Development banks “must move beyond business as usual to support SDGs”

3 Dec 15

Multilateral development banks (MDBs) need to be more “nimble and flexible” in order to help countries meet the new Sustainable Development Goals, the president of the European Bank for Reconstruction and Development has said.

Speaking at an event hosted by the UK’s Overseas Development Institute, Sir Suma Chakrabarti commended the past success of development banks but they now needed to move beyond “business as usual”.

In particular, he said the MDBs needed to learn to be more flexible in the way they respond to demand, as well as giving their clients a stronger voice in the organisation.

He referred to a common critique that the world’s development banks are too “flat footed” when it comes to responding to new needs.

Leveraging private sector finance would also be critical, he said, as would cooperation between banks and the leveraging of expertise across the whole MDB system.

Different MDBs have different specialisms, expertise and knowledge and this should be exploited when two or more banks work in the same area to ensure their work is complementary, their impact optimised and to ensure they are not duplicating efforts, he added.

Also speaking at the event, Qianghwu Zhou, executive deputy director general of the Asia-Pacific Finance and Development Centre in the Chinese Ministry of Finance, said the Asian Infrastructure Investment Bank would work to be “lean, clean and green”.

The AIIB, established in 2014, would seek to complement the work of other banks rather than rival them, and would aim to cut down on bureaucracy.

In addition, its recruitment and procurement processes would be global, while developing countries would have greater shares to ensure the institution was more representative, Zhou said. The AIIB would also do more to engage the private sector, in order to mobilise private capital and co-finance more projects, but look for ways to “raise more funds at a lower cost”.

On the question of whether it would support more controversial projects such as coal-fired power plants, Zhou said this would be a “very sensitive issue” that will have to decided by the bank’s future board of directors. However, he believed that if they were to fund such projects they would need to be “of a high standard and clean”.

Both Chakrabati and Stephany Griffith-Jones, a research associate at the ODI were positive about the introduction of new banks like the AIIB.

Griffith-Jones highlighted that if the AIIB is successful in its goal to be “clean, lean and green” other MDBs will benefit from its experience and it could spark a “race to the top” within the MDB system. 

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