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WHAT THE MDBs DO
The five multilateral development banks (MDBs) lend money for projects in developing countries on five continents – Africa, Asia, Eastern Europe, and Central Asia (ECA), the Middle East & North Africa (MENA), and Latin America.
The World Bank lends to developing countries on all continents; the regional MDBs lend to developing countries in their individual regions, so that in all regions there are at least two MDBs providing low cost, long-term financing for projects. In Central Asia, there is an overlapping responsibility of three MDBs, with the World Bank, Asian DB and the EBRD all providing project funds.
The World Bank's fiscal year (FY) runs from July 1 through June 30, so that FY 2008 is from July 1, 2007 to June 30, 2008, while the FYs of all the regional MDBs are calendar years.
The volume of lending of the MDBs is substantial:
Whatever sector or type of project it is, all the MDBs are concerned that each project will help alleviate poverty in the developing country, improve standards of living there, and help reform the structure and governance of different segments of the economy to be more effective for the public good.
Before committing funds to any project, the MDBs ask Why? The origins of every MDB-financed project are in its objectives, in what the project is to achieve, and how the quality of life will be improved as a result.
The money the MDBs provide for projects are either “hard loans” borrowed on international capital markets and on-lent to governments in developing countries at minimal interest rates for 17 years or longer; or so-called “soft loans” or “credits,” with even longer terms, which come from donor developed countries and are passed on, with a small fee, as zero-interest credits.
Which developing countries receive what kind of loan or credit from the MDBs depends on their credit-worthiness and national per capita income. There are certain income thresholds and other indicators used by the MDBs to assess the ability of each developing country to repay the funds.
The mission of the World Bank is “to fight poverty and improve living standards for people in the developing world.” The World Bank's hard-loan arm (the "IBRD") aims to reduce poverty in middle-income and creditworthy poorer countries by "promoting sustainable development through loans, guarantees and (non-lending) analytical and advisory services."
The Bank's soft-loan arm ("IDA"), that funds projects in mainly the "less than $2 a day" nations, supports "country led poverty-reduction strategies in key policy areas, including raising productivity, providing accountable governance, improving the private investment climate, and improving education and health care for poor people."
So far as companies are concerned, the financing available for consulting, goods, and works derives directly from the so-called public sector investment projects, which are administered by project units in the ministries in developing countries, not by the MDBs directly. Hence your market is not the MDBs, but the projects themselves at the ministries.
The public sector investment MDB projects – as opposed to lines of credit, emergency loans, policy, private, and other non-investment, non-project loans – amounted to about $28.4 billion in fiscal 2005, or about 65 percent of total MDB lending.
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© Development Bank Associates, Inc, 2006 All Rights Reserved. Last updated April 25, 2008 |
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