The Government is looking at establishing an Irish development bank to boost overseas aid after receiving proposals from two prominent private sector players.
Speaking at a lecture in Trinity College Dublin last night, Conor Lenihan, Minister of State with responsibility for Overseas Development Aid, told the audience he was "impressed" with two proposals suggesting the Republic should set up such an institution.
The submissions were made as part of a consultation on a White Paper that the Government plans to publish on overseas aid.
The Irish Times understands that one proposal came from a partnership of venture capitalist Paul Connolly and Citibank. The other was made by Mark Redmond, an executive of German Depfa Bank, which has an operation in Dublin's International Financial Services Centre (IFSC).
Mr Redmond made his proposal in a private capacity, and was not acting on behalf of Depfa. However, Depfa is active in development banking, and he is understood to have experience in that field.
Both are proposing to set up non-profit institutions in partnership with the State. These would provide cheap credit for businesses and entrepreneurs in developing countries who cannot get loans from mainstream banks.
A number of European countries, including Holland and Norway, operate development banks in partnership with the private sector and groups like trade unions.
Mr Connolly worked with businessman Denis O'Brien on the development of the Esat telecoms business. He is now a director of Mr O'Brien's Digicel business, which operates mobile networks in the Caribbean. He is the director of Connolly Corporate Finance, a venture capital and corporate finance house.
Development banks operate in developing countries that most finance institutions avoid because they consider the risks to be too high. Most offer cheap credit and operate on a not-for-profit basis. They aim simply to recover their money and recycle the capital back into the regions in which they operate.
Speaking at the Millennium Development Goals lecture series, Mr Lenihan, pointed out that most of the states in the Nordic plus group of donor countries, of which the Republic is a member, have development credit institutions.
"The idea of an Irish development bank needs to be closely examined and carefully evaluated," the Minister said. He pointed out that one of the problems he had noticed during visits to developing countries, particularly in Africa, was the absence of credit.
Mr Lenihan stressed that the Republic needed to look at all options for dealing with this problem. Any Irish development bank would most likely focus on either a particular region or specific sectors, and would work with other such institutions.
