Development Banking: Only With Clear Missions

Banking is a social privilege. Within the social structure, banking plays a crucial role in underpinning the productive processes of the economy. By facilitating access to capital and financial services, all economic activities can proceed with greater agility, shortening economic cycles and increasing returns. In social terms, it helps businesses grow, raises employment, and ideally serves to dissipate capital problems in times of crisis. Development banking, however, operates with different priorities than private banking.

The key distinction rests on understanding that certain economic processes, projects, or businesses carry risk levels so high that the interest rates private banks would need to charge become prohibitive. Or, simply put, no functional structures exist to calculate the risks, making it neither possible nor desirable to deploy depositors' savings in these endeavors. Development banking, by contrast, can pursue a range of priorities: participating in projects where risk-assessment frameworks do not yet exist; serving sectors with no access to banking services; helping businesses enter the conventional financial system through project planning support; and drawing on funding from international institutions or governments. In its public dimension, development banking's priority is to act as a lever for national economic development, aligned with national priorities.

In Mexico, one need only recall the banking crises under Echeverría, López Portillo, and Zedillo (Fobaproa) to understand that private banks have always counted on state support. In each case, bankers who made poor business decisions were bailed out rather than directing resources toward the national economy or depositors directly. Compare this with Iceland's response to the 2008 financial crisis: the government nationalized the banks and owners lost their investments as a direct consequence of their own mismanagement. The state's track record with banking in Mexico is full of contrasts, including notable successes such as Bancomext, alongside a private banking sector that extracts roughly 30% of revenue from fees alone.

Private and development banking must operate in parallel, in a coordinated and synchronized manner. Processes where each complements the other should drive the economy efficiently and swiftly. This is especially relevant given how banking innovations in Asian countries have made credit approvals nearly instantaneous, covering everything from factoring to immediate project financing. For this to become a reality, Mariana Mazzucato of University College London argues that the state must define clear missions: a set of objectives around which the entire state apparatus coordinates, and where every member of society understands what they are contributing toward the shared goals.

A strong illustration of this in practice is the UK Labour government's economic plan, and Mazzucato's advisory work extends across every continent. https://labour.org.uk/change/kickstart-economic-growth/

In that plan, one clear mission is employment growth, with development resources directed at creating jobs, improving financial services, and injecting fresh capital so businesses can expand and absorb working-capital gaps from supplier credit. In other words, a policy that transfers onto the state balance sheet the financing burden currently borne by suppliers to businesses that are operational but lack access to capital. This frees up locked resources within companies to pursue more business activity.

Mexico must follow a clear process in which priorities and missions are defined. Beyond having a broad vision of what the Fourth Transformation means, concrete objectives must be specified. One goal Mexico shares with the United Kingdom is clean energy: the British have set themselves the mission of becoming a global powerhouse in renewables. President-elect Sheinbaum has also announced railway infrastructure investment that will reshape Mexico's future. The investments the United Kingdom will make in ports, new factories, steel support, carbon capture, and hydrogen as an alternative to electrification exceed $10 billion.

Development banking must be the lever that drives the administration's major projects, drawing on support from development banks worldwide to bring not just capital but knowledge and savoir faire to deliver the best outcomes for Mexicans. Mexico's new rail projects should draw on the best available technologies, whether Japanese, Chinese, Korean, German, or French, to achieve the goal of connecting Mexicans within a renewed national fabric. The aspiration that Mexico, following China's example, could develop high-speed rail lines in two to four years to integrate the country should not belong to Mexico alone. It should be a benchmark for the West as a whole.

With clear objectives in place, development banking is the instrument to achieve them. Let us give it the priority it deserves, focused on filling every gap from factoring to supplier credit, but above all focused on bringing the resources Mexicans need to build a more just and prosperous Mexico.

Frequently Asked Questions

What distinguishes development banking from private banking?

Development banking targets sectors and projects where risk levels are too high or structurally opaque for private banks, acting as a lever for national economic priorities rather than profit maximization.

What is the mission economy framework and why does it matter for development banking?

Economist Mariana Mazzucato argues that governments must define clear, society-wide missions such as clean energy or full employment that coordinate all public institutions, including development banks, toward shared objectives.

How could Mexico's development banking support major infrastructure projects?

By partnering with international development banks and adopting proven technologies from Japan, China, Korea, Germany, and France, Mexico's development banking can finance transformative projects like a high-speed rail network deliverable in two to four years.