The Monterrey Consensus and the Doha Declaration emphasized the key role that multilateral development banks (MDBs) play in the provision of finance for development. The Addis Agenda reaffirms the contribution of MDBs and other international development banks to sustainable development including in countercyclical lending and providing both concessional and non-concessional stable, long-term development finance.
Loan disbursements by the multilateral development banks (MDBs) amounted to USD 66.8 billion in 2015, representing a 4.5 per cent increase over 2014. Their lending was largest in the aftermath of the global economic and financial crisis, with disbursements reaching a high of USD 74.4 billion in 2010, underlining the important counter-cyclical role they have been playing.
Source: MDB Response to the G20 Action Plan for MDB Balance Sheet Optimisation, July 2016.
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- To increase capital efficiency, MDBs have implemented policies aimed at a more efficient use of capital – for example, by introducing economic capital models that assess capital adequacy by assessing risks of specific operations, rather than general equity-to-loan ratios.Five MDBs have collaborated to establish a framework to exchange loans to diversify their portfolios and reduce sovereign risk. Three bilateral exposure exchange agreements for a total of USD 6.5 billion were approved in December 2015.In response to the request for concrete proposals for financial innovations using their concessional windows, MDBs have been merging and leveraging concessional windows with accumulated equity and increased liquidity. For example, the Asian Development Bank has decided to combine the lending operations of the bank’s Asian Development Fund (ADF), which provides concessional loans and grants, with its ordinary capital resources, from which it lends to middle-income countries at market-based rates from 2017, with a view to increase total lending and grant approvals.MDBs with private sector portfolios are also active in using instruments to share risk with private investors and to free up risk capital or mobilize additional resources, including syndications, structured finance, mezzanine financing, credit guarantee programs, hedging structures, and equity exposure (see section II.C.5.). MDBs have also taken measures to raise the banks’ net income, through cost cutting or income generating activities such as revision of lending terms to fully cover operational lending costs.
The Addis Agenda pays particular attention to development banks’ social and environmental safeguards, particularly in new development banks. In the design of safeguard systems, it calls for consultation with all stakeholders on the basis of established international standards, including on human rights, gender equality and women’s empowerment. Development bank’s safeguards should also aim at being “transparent, effective, efficient and time-sensitive.”