Economist hails potential of public development banks for Ireland

Public development banks could boost economic growth and aid job creation in Ireland, according to international financial expert Prof Stephay Griffith-Jones.

The economist, who is financial markets director at the Initiative for Policy Dialogue at Columbia University, was in Dublin on Wednesday to deliver the second annual Dónal Nevin lecture at the Nevin Economic Research Institute.

The need for increased investment through a new approach to banking in Ireland was a key theme of Prof Griffith-Jones’s speech, which looked at the role that public investment banks such as Germany’s Kreditanstalt für Wiederaufbau (KfW) could have in aiding Ireland’s economic recovery.

Kfw is involved in the recently announced Strategic Banking Corpororation of Ireland plan, which is to make over €500 million in credit available to Irish SMEs. KfW is financing the scheme in partnership with the European Investment Bank and the Ireland Strategic Investment Fund (ISIF), the replacement for the National Pension Reserve Fund.

The bank, which is now the second largest commercial financial institution in Germany, was established in 1948 as a public law institution. It is owned 80 per cent by the Federal Republic of Germany and 20 per cent by the federal states. It has a long track-record in providing funding for SMEs.

“Public investment banks provide the vision and long-term finance that help sustain investment, innovation and job creation particularly when private lending on its own is not sufficient,” said Prof Griffith-Jones.

“A significant level of lending is required for public investment banks to have a positive impact on the economy. In Germany the state-owned KfW bank accounts for 12.7 per cent of total bank credit in the domestic economy”, she added.

Prof Griffith-Jones also cited the work done by development banks such as BNDES in Brazil and CAF in the Andean region in aiding economic growth.