Development Banks

Development banks are patient capital incarnate—financial institutions designed to fund investments that commercial markets won't touch. Infrastructure that takes decades to pay off, green energy that requires policy support, emerging markets that private lenders avoid—development banks fill these gaps by accepting returns and timelines that would bankrupt a commercial bank. The biological parallel is parental investment. Just as mammalian parents invest years in offspring that won't reproduce for decades, development banks invest in projects that won't generate returns for generations. This long-term orientation is metabolically expensive but evolutionarily successful. Patient capital enables compound growth that impatient capital cannot. Development banks also function as coordination mechanisms. A single road is worthless; a road network is transformative. Commercial banks won't fund the first road because returns depend on the network that doesn't exist yet. Development banks can coordinate multiple investments simultaneously, solving the collective action problem that paralyzes private capital. The entities in this category include multilateral development banks (World Bank, regional development banks), bilateral development finance institutions (national export-import banks), and specialized funds (climate finance, infrastructure funds). They share a common structure: government backing that enables below-market lending, policy mandates that justify below-market returns. When exploring development banks, look for: additionality (are they funding what markets wouldn't?), sustainability (can projects survive without continued subsidy?), and governance (whose development priorities do they serve?).

Patient capital institutions that fund what commercial markets won't—infrastructure, green energy, emerging markets—by accepting returns measured in decades.