The role of government is often to reduce risk and incentivize investments that might otherwise not occur.
The best example of this is the U S Small Business Administration’s loan guaranty programs. They dramatically reduce financial risk to investors who purchase the guaranteed portions of SBA loans in the capital markets. These incentives to reduce risk make it possible for banks and other lenders, including, increasingly, Community Development Financial Institutions (CDFIs), to lend to businesses that would otherwise be unable to borrow at reasonable rates. In partnership with these lenders, the SBA delivers tens of billions of dollars annually to help small businesses grow.