This makes a lot of economic sense to me. Governments can capture some positive externalities through their ability to impose taxes on the catchment area of those activities. There's therefore some things that make sense for governments to do but not private actors - infrastructure is a great example of this.
For loans, there's some that would make sense for governments but not private banks. Suppose a dollar of this loan has an expected value of 99 cents for the bank, while generating $2 worth of taxable economic activity at a 10% rate. Private banks would lose a penny, municipal governments would make 19 cents.
It does leave two big questions. First is how big this class of loans actually is in practice. If there's not much there, the overhead of running it through government doesn't make sense. Second is how to keep incentives aligned and un-corrupted. I'm pretty worried that "drive economic development" will become a pretext for "give handouts to friends and political supporters".
For loans, there's some that would make sense for governments but not private banks. Suppose a dollar of this loan has an expected value of 99 cents for the bank, while generating $2 worth of taxable economic activity at a 10% rate. Private banks would lose a penny, municipal governments would make 19 cents.
It does leave two big questions. First is how big this class of loans actually is in practice. If there's not much there, the overhead of running it through government doesn't make sense. Second is how to keep incentives aligned and un-corrupted. I'm pretty worried that "drive economic development" will become a pretext for "give handouts to friends and political supporters".