must ask what about the effects on existing microfinance and small business loan agencies, such as the Institute of Private Enterprise Development (IPED), and credit unions.

There is a legitimate concern that heavily subsidised lending at scale could distort the market. Microfinance institutions, credit unions, and small commercial lenders operate on thin margins and depend on disciplined repayment cultures. If a state-backed institution enters the same space offering loans at zero interest and without collateral requirements, it could unintentionally crowd out these actors. The result may not be an expansion of credit markets, but a substitution of one set of providers with another.

This is not an argument against public lending institutions per se. Development banks exist precisely because markets sometimes fail to allocate capital efficiently to productive small enterprises. But the design of such institutions matters enormously. If concessionary lending is not carefully targeted, time-bound, and linked to capacity-building, it can create dependency rather than entrepreneurship.

Another concern sometimes raised is the long-term fiscal and institutional risk associated with large-scale concessional lending. A bank capitalised with a substantial public injection—reportedly in the range of forty billion dollars—must maintain strong repayment discipline to remain viable.

If repayment rates are weak, whether due to weak enforcement or overly optimistic lending criteria, the institution could face chronic stress. Over time, such stress often leads to one of two outcomes: repeated recapitalization by the state, or pressure for restructuring, including partial or full privatisation.

In many countries, development financial institutions have at times been restructured in ways that shift their balance sheets and customer bases into the private sector once they become viable or strategically valuable. It is therefore not unreasonable for citizens to ask what safeguards exist to ensure that a publicly capitalised institution remains aligned with its development mandate over time.

The presence of a large small-business sector, perhaps on the order of ten thousand does raise an important strategic question as to what gap is the new institution meant to fill? If the argument is that small businesses are underserved, then the design of the bank should be explicitly oriented toward complementing, rather than displacing, existing lenders.

A privately owned development bank, in particular, would have a clear incentive to target this segment because small businesses provide diversified risk, broad customer bases, and scalable lending opportunities. But precisely because of that attractiveness, it is also a segment that must be developed carefully to avoid over-indebtedness or predatory competition.

Ultimately, the most serious concern is not whether staff are overqualified or whether loan caps are too small to require sophisticated expertise. These are secondary issues. The real questions are about institutional integrity, governance safeguards, and long-term alignment with public purpose.

The most important safeguard any society can demand is clarity about ownership. If the Development Bank is intended as a public instrument for inclusive growth, then there should be explicit and transparent commitments that it will not be quietly transferred into private hands or repurposed for narrow commercial interests once its balance sheet becomes attractive.

That is why the central issue that should preoccupy public concern is not the technical exaggerations about trained staff but rather the governance architecture that protects the institution’s mandate. The selection of a CEO with integrity, independence, and demonstrated competence in small business loans is critical. So too is the establishment of legal and institutional safeguards that prevent the bank from being “flipped” or captured by powerful economic interests once it becomes capital-rich and operationally stable.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper)

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• Development Bank, Institute of Private Enterprise Development, Peeping Tom, private interests, scrutiny

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