Role Of Multilateral Development Banks Research Articles

Greenfield project finance loan maturity and the role of multilateral development banks in developing countries

This paper is intended to provide empirical evidence for the financial additionality of multilateral development banks (MDBs) in private sector infrastructure projects. To validate MDBs’ financial additionality, this study uses IJGlobal’s project finance database to examine whether the loan tenor of MDBs’ project finance loans is significantly longer than the average loan tenor extended by commercial banks, using ordinary least squares (OLS) and Poisson Pseudo Maximum Likelihood (PPML) estimations. The result of the empirical analysis shows that project finance loans involving MDBs have significantly longer loan maturity than average loans in lower-middle-income and upper-middle-income countries, while projects in low-income countries and Sub-Saharan Africa do not have such a tendency. Furthermore, in host countries where government effectiveness is underdeveloped, the coefficient of project finance loans provided by MDBs is negative with statistical significance. As a policy implication, these findings indicate that for MDBs to ascertain financial additionality in countries where government effectiveness is weak, additional measures such as capacity building of the host government and additional financial intervention are needed.

Multilateral development banks – Strategic actors in the new economy?

The paper addresses the role of multilateral development banks in the new economic paradigm, built in the context of multiple crises with global impact. Multilateral development banks, in their capacity as promoters of governments’ policies are “invited/expected” to play a key role in the new geopolitical architecture, holding a competitive advantage in the provision of finance, which is linked to the design and implementation of structural reforms and programs of strengthening institutions controlled by governments. The paper aims to represent a signal regarding the strategic component and the synergies that multilateral development banks can determine. It highlights the tools that multilateral development banks have for selecting, monitoring and supporting programs and projects with regional and global impact. The paper describes the state of knowledge and reviews the specialised literature in the field of multilateral development banks, describes intervention channels and financing products of multilateral development banks, and discusses their impact on a European and regional level. The concluding remarks address the strategic role of multilateral development banks, their contribution to sustainable development goals and outline directions for future research.

The Role of Multilateral Development Banks in Humanitarian Action and Sustainable Development

Of all international organisations, Multilateral Development Banks (MDB) are not the most well-known nor the most scrutinised neither by the academy nor the public. However, they play a major role as financial institutions for the purpose of development. The article, drawing on the broader field of Humanitarian Aid and Aid for Development discusses the role of those agencies, particularly with reference to the connections between the humanitarian and the development dimensions, and within this later case, assessing their efforts in order to tackle poverty and to abide by sustainability concerns. The conclusion highlights some of the main findings, mainly with reference to two cases, the European Development Bank (EIB) and the New Development Bank (NDB).

Institutional structure formation of the global green finance market

The article studies the strategic directions of the Eurasian Development Bank as an important element of the institutional structure of the global green finance market.The current differentiated global structure of green finance market institutions has been shown, and the substantive focus of organisations at two levels of the institutional structure of this market has been shown. A statistical overview of green finance institutions by country, region, type and financial instruments used has been made. The role of multilateral development banks in the structure of such institutions has been shown. The need for the formation of institutions in the green financial market segment as a necessary element of green finance has been substantiated.The structure of institutions on two levels has been given: 1) subjects – participants of the green bond market; 2) a set of institutions developing and shaping the methodology for green financial instruments assessment, standards, taxonomy, ratings. Using the global green bond market as an example, up-to-date statistics and analysis of the broader composition of issuers of green financial instruments by country, world region, sovereign and corporate participants, and development institutions have been presented. Emphasis has been placed on public issuers and the participation of multilateral development institutions in financing green economy projects in various countries. The experience of Eurasian Economic Union countries in developing green finance has been summarised and the prospects for Russia and Kazakhstan in the green finance movement have been noted.The institutions of the differentiated structure of the global green finance market identified in the study have been grouped into two levels depending on the profile of their participation in the green economy; the directions and tools for the prospective development of the Eurasian Development Bank’s green finance activities have been defined; recommendations for prospective aspects of the methodological and analytical activities of the bank in the context of the Eurasian Development Bank Strategy 2022–2026 have been proposed.The study applied an analysis of scientific literature in the field of institutional theory, green economy and green finance, statistical, comparative, factual analysis, review and analysis of information from official websites of international development institutions, government and corporate entities, international rating agencies included in the architecture of the global green finance market.

