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Multilateral Development Banks

Multilateral Development Banks (MDBs) are publicly funded international financial institutions that fund large-scale development projects, such as dams, power plants, oil and gas pipelines, and mines through long-term loans, grants, technical assistance and advice to countries and private sector companies.

MDBs are not banks as most people know them; an ordinary person cannot open an account with them or ask for a loan.

The World Bank is arguably the most well-known of the MDBs. It has over 184 member countries. It provides over $24 billion annually to developing and transition countries for activities ranging from agriculture to trade policy, from health and education to energy and mining. The World Bank also promotes economic and policy prescriptions that it believes will promote economic growth and reduce poverty.

The World Bank Group comprises five separate arms. Two of them -- the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) -- work primarily with governments and together are commonly known as the “World Bank". Two other branches -- the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) -- directly support private businesses operating in developing countries. The fifth arm, the International Center for Settlement of Investment Disputes (ICSID), arbitrates disagreements between foreign investors and governments.

The other main MDBs are:

  • The European Bank for Reconstruction and Development (EBRD), headquartered in London, which is owned by 61 countries, the European Commission and the European Investment Bank. The EBRD invests in 29 countries ranging from central Europe to central Asia, primarily in private sector companies. It aims to promote entrepreneurship and open and democratic market economies. It works with publicly owned companies to support privatisation and restructuring of state-owned firms and services.
  • The Asian Development Bank (ADB), headquartered in Manila, which is owned and financed by its 67 members, 48 of which are from the Asia-Pacific region and 19 from other parts of the world. In 2009, it provided $13.2 billion in loans, $1.1 billion in grants and $267.2 million in technical assistance.
  • The Inter-American Development Bank Group (IDB) focuses on Latin America and the Caribbean, although it is headquartered in Washington, DC, in the United States. It is the largest multilateral public lender the region’s governments and private sector entities. In 2009, it provided $15.5 billion in loans and grants. Its shareholders are 48 member countries; 26 of these are Latin American and Caribbean borrowing members, who have 50.02% voting power on the IDB board. The remaining 22 non-borrowing members are Northern countries.
  • The African Development Bank (AfDB), headquartered in Abidjan in Côte d’Ivoire, encompasses the African Development Fund, and the Nigeria Trust Fund. It emphasises major regional infrastructure projects, such as massive hydroelectric projects, and works closely with the World Bank Group. Its shareholders are 53 African countries and 24 non-African countries.

Concerns have long been raised about the conditions attached to MDB loans, including liberalisation of a country's trade, investment and financial sectors and deregulation and privatisation of any nationalised industries.

Many infrastructure projects financed by MDBs have been controversial because of their significant negative social and environmental impacts, often harming poorer and more vulnerable communities – the very groups of people in whose interest the MDBs are meant to operate.

Although publicly financed with taxpayer money, MDB activities are often carried out without the informed participation of affected people or even the elected officials in the borrowing countries.

The lack of accessible information about MDB operations is also a cause for concern.

For more on Multilateral Development Banks and other international financial institutions, see Bank Information Center and Bretton Woods Project.