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Tapping the potential of borrower-led multilateral development banks

January 27, 2023

About 30 multilateral development banks (MDBs) operate across the globe today. While the World Bank and major regional MDBs (the ‘legacy’ MDBs) have a high profile, most MDBs are less well known. In light of the serious challenges facing the world and the limitations of other development agencies, it should be a priority to integrate these MDBs into the international agenda and strengthen their capacity.

Although most borrower-led MDBs remain relatively small, they are growing rapidly. The outstanding loan portfolios of 10 borrower-led MDBs grew from $7.2 billion to $73.4 billion between 2000 and 2021 – a 920% increase over two decades. Growth has been led by the Development Bank of Latin America (CAF), the Central American Bank for Economic Integration (CABEI), Afreximbank, the Trade and Development Bank (TDB) and the West African Development Bank (BOAD). The Black Sea Trade and Development Bank (BSTDB), the Eurasian Development Bank (EDB) and the Financial Fund for the Development of La Plata Basin (FONPLATA) have grown more modestly, while the Economic Community of West African States (ECOWAS) Bank for Investment and Development (EBID) and the East African Development Bank (EADB) remain small.

This paper provides an overview of the governance, operational and financial characteristics of 10 borrower-led MDBs operating in low- and middle-income countries, offers three case studies highlighting their innovations and developmental potential, and proposes policy options to help improve the effectiveness of these MDBs.

This is the first in a series of studies on borrower-led MDBs. Upcoming papers will examine in more detail the challenges and opportunities faced by borrower-led MDBs, linking their governance with their financial context and operational attributes.

Key messages

  • Borrower-led multilateral development banks (MDBs) have the potential to play a larger role in tackling global challenges, but they are often overlooked in the international development agenda.
  • Governance control by borrower countries leads to different characteristics from legacy MDBs, notably closer alignment with the principles of country ownership but more difficult access to funding.
  • Several borrower-led MDBs in Latin America, Africa and Eastern Europe/Central Asia have grown very quickly in recent years, driven by internal reforms and improved access to bond market financing.
  • Some borrower-led MDBs are able to react quickly to crises like the Covid-19 pandemic and the Ukraine conflict, and are adapting to changing priorities such as a greater emphasis on sustainable infrastructure.
  • Bilateral aid agencies, legacy MDBs and impact investors should seek opportunities to work more with borrower-led MDBs to better leverage their potential to address global development needs.
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