Multilateral Development Banks: International Organizations or Profit-Oriented Enterprises

The article describes the role of multilateral development banks in financing economic and social changes in the world. The structure, directions and priorities of these international organizations and the process of selection of projects they finance have been analyzed. Individual features of these organizations have also been characterized. The data for analysis are mostly official information published by Multilateral Development Banks (in reports or websites) as well as analyses prepared by independent institutions (e.g., the Word Bank, or NGOs). The paper is trying to answer the question whether Multilateral Development Banks are international organizations driven by the desire to help by supporting investments, or whether it is more important for them to generate economic profit and strengthen their international position.

Financing adaptation for resilient livelihoods under food system transformation: the role of Multilateral Development Banks.

Climate change is imposing a transformative process on agricultural and food systems, threatening the livelihoods of people dependent upon them which includes a large share of the world’s poor people. Transformative adaptation that addresses the risks and vulnerabilities to livelihoods that climate change imposes is essential for effective and inclusive transformation of food systems. Financing that is adequate, accessible and appropriate is essential to realizing these objectives. Multilateral Development Banks (MDBs) are already playing an important role in financing transformative adaptation in the agri-food sector and are well-placed to address some of the existing shortcomings. Expanding public sector climate finance and incentivizing private sector investments is needed to attain adequate levels of financing. Reconsidering the rules and procedures for obtaining public sector finance and the capacity to utilize already existent administrative structures, as well as better targeting of activities and communities is important for accessibility. Appropriate finance requires use of mechanisms that address characteristics of the investment, including riskiness, delayed returns, high social values and new and unproven activities. Utilizing blended finance integrated with development finance can generate financing appropriate to the investment needs. Some positive shifts in these directions are already being undertaken by MDBs but more is required.

Роль МБР в синдицированном кредитовании (Обзор доклада «Стоимость заимствований и роль многосторонних банков развития: случай трансграничного синдицированного банковского кредитования»)

The review covers the 2018 IMF working paper “Borrowing Costs and The Role of Multilateral Development Banks: Evidence from Cross-Border Syndicated Bank Lending.” It is acknowledged that cross-border bank lending is becoming an increasingly important source of external financing for developing countries and therefore can play a key role in infrastructure development. The working paper examines the impact of participation by multilateral development banks (MDBs) in loan syndicates on the terms of loan deals, with a particular emphasis on loan pricing. The results of the study show that MDB participation is associated with higher borrowing costs and longer maturities, indicating a greater willingness on the part of MDBs to finance projects with higher risks which may otherwise be unattractive to private investors. In addition, MDB participation is associated with lower spreads for riskier borrowers compared to similar loans from private banks. The authors show that MDBs can help mobilize private investment in developing countries, including in infrastructure, through risk mitigation.

Sustainable Banking: The Role of Multilateral Development Banks as Norm Entrepreneurs

This article explores the role of multilateral development banks (MDBs) in originating norms of sustainable banking that have attracted and supported green private finance, a role not widely known in the management literature. Any prospect of achieving the United Nations (UN) Sustainable Development Goals by 2030 presupposes mobilizing the estimated US$23.3 trillion currently locked-up in risk-averse private savings to bridge the gap between developing countries’ demand for capital and the current global financial architecture’s capacity to supply it. The three biggest obstacles to sustainable banking identified by the authors are discussed: (1) The uncertain bankability of projects; (2) non-transparency in tracking sustainable capital flows; and (3) no universal mechanism capable of making matches between green investment supply and demand; and what MDBs have actually done to overcome these roadblocks, and might do in future, is also discussed. Seen through the lens of “applied constructivism”, MDBs are revealed to be norm entrepreneurs proactive since at least the 1970s in socially constructing most of the basic norms and practices of sustainable banking which the private sector relies on or is now striving to take up. MDBs are typically the first “port of call” for international governmental organizations (IGOs) and civil society organizations wishing to establish a sustainable financial framework for development; and are the likeliest political agents to pioneer sustainable banking in future. MDBs would do well to develop an awareness of the methods of Constructivism, which they have actually been unwittingly using, to empower themselves to meet the challenges of the 21st century.

The role of multilateral development banks in mainstreaming the use of space and geospatial technologies for sustainable development

AbstractThe potential of space and geospatial technologies (SGTs) for sustainable development is enormous. In particular, all Sustainable Development Goals can be approached though SGTs utilisation, making it a key area of interest for multilateral development banks (MDBs). This article argues that development banks have the influence and responsibility to mainstream the use of SGTs for sustainable development. It first presents the current utilisation of such technologies before introducing two specific directions MDBs should follow, namely the development of a space infrastructure and the support to the emerging private space sector. The recommendations made in this article are based on a pragmatic analysis of the potential of SGTs and on the actual scope of MDBs' activities. They can be easily implemented, without requiring significant structural or strategic change for any of the major existing MDBs.

Funding Economic Development and the Role of National Development Banks - The Case of Cyprus

The paper draws on previous research on the role of Multilateral Development Banks (MDBs), Regional Development Banks (RDBs) and National Development Banks (NDBs). It examines the role of the Cyprus Development Bank (CDB), prior its privatisation in 2008, in the economic development of the country and, specifically, its intermediation of international finance from multilateral and regional development banks. Currently, this function is undertaken by the commercial banks, which are however limited by a balance sheet fatigue, resulting from the excessive levels of private debt, as shown in this paper. Moreover, the commercial banks lack necessary elements in successfully executing this key role. They do not have the professional competence as well as the discipline and culture for executing such a highly demanding role in the economy. Last but not least, and judging from the experience of the CDB it is imperative to have a totally independent and competent financing institution, which will lead by example. Further to the analysis of the current macroeconomic and institutional context in Cyprus, there is a void of institutional capacity to fund projects and offer valuable advice to state and private decision-making bodies on decisive development projects. This paper recommends the establishment of an NDB or a National Development Finance Agency (NDFA), and proposes an appropriate model.

Borrowing costs and the role of multilateral development banks: Evidence from cross-border syndicated bank lending

Cross-border bank lending is a growing source of external finance in emerging and developing countries and could play a key role in infrastructure and development financing. This paper looks at the role of multilateral development banks (MDBs) on the terms of syndicated loans, focusing on loan pricing. The results show that MDBs’ participation is associated with higher borrowing costs and longer maturities—signaling a greater willingness by MDBs to finance risky projects which may not be financed by the private sector. We also show that MDBs are more likely to lend to borrowers located in countries with high credit and financial risk. Overall, our findings suggest that MDBs could play a role in easing access to credit for high risk borrowers.

Climate Finance by Multinational Development Banks - with Special Attention to Europe

The paper aims at highlighting the importance of climate protection in the world and in Europe due to climate change, as well as the role of multilateral development banks in climate finance. The topic has a current relevance as in 2017 President Donald Trump gave a notice to quit the Paris Climate Agreement accepted by all United Nations (UN) member states, amongst them by the members of the European Union (EU). The move of the United States (US) President was a shocking surprise worldwide and provoked heavy reactions – including the US. The paper gives an overview of the relationship between climate change, climate protection and climate finance. It sees climate change a threatening reality of today, affecting Europe as well. It considers climate protection necessary not only on country but also on regional and global level. Besides regulation and voluntary pledges, it attributes a crucial role to climate finance focusing on huge, long-term, high risk investments and projects to mitigate the effects and adapt to climate change. It mentions its sources, major directions and institutions, amongst them the multilateral development banks. It compares them with special attention to Europe exploring similarities and differences how climate finance is reflected in their policy, what resources they mobilize, what kind of projects they finance, what results they have achieved, what their plans are in this area and what reactions their activity provoke. Results show that multilateral development banks play a key role in climate finance. Due to differences in geographic, historic and economic circumstances and exposure to climate change they act on it differently. The paper helps to better understand the links between climate change, climate protection and climate finance and the role of the multilateral development banks in it in a comparative perspective

Borrowing Costs and The Role of Multilateral Development Banks

Cross-border bank lending is a growing source of external finance in developing countries and could play a key role for infrastructure financing. This paper looks at the role of multilateral development banks (MDBs) on the terms of syndicated loan deals, focusing on loan pricing. The results show that MDBs' participation is associated with higher borrowing costs and longer maturities---signaling a greater willingness to finance high risk projects which may not be financed by the private sector---but it is also associated with lower spreads for riskier borrowers. Overall, our findings suggest that MDBs could crowd in private investment in developing countries through risk mitigation.

Borrowing Costs and the Role of Multilateral Development Banks: Evidence from Cross-Border Syndicated Bank Lending

Cross-border bank lending is a growing source of external finance in developing countries and could play a key role for infrastructure financing. This paper looks at the role of multilateral development banks (MDBs) on the terms of syndicated loan deals, focusing on loan pricing. The results show that MDBs' participation is associated with higher borrowing costs and longer maturities---signaling a greater willingness to finance high risk projects which may not be financed by the private sector---but it is also associated with lower spreads for riskier borrowers. Overall, our findings suggest that MDBs could crowd in private investment in developing countries through risk mitigation.

International Trade as an Engine for Sustainable Development: The ITFC Experience in Supporting SMEs

AbstractThis article seeks to shed some light on financing and supporting international trade with a particular focus on SMEs. The paper will look into the situation of Organisation of Islamic Cooperation (OIC) countries vis‐à‐vis international trade. Then, the role of multilateral development banks (MDBs) in supporting international trade will be expounded, while the following section will focus on the experience of ITFC as the sole MDB fully dedicated to trade. Afterwards, the article will cover SMEs’ state in today's world, and make the case of SME development through trade. Finally, a proposal for an innovative trade fund for SMEs will be put forward. The article will conclude with recommendations and proposals to reinforce and develop SMEs through trade for sustainable global social and economic prosperity.

Вклад многосторонних банков развития в финансирование систем образования в развивающихся странах

This article examines the role of multilateral development banks (MDBs) in financing education development at the national level. It evaluates the share of national expenditures spent on education, analyzes loan structures by stage of education, and highlights key measures and instruments. In the context of the global economic slowdown, expected to continue for the long term, the most important objective is to identify new drivers of economic growth as traditional sources are exhausted. One of the main sources of economic growth is human capital, especially with regard to the gradual transition from an industrial economy to a service and knowledge economy. Human capital accumulation is particularly important in developing countries. Most developing countries face insuperable obstacles in building human capital accumulation particularly with regard to education development.The potential contribution of MDBs to human capital accumulation has been underestimated and there is a lack of empirical research on this issue. An evaluation of current experience will help identify opportunities for MDBs to increase their role in education performance, which in turn could have a positive impact on economic growth in developing countries.This article addresses this issue by studying MDBs’ financing of education projects in emerging economies. The authors collected a database that includes information on the volume and structure of financing with a breakdown by education stage. It was based on more than 500 projects funded by key MDBs. Sources included loan and grant agreements, project interim reports and project completion reports. The authors calculated an average annual ratio of MDB education financing to public expenditure for each country in the final selection.Results showed that the ratio of average annual MDBs allocations to average government expenditures on education is relatively low - between 1.5% and 4.0% for most countries. The largest share can be seen in relatively small countries, where government expenditures stay at low levels. Large developing countries such as Brazil, India, Indonesia and Mexico are lead in terms of absolute volumes of financing from MDBs. The authors also show that most projects during period researched aimed at reducing inequality, developing infrastructure, improving teacher qualifications and reforming the management of education system. The authors also give recommendations for the BRICS New Development Bank.

(Financial Cooperation between Korea and the Middle East in The New Industrial and Financial Environment)

Korean Abstract: 본 연구의 목적은 중동지역의 산업 및 금융 환경 변화를 살펴보고 해외 개발금융기관의 대중동 금융지원 전략 및 사례를 분석하면서 국내 중동 진출 기업의 금융조달 능력 강화를 위한 한ㆍ중동 금융협력 방안을 도출하는 것이다. 본 연구에서 말하는 ‘금융협력’이란 주로 국내 기업의 대중동 투자진출을 활성화하기 위한 것으로, 국내 및 중동 국가들의 금융기관과 국제적인 다자 개발금융기관, 수출신용기관 사이의 금융 지원을 둘러싼 협력관계를 말한다.본 연구는 이러한 한ㆍ중동 금융협력 관계를 기반으로 GCC 지역의 민간 부문 투자를 확대하고 더 나아가 여타 중동ㆍ아프리카 지역의 신흥경제국에 공동으로 진출할 수 있는 정책방안을 수립함으로써 우리나라 금융 부문의 신성장동력을 창출하고, 중소ㆍ중견 기업의 중동 진출을 도모하면서 국내외에 많은 일자리를 창출하는 데 기여하고자 한다. 또한 이는 중동 국가들이 중소 제조업 기반을 확충하고 일자리를 창출하면서 민간 부문을 확대하는 데도 도움을 줄 수 있을 것으로 기대한다.English Abstract: The aim of the research is to suggest policy proposals for financial cooperation between Korea and the Middle East in the changing industrial and financial environments after global financial crisis and 'Arab Spring' in the late 2000s and the early 2010s. Although it can be used in diverse frameworks, financial cooperation in the research means development of cooperative financing schemes for investment projects in the Middle Eastern countries and other emerging economies. It is expected that bilateral financial cooperation will help Korean companies including small and medium sized enterprises to make direct investments in the region with job creation. This will also contribute to expansion of the private sector and reduction of the unemployment rate in the Middle Eastern countries. Recently, industrial diversification has been promoted in response to post-oil era to lessen the degree of dependency on the oil sector in the region. The size of plant construction projects has been growing with increasing demands for financing capabilities. In the process, the role of multilateral development banks (MDBs) and export credit agencies (ECAs) has been augmented while European commercial banks have weakened financing the projects after the Eurozone crisis. Thus, it is necessary to implement government policies to activate financial cooperation with the Middle Eastern financial institutions including sovereign wealth funds and Islamic banks as well as MDBs and ECAs as Korean companies are suffering from shortage of financing sources. In the research, policy proposals for financial cooperation is divided into three fields as follows. First, financial capabilities for global cooperation should be improved in the finance sector. Korean ECAs can play a leading role in enhancing those capabilities as they have accumulated human resources and experiences since the 1970s. Commercial banks in the private sector should make their efforts to improve their capabilities for debt financing in overseas projects in cooperation with ECAs. It is also recognized that financial cooperation with the Middle Eastern institutions could be hampered by lack of experts in development finance with understanding of regional characteristics of the Middle East. Second, financial networks between Korea and the Middle East should be strengthened for information sharing and experts exchange, encompassing all the stakeholders related to cooperative financing. This can be developed into an investment platform finding investment opportunity in accordance with industrial and technological demands in the region. It is also necessary for Korean banks to increase their presence in the region, building their brand values and mutual understanding. Third, co-investment between Korean and GCC investors should be encouraged to develop new projects in the emerging economies in the Middle East, Africa, and Central Asia. Considering country risks in the emerging economies, it is necessary to establish legal and institutional frameworks for implementing various contracts in the public-private partnership projects. Moreover, co-financing models should be designed with help of multilateral development banks, which can play a significant role in financing from other commercial banks and mitigating country risks.

The Multilateral Response to the Global Crisis: Rationale, Modalities, and Feasibility

The paper reviews the case for a strong multilateral response to the global crisis in emerging markets (EMs). It discusses modalities and feasibility of intervention and its associated risks, depending on country circumstances of fiscal space and liquidity needs. The specific role of Multilateral Development Banks (MDBs) in ensuring the development effectiveness of the fiscal response is also discussed. The paper concludes by highlighting the international financial architecture issues raised by the global crisis that cannot be addressed immediately but will need to be dealt with once the current crisis has been tamed.

Public Participation and the Private Sector: The Role of Multilateral Development Banks in The Evolution of International Legal Standards

markdownabstract__Abstract__ This paper systematically describes the public participation standards currently applied by multilateral development banks (MDBs) to the private sector and seeks to identify emerging trends and areas for further development or improvement. It begins by outlining the developing body of international law on public participation and its relationship to good development practice. Thereafter, the paper describes the two principle models for standards attached to MDB funding and assistance to the private sector: (1) the World Bank policies applicable to the public sector; and (2) the International Finance Corporation (IFC) standards that are applicable to the private sector and how these are utilized in each of the principal regional MDBs: Inter-American Development Bank (IDB); the African Development Bank (AfDB); the Asian Development Bank (AsDB); and the European Bank for Reconstruction and Development (EBRD). Each sub-section devoted to a regional MDB focuses on the substantive public participation standards with which private sector funding recipients must comply; and on the oversight and review mechanisms by which the MDB promotes and enforces compliance with these policies. The final part of the paper argues that the MDBs have taken a critical first step in extending public participation requirements to the private sector and are making important progress in enforcing such requirements. It urges the MDBs to recognize that they are, in fact, becoming creators of evolving international standards and norms or soft law. Consequently, in developing and interpreting their policies and standards, they should pay closer attention to other, more formal sources of international and domestic law on public participation.

Public Investment and Fiscal Adjustment in Latin American Countries

Martner and Tromben consider the solutions which may reverse the decline of public investment occurred in Latin American countries in recent decades. The paper examines public investment trends and notes that in fiscal consolidation episodes there has been a bias against public investment – although this cannot be generalised to all countries. In some countries, the fall in public investment has taken alarming dimensions. The paper evaluates the solutions which can fill the infrastructure gap without endangering fiscal sustainability. It evaluates the golden rule and the broad adoption of the accounting principles of the Government Finance Statistics Manual. However, both these solutions present some problems in the Latin American context. Martner and Tromben also evaluate the exclusion of public enterprise operations from fiscal targets, in line with EU practice, and the role of Public Private Partnerships. They stress the importance of fiscal frameworks based on structural indicators, which can limit the need for painful fiscal consolidations. Finally, they examine the possibility to expand the role of multilateral development banks.