Regional Development Banks

Regional development banks (RDBs) are public regional financial organizations established by governments of countries in a region with an aim to spur economic development in a region (or continent). They are, to a large extent, the result of mimicking the International Bank for Reconstruction and Development (IBRD), better known as the World Bank. However, the focus of the regional development banks is somewhat narrower, and they usually do not have as large a portfolio of services. Regional development banks are the product of the 20th-century trend of promotion of multilateral diplomacy.

The era of multilateral diplomacy basically started with the end of World War I and the attempts to create a long-lasting peace in Europe. Although the United States actively participated in World War I (from 1917) the U.S. Senate did not look favorably at further U.S. involvement in European affairs and full U.S. participation in the League of Nations. So, although the Bank for International Settlements (BIS) was created to support financial stability in Europe, acting as the “bank of the central banks,” it has, to a large extent, failed to play the role that it was supposed to play.

The end of World War II brought another attempt to create a more efficient and stable world order, where the basic ideals of democracy and universal freedom would be upheld. With the establishment of the Organization of United Nations (OUN), a large part of the political infrastructure has been set up, while the Bretton Woods institutions (IBRD and the International Monetary Fund, or IMF) were created to cover the economic sphere. The IBRD had more or less universal coverage, operating in the majority of the countries. However, already in the late 1950s, there was dissatisfaction with the World Bank, and a series of regional financial organizations were set up. Although they are regionally based, some founding members are not countries from the region, but are the leading countries in the world (most Organisation for Economic Co-operation and Development [OECD] countries are founding members of regional development banks).

Regional development banks share the same broad objective with the IBRD, which is to promote the [Page 1346]social and economic development of the population of their beneficiary member