Multilateral development banks
Also called: MDBs · Topic: International Trade Policy, WTO and Intellectual Property · NCERT: Beyond NCERT
Meaning
Multilateral development banks (MDBs) are banks owned jointly by many member countries. They lend money to developing countries for long-term development, such as roads, power, water and health. Examples include the World Bank, the Asian Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB). They raise money cheaply because rich members stand behind them, so they can offer concessional finance. This means loans with lower interest or longer repayment than market loans, or sometimes outright grants. Most of their climate money is lent as loans that must be repaid. A loan is not free money, so it adds to a poor country's debt.
Example
India borrows from the World Bank and the ADB for projects such as rural roads and urban water supply. Developing countries like India also own shares in these banks. So when MDB climate lending is counted as "finance from developed countries", India objects that part of that money was put in by developing countries themselves.
Don't confuse with
- International Monetary Fund (IMF): The IMF is not a development bank. It gives short-term loans to countries facing balance-of-payments problems, meaning they cannot pay for their imports or foreign debts. MDBs fund long-term development projects.
- Bilateral aid: One government gives this money directly to another. MDB money comes from a shared pool owned by many countries.