The New Development Bank (NDB) in Shanghai will back projects in Brazil, Russia, India and South Africa in a bid to improve and complement the existing system of development finance.

The launch follows the establishment of the Chinese-led Asian Investment Infrastructure Bank (AIIB) last month. The NDB bank will collaborate with the AIIB, including setting up a “hotline” with it to discuss issues and forge closer ties between “new institutions coming together with a completely different approach”.

The NDB is seen as an alternative to the World Bank and International Monetary Fund, but the group insisted it was not a rival.

“Our objective is not to challenge the existing system as it is but to improve and complement the system in our own way,” president Kundapur Vaman Kamath said.

He added that the bank was looking at local funding solutions, including making greater use of financial and capital markets in BRICS nations.

“We will have an open mind in terms of the instruments we will use for funding projects,” Kamath said.

“Should we approach the financial markets, the capital markets in five BRICS countries to raise local-currency funds so that in a way we break the challenge and the cost of dealing in hard currencies where the exchange rate continues to impact you for a long, long time?” he asked. “Could we start by making substantially large bond issuance in the domestic market?”

The NDB will have an initial capital of $50bn with plans to raise that to $100bn over time.

Meanwhile, World Bank president Jim Yong Kim paid tribute to the launch of the bank, saying it was committed to partner with the NDB to reach the common goal of ending extreme poverty by 2030.

He said: “We are committed to working closely with the New Development Bank and other multilateral institutions, offering to share our knowledge and to co-finance infrastructure projects. These types of partnerships will be essential to reach our common goals to end extreme poverty by 2030, boost shared prosperity, and to reduce inequalities.

“We would like to congratulate Mr. K.V. Kamath, president of the New Development Bank, and the founding members — Brazil, Russia, India, China, and South Africa — on this important occasion.”