Regional Development Banking for Jobs and Productivity
Our current financial system does not provide this.
A dedicated Development Banking sector can spread growth across the nation, creating jobs and providing the wherewithal for existing companies to increase their competitiveness. Investment targeted regionally can bring industry and growth to traditionally under-developed areas. Germany provides a long-established and ongoing example.
Traditional banking practice requires pre-existing assets as security, and loans carry no long-term commitment.
Development Banking avoids these two limitations of traditional banking by making a long-term commitment based on an intimate involvement with the business or project in which it is invested. This facilitates the creation of new business and new jobs, as well as providing secure finance with which existing business can maximize quality and productivity.
The two broad principles of Development Banking
The Development Bank begins by thoroughly researching each loan proposal from design to production, management and sales, calling on outside expert advice and assistance where necessary. A successful loan recipient will receive full back-up support in a close working and constructive partnership with the Development Bank, both on start-up, then continuously monitored with an ongoing flow of performance data. The Development Bank would levy a fixed charge covering its administrative costs, plus a small insurance premium.
With investment risk minimized through proper, pre-investment research and positive on-going monitoring of physical production, sales, and accounting, the business becomes its own security.
By setting up Development Banks to operate at regional level, focusing on regional and local needs, investment benefits can be spread widely and uniformly across the nation, avoiding the usual pockets of non- or under-development.
Investment creates purchasing power now, and goods later. Thus the quantity and duration of investment must be related to the current productive capacity of the economy.
Aggressively promoted, Development Banking can spread growth across the regions, creating jobs and providing the wherewithal for existing companies to increase their competitiveness. And the benefits will stretch into the future as a thriving, broadly based economy sends a positive signal to young people providing the prospect of a challenging, well-paid job as the sure reward of education.
Indeed, a percentage of the investment charge should be set aside to fund apprenticeships and on-location training. High youth unemployment is largely caused by the mismatch between the skills that young people offer and those prospective employers need. Countries with the lowest youth jobless rates tend to have a close relationship between education and work. Well trained apprentices ensure a smooth flow of new talent to provide for growth and replacement of retiring personnel.
Many of today's successful businesses grew over many years and a long hard climb, starting with minimal capital, operating on a shoestring, and reinvesting every penny of profit. Regional Development Banks can provide sufficient capital for a good business venture to start at full operation, properly equipped for maximum quality and productivity.
And by conditionally requiring the highest standards of product and service quality, Development Banking can increase competitiveness, and the high level of productivity which creates real and lasting prosperity.
Most significantly, Regional Development Banks can create jobs and industries NOW, with the guaranteed longterm finance needed to maximize productivity and most importantly, maximize quality.
The Formula for National Prosperity is very simple:
Dedicated, Project-secured Development Banking can make it happen.
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