for building, implementing, financing, and evaluating the mandates of SFIs, and examines the experiences of these SFIs regarding the ownership and nomination of board members.

The analysis is based on four case studies of wholly state owned banks: Canada’s Business Development Bank (BDC), Chile’s BancoEstado, South Africa’s Development Bank of Southern Africa (DBSA), and Finland’s Finnvera plc. While attempting to diversify the geographical pool of our case studies, we selected these four state owned banks because they, in our opinion, operate successfully within their predetermined set of targets, exist in a sound functioning regulatory framework, and can be regarded as benchmarks for other state financial institutions. Three of the four banks are development banks, and BancoEstado is the only commercial bank, but with a social objective.

BDC, a Canadian development bank, is the only state owned bank in Canada. It provides support to Canadian entrepreneurship, with special emphasis on SMEs. While lending to Canadian businesses is the main area of business, BDC is also involved in venture capital, consulting, and subordinate financing. BancoEstado is the third largest commercial bank in Chile and also the only government owned bank. Although it is increasingly evolving towards a universal bank, its main social focuses are supporting access to financial services for poor or geographically isolated individuals, lending to micro- and small businesses, and housing financing for low income people. DBSA is one of the four state owned development banks in South Africa. Its main objective is to facilitate financing and technical assistance to companies and municipalities with a focus on infrastructure funding. It also provides financing to large infrastructure projects in neighboring countries. DBSA taxable profits go to DBSA Development Fund, a subsidiary of DBSA, main objective of which is to provide support to low income municipalities through grants, deployment of technical expertise, training and identification of projects. Finnvera plc, the only state owned financial institution in Finland, provides funding to SMEs, and promotes internationalization of the Finnish companies. Finnvera operates also as an export credit agency (ECA).

The paper highlights the need for defining clear and sustainable mandates aimed at solving a market failure. Both BDC and Finnvera have clear and sustainable mandates and play a role that is complementary to that of privately owned commercial banks. As the mandates of BancoEstado and DBSA are less clearly defined, they get more engaged in competing with privately owned commercial banks. The Corporate Plan of SFIs is a useful tool that owners can use to focus and monitor their mandates. In the case of DBSA, for example, the Corporate Plan imposes targets that emphasize the development impact of the bank over the commercial aspects of the operations. The paper emphasizes the importance of self-financing of the mandates and limiting the distortions on the rest of the financial sector. All of the SFIS analyzed fund themselves from the market, which has helped to impose market discipline on the management.

High quality of management and boards of directors are one of the common elements of the four cases analyzed. While competent board of directors and management in the cases of BDC and 3