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World Bank’s move on Multilateral Development Banks (MDBs)

  • Category
    Economy
  • Published
    24th Dec, 2023

Context

Recently, the World Bank has set up a task force to study the recommendations for strengthening multilateral development banks (MDBs), laid out by an independent experts’ group formed during India’s G20 presidency.

Background

  • Multilateral development banks (MDBs) originated in the aftermath of World War II to rebuild war-ravaged nations and stabilize the global financial system.
  • Today, MDBs fund infrastructure, energy, education, and environmental sustainability in developing countries.

What Is a Multilateral Development Bank (MDB)?

  • A multilateral development bank (MDB) is an international financial institution chartered by two or more countries for the purpose of encouraging economic development in poorer nations.
  • Multilateral development banks consist of member nations from developed and developing countries.
  • MDBs provide loans and grants to member nations to fund projects that support social and economic development, such as the building of new roads or providing clean water to communities.

About India’s plan:

  • World Bank has identified eight unique global challenges to focus on in the next few years as they affect many countries and require attention.
  • The Indian Union Finance Minister highlighted the need for World Bank to explore possibility of coordinated approach in implementation of the projects with special emphasis on Finance Plus/Budget Plus elements in projects funded by the World Bank.

Major Multilateral Development Banks:

The following is a list of the major multilateral development banks, ranked by total assetsare;

  1. European Investment Bank: €555.8 billion ($606.5 billion)
  2. International Bank for Reconstruction and Development, World Bank Group: $283 billion
  3. Asian Development Bank: $191.9 billion
  4. International Development Association, World Bank Group: $188.5 billion
  5. Inter-American Development Bank: $129.5 billion
  6. European Bank for Reconstruction and Development: €61.9 billion ($67.7 billion)
  7. African Development Bank: 33.8 billion UA
  8. Asian Infrastructure Investment Bank: $19.6 billion
  9. Islamic Development Bank: 22 billion Islamic dinars ($18.5 billion)
  10. Central American Bank for Economic Integration: $10.9 billion
  11. New Development Bank: $10.4 billion

How a Multilateral Development Bank (MDB) Works?

  • Multilateral development banks are subject to international law.
  • They and other international financial institutions, such as the International Monetary Fund (IMF).
  • The World Bank, which has been semi-officially dominated by the U.S. since its founding, is one of these institutions.
  • Unlike commercial banks, MDBs do not seek to maximize profits for their shareholders.
  • Instead, they prioritize development goals, such as ending extreme poverty and reducing economic inequality.
  • They often lend at low or no interest or provide grants to fund projects in infrastructure, energy, education, environmental sustainability, and other areas that promote development.

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