Far-reaching reforms to modernize the state-owned National Bank for Economic and Social Development (BNDES) can help Brazil support productivity growth and job creation by making better use of investment capital, according to the new World Bank Group study, “Towards a More Effective BNDES,”.

The study provides the government of Brazil with recommendations to establish BNDES as a more effective and better-focused development bank, making it less dependent on the government for funding, and making it less vulnerable to interference by improving its decision-making processes and internal governance.

Authored by five experts in the Finance & Markets (F&M) Global Practice of the World Bank Group, the study aims to contribute to Brazil’s current debate on improving BNDES operations and strengthening its medium – to long-term role in the Brazilian economy. By establishing BNDES with the full capabilities of a development bank – providing technical assistance as well as financing to its clients – Brazil can better target investment capital toward the most promising small-and medium-sized enterprises (SMEs) that have the potential to create jobs, incomes and wealth.

“Strengthening BNDES can help unleash the full potential of the country’s most promising high-growth firms,” said Martin Raiser, World Bank Country Director for Brazil. “Development banks in other countries have increasingly refocused from pure lending to leveraging commercial funding through guarantees and other instruments and combining financial with technical assistance to foster innovation and job creation – experiences from which BNDES can benefit,” he added.