Rationale
Address Misconceptions, Clarify the Essence of MDBs
Despite existing publications and public discourse, the role, governance, and potential of Multilateral Development Banks (MDBs) remain obscured by fragmented and often inaccurate information. These institutions remain poorly understood, implying the need for an open, comprehensive, and balanced overview, going beyond history and data.
This book sheds light on a number of misconceptions regarding MDBs, widely spread not only among the public, but even among MDBs’ stakeholders such as counterparts, shareholders, managers, and staff. These misconceptions include but are not limited to the following: (1) MDBs are UN agencies; (2) MDBs are aid/grant/subsidy funds; (3) all MDBs are subsidiaries of the World Bank ; (4) MDBs are just international commercial/investment banks; and (5) MDBs provide a key share of financing in some countries but there are no tangible results.
Chapters 3, 4, and 5 (Financial Dynamics, Current Governance, and Governance Principles) constitute the core of the book, providing insight for the bumpy road ahead, outlined at the concluding Chap. 7 (The Future). These chapters provide a comprehensive review of multiple governance and funding issues that constrain MDBs’ effectiveness, presenting seven novel governance principles (Chap. 5), followed by an assessment of reality against those principles.
Compare Global, Regional, and Sub-regional MDBs
The book provides an overview of what the MDBs are often mistakenly assumed to be, in order to reveal and clarify their distinct nature and modus operandi, recent evolutions, toward future perspectives, covering all essential aspects, including the most recent challenges to institutional governance and finance. This is a timely and forward-looking response to the aggressive pressures on multilateralism and development , fuelled by contemporary tides of populism, nationalism, and protectionism, already affecting many MDBs and other international institutions.
Methodology
The book has a specific focus on recent waves of criticism and discontent with governance and results, both legitimate and ill-informed, that triggered ad hoc reforms, as well as a proliferation of “new”, “green, lean, and clean” MDBs. The recent motion of creating “alternative” new MDBs is subject of a balanced assessment of pros and cons, with the ultimate objective of suggesting feasible improvements in both the “old” and the “new” generations of MDBs.
Approach
The book covers 25—virtually all—MDBs. While a reference to particular cases is used along with specific individual examples, the important institutional issues are approached in a forward-looking perspective, dealing with and comparing three groups of MDBs—Global, Regional, and Sub-regional—revealing their similarities, differences, strengths, and weaknesses. The goal of grouping and comparing is to perform “MDB family” mapping in order to suggest possible enhancements that are relevant for each respective group, as individual MDB approach would be less meaningful or efficient. Another goal is to make MDBs more aware of comparative advantages and potential to improve, toward becoming more synergetic and relevant to the pressing regional and global challenges of the future.
The methodology used in reviewing the 25 MDBs consists of an interdisciplinary process, integrating a number of interrelated components, outlined below. The issues covered by each chapter are addressed by extensive data reviews, as well as several rounds of peer-to-peer anonymous direct interviews with key MDB staff and management, focusing on the departments involved with institutional learning and memory—the Independent Evaluation departments . The analysis is also supplemented by interviews with key MDB borrowers, to reflect their perspective. Most interviews were conducted in the course of several years, within an ongoing MDB comparative research, covering 260 respondents from 19 MDBs.
The methodology, along with the main messages of each chapter, should remain informative and relevant in the years to come, as the focus is on how to improve MDBs’ functioning, looking at the cross-cutting groups and issues. Hence, it is aimed at providing practice-based inspiration for further debate regarding the MDB evolution, with a particular attention on the need and obstacles to enhance old-fashion institutional governance, in the light of recent efforts of last generation MDBs to challenge the more traditional “old” development institutions (perceived as inefficient and donor-dominated).
Overall, the methodology constitutes an interdisciplinary mapping process, catalyzing insights from extensive reviews and discussions, involving the following key elements: (1) MDB categorization based on geographical outreach; (2) development and application of MDB-specific governance assessment framework (principles); (3) an assessment of the outreach and impact of MDBs, based on key ex-post evaluation results; (4) a financial assessment framework for MDBs, addressing inherent subsidies and privileges as unrecognized risk mitigation instrument; and (5) evaluating the accessibility of MDBs to borrowers through a borrower-based perspective. Details on the approach regarding these five elements are presented below.
Unlike existing research that treats MDBs as banks, hereby they are addressed by revealing the institutional aspects of their operations, going well beyond the bank concept—toward high-profile self-regulated knowledge banks , change agents, and franchise-based standard setters. These concepts involve relevant comparisons of the three regional groups of MDBs, with a focus on a feasible and sustainable governance-centered, rather than ad hoc, reform agenda. The goal is to improve all or most MDBs through an evidence-based advancement of values, management, staff, and governance, rather than already known polar pressures that resulted in various stop-and-go reform campaigns, triggering alarming staff disengagement and overall reform fatigue across most MDBs.
MDB Categorization
All MDBs are grouped by their regional coverage. This facilitates the process of understanding and improving different institutions, based on common denominators rather than extensive piecemeal approach. It is instrumental to demonstrate the similarities and differences among groups, as well as key issues and shortcomings without criticizing a particular individual institution. The ultimate goal is to offer feasible improvements that acknowledge MDBs as complex related institutions, providing additional value beyond mere finance, unlike conventional banks. This mainly refers to the provision of knowledge and public goods—hence arguing that MDBs are primarily knowledge banks and role models that should be treated very differently from any other financial institutions.
The categorization generally reflects the MDBs’ size and ambition and is defined as follows:
- 1.Global MDBs lend to several continents, covering those almost entirely;
- 2.Regional MDBs lend to just one continent, covering it almost entirely;
- 3.Sub-regional MDBs focus on a specific region that is smaller than a continent.
Governance Assessment Framework
The very specific governance systems utilized by MDBs deserve central attention. For this reason, Chap. 4, dedicated to MDBs’ Current Governance, followed by Chap. 5, which offers principles to elevate governance, are of specific importance. The latter chapter is based on a methodology involving a thorough process of reviewing and assessing respective governance systems against a set of principles, developed by the authors. This is done at group levels rather than at each MDB , but outlier cases are also addressed as a source of insight, from both negative (risk) and positive (potential) perspectives. Given the extensive experience and communication (including dedicated interviews over the past four years) of the authors in dealing with those governance systems within the MDBs, a particular attention is devoted to the less obvious but very important details and practices of implementing the governance rules, as they have substantial implications, rarely understood. The analysis is steered by a review of critical post evaluations at corporate/institutional levels, in order to derive common issues.
Chapter 5 (Governance Principles) presents the development and application of a unique governance assessment framework, specifically tailored to MDBs. This involves MDB -customized institutional matrices, addressing the role of two couples: formal/visible vs. informal/invisible practices at all levels measured against seven core principles. Hereby an outlier assessment is also instrumental in revealing and understanding borderline governance practices that could inspire improvements, with due respect of existing constraints and feasibility considerations such as the inherent complexity and inertia in multilateral dialogue.
Financial Assessments
The application of standard instruments of financial analysis (Chap. 3: Financial Dynamics) is enhanced by applying an assessment framework for the MDBs’ financial perf...