The Future of Multilateral Development Banks

Multilateral development banks—the World Bank and two dozen regional and sub-regional MDBs—have led the global development agenda for decades, providing financing and knowledge services to support economic growth and improve living standards. In recent years, however, the global economic and political panorama has shifted, putting pressure on MDBs to adapt or lose relevance.

This research project seeks to understand i) what pressures MDBs are facing, ii) how different MDBs are reacting to those pressures and iii) what further reforms are needed.

Specific themes addressed within this broad research agenda include:

• Borrower country views on the relative advantages of different MDBs
• The workings of the MDB financial model and the use of innovative financing approaches
• The creation of new MDBs, such as the Asian Infrastructure Investment Bank and BRICS New Development Bank
• The recent rapid growth of smaller MDBs such as the Development Bank of Latin America and the Trade and Development Bank in eastern Africa
• The impact of rising non-traditional development finance sources – notably China – on the activities of MDBs

The MDB model is uniquely well-suited to help coordinate responses to development challenges, such as rising economic inequality and climate change. But some MDBs have been slow to adapt to new global realities. This project is intended to provide inputs to academic research on development as well as to policy makers seeking to improve the effectiveness of MDBs.

Project leader Chris Humphrey was in October 2021 named by the G20 to the Independent Panel on MDB Capital Adequacy Frameworks, which generated a series of recommendations to increase the financing capacity of MDBs to address global challenges.

In fall 2022, the Rockefeller Foundation awarded a grant to Dr. Humphrey to pursue an agenda of research on the development potential of borrower-led MDBs. Although the World Bank and major regional MDBs are much better known, at least a dozen MDBs controlled by borrowing countries operate around the world, including the Development Bank of Latin America (CAF), the Eastern and Southern African Trade and Development Bank (TDB), the West African Development Bank (BOAD) and the Black Sea Trade and Development Bank (BSTDB). Because of their ownership structure, these MDBs have a number of unique advantages as well as challenges compared to their larger “siblings”. This research project—which runs until December 2023—investigates these MDBs with a view to generating policy-relevant evidence to increase their potential to address global development goals.

Researchers: Chris Humphrey