Prolegomena to an Evolutionary Theory of Development Banking for a Sustainable Future

Abstract

This article argues that an evolutionary theory of development banking should focus on its double role as provider of long-term financing for sustainable development and vehicle of institutional change. In this sense, Commons’ “reasonable value” theory provides a comprehensive approach to the lender-borrower relationship which takes into account public purpose. Besides, his view of reform in the presence of limiting factors renders the institutional connotation of development banks’ lending more explicit. Furthermore, Veblen’s theory of institutional change in the interaction between technological change, institutions, and habits of thought sheds light on the role of public development banks in institutional development and change with social and ecological concerns. Hence, an evolutionary theory of development banking transcends mainstream allegations of inefficiency and integrates economic development with social and ecological sustainability.