Shareholding Formulas in International Financial Institutions: Learning From the Asian Infrastructure Investment Bank

Abstract

ABSTRACT Shareholding formulas determine member countries’ voice in capital-based international organizations. They are crucial for international finance and draw much attention in negotiations. In principle, these formulas reflect member countries’ relative economic positions, but in practice, they serve as a starting point in negotiations, alongside other economic and political factors. This article investigates the unique shareholding formula of the Asian Infrastructure Investment Bank (AIIB), and compares it with those of the Bretton Woods institutions, that is, the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (IBRD), and the International Finance Corporation (IFC). It shows that both the AIIB and the Bretton Woods institutions have learnt from each other’s shareholding formulas. Built upon the Bretton Woods practice, the AIIB’s gross domestic product-based shareholding formula could stimulate the IMF to establish a new quota formula under the 16th general review of quotas, the IBRD to implement the results calculated from its 2016 Dynamic Formula, and the IFC to develop its own formula by the date of the next shareholding review in 2025.