International financial institutions

Types

Multilateral Development Banks

A Multilateral Development Bank (MDB) is a development bank, created by a group of countries, that provides financing, technical assistance and professional advice to enhance development. An MDB has many members, including developed donor countries and developing borrower countries. MDBs finance projects through long-term loans at market rates, very-long-term loans below market rates (also known as credits), and grants. Additionally, MDBs often have a geographic concentration area for their development objectives. With this geographic and thematic focus, funding for a variety of ventures – often resource-intense infrastructure projects – is provided. Since MDBs have a shareholding structure and are backed by member countries, they tend to profit from favorable loan conditions compared to other banks and can therefore take more risks in their investment strategy. This aids their development-driven cause.

Since the 2020s, in the context of the G20, the World Bank-IMF Annual Meetings and other International Summits, MDBs have committed to multiple shared reform objectives. This MDBs Reform process aims to integrate MDBs in terms of operational practices, objectives, financial metrics and governance structures, enabling them to work as a system in development projects, to mobilize additional capital and achieve credit rating stability. The Capital Adequacy Framework (CAF) reform has been one of the main fields of MDB reform, aiming the enhance financing capacity and harmonize financial metrics among MDBs.

The following are usually classified as the main MDBs:

• World Bank
• European Investment Bank (EIB)
• Islamic Development Bank (IsDB)
• Asian Development Bank (ADB)
• European Bank for Reconstruction and Development (EBRD)
• Inter-American Development Bank Group (IDB, IADB)
• African Development Bank (AfDB)
• New Development Bank (NDB)
• Asian Infrastructure Investment Bank (AIIB)
• North American Development Bank (Nadbank)

There are also several multilateral financial institutions (MFIs). MFIs are similar to MDBs but they are sometimes separated since they have more limited memberships and often focus on financing certain types of projects.

• European Stability Mechanism (ESF)
• European Investment Fund (EIF)
• International Finance Facility for Immunisation (IFFIm)
• International Fund for Agricultural Development (IFAD)
• Arab Petroleum Investments Corporation (APICORP)
• OPEC Fund for International Development

Bretton Woods institutions

Main article: Bretton Woods system

The best-known IFIs were established after World War II to assist in the reconstruction of Europe and provide mechanisms for international cooperation in managing the global financial system. They include the World Bank, the IMF, and the International Finance Corporation. Today the largest IFI in the world is the European Investment Bank which lent 61 billion euros to global projects in 2011.

Regional development banks

There are also several regional multilateral development banks. Their membership typically includes only borrowing nations. The banks lend to their members, borrowing from the international capital markets. Because there is effectively shared responsibility for repayment, the banks can often borrow more cheaply than could any one member nation. These banks include: Regional development banks consist of several regional institutions that have functions similar to the World Bank group's activities, but with particular focus on a specific region. Some banks consist of the regional countries plus the major donor countries. The best-known of these regional banks cover regions that roughly correspond to United Nations regional groupings, including the Inter-American Development Bank, the Asian Development Bank; the Islamic Development Bank; the African Development Bank; the Central American Bank for Economic Integration; the European Investment Bank; and the European Bank for Reconstruction and Development.

Other regional financial institutions

Financial institutions of neighboring countries established themselves internationally to pursue and finance activities in areas of mutual interest; most of them are central banks, followed by development and investment banks. The table below lists some of them in chronological order of when they were founded or listed as functioning as a legal entity. Some institutions were conceived and started working informally 2 decades before their legal inception (e.g. the South East Asian Central Banks Centre)

Bilateral development banks and agencies

A bilateral development bank is a financial institution set up by one individual country to finance development projects in a developing country and its emerging market, hence the term bilateral, as opposed to multilateral. Examples include:

• the Netherlands Development Finance Company FMO, headquarters in The Hague; one of the largest bilateral development banks worldwide.
• the DEG German Investment Corporation or Deutsche Investitions- und Entwicklungsgesellschaft, headquartered in Cologne, Germany.
• the French Development Agency, and Caisse des dépôts, founded 1816, both headquartered in Paris, France.
• the British International Investment, is a development finance institution owned by the UK Government headquartered in London.

References

References

1. Humphrey, C., & Brugger. (n.d.). ''The Role of Multilateral Development Banks in Financing the Sustainable Development Goals'' [Policy Paper]. https://ethz.ch/content/dam/ethz/special-interest/gess/nadel-dam/publications/NADEL_Policy_Paper_MDB_EN_web.pdf
2. (April 11, 2024). "MDBs Reform Tracker".
3. "Nordic Investment Bank".
4. "Nordic Investment Bank - About NIB".
5. "FMO :: About FMO".
6. "Homepage".
7. "Home".
8. "Home".