"Many development banks are still sticking to their original missions and legacy environments – and run the risk of inadequately countering current developments. "

Development banks play an important role to combat the absence or failure of market mechanisms, advance specific public policy goals or support wider social and economic development in their countries. Although this model has a successful track record megatrends such as digitalization, globalization, climate change and migration giving rise to new priorities and change the market environment development banks operate in. Therefore they have to adapt too. Times are changing – and so are the challenges that development banks have to face.

The study “Successful past – fit for the future? Realigning the mission of development banks in a changing world” by Roland Berger offers strategic guidance to help development banks clarifying their future roles. It discusses typical issues challenging their position, shows how an existing mission can be substantiated or realigned, and provides practical takeaways, showing how to realize such missions and enhance the banks’ impact.

A systematic approach for development banks

First, a three-step framework provides a useful tool going forward: Identify global factors which are expected to have a significant economic, political or social impact. Analyze the future development of domestic market factors which can point development banks in the right direction for potential future priorities. And proactively align with policy priorities and divide topics among public stakeholders according to market knowledge and competence.

Armed with a clear mission development banks can move forward with greater certainty and a sharper focus. On this basis five general actions can help development banks boost their impact.

• • Review the development bank’s governance arrangements, including stakeholder relations

First, the status quo must be assessed. This enables strengths and weaknesses to be identified. Development banks have to ask themselves several questions: Is the current ownership structure the most efficient and effective one? Does the bank have sufficient freedom to act, or is it too heavily dependent on government stakeholders and processes within ministries and other public bodies? Are governance arrangements clearly defined and transparent to stakeholders? Are governance processes for decision-making efficient and effective?

• 2. Digitalize the business model to reach clients more easily, make services more accessible, and optimize internal and cross-company processes

As the broader market and client expectations become more and more digital, development banks must master digitization too. They must develop digital end-to-end processes and learn how to handle large volumes of data and open platforms. Key questions could be: Which offerings and services are most important for the customer and how can they be redesigned to optimally meet customer needs? Or, how can digitalization help reduce costs and accelerate delivery? Especially for development banks that have until now relied on indirect business models, changes resulting from digitalization could be very fundamental.

• 3. Produce and publish an annual business plan, including financial, economic, social and other goals

This sounds simple, but it helps focus management's attention on developing and agreeing goals that are clear and robust enough for publication and that align with the defined mission. That in turn improves external perceptions of the bank's transparency and accountability and justifies public support and funding for the bank.

• 4. Produce and publish impact assessments based on stated mission and targets

In the course of this measure, it is possible on the one hand to determine where banks are already fulfilling their mandate – but also where improvements are (urgently) needed. As with the business plan, this step also helps to highlight a bank’s own performance vis-à-vis external interest groups, and to positively influence their strategy.

• 5. Liaise with other relevant players in the development context to ensure alignment within the ecosystem

In countries with networks of differentiated development banks and other public agents with similar targets, clients and distribution partners may not know which one to approach ("development support jungle"). Coordination, collaboration and the use of integrated digital solutions can help maximize the overall impact. A good case for this is the European Union with a very broad and diverse scenario of supranational, national and regional development institutions that could play a stronger role in the further integration of the Union.

More strings to their bow

Depending on the focus of a development bank, there are several more specific initiatives focusing mainly on creating market incentives and supporting modernization and digitalization. The diversity of development banks makes it clear that there can never be a “one-size-fits-all” approach. However, constant change must also become a constant for development banks. These banks must become more agile and take a more proactive approach than in the past to meet challenges of today and tomorrow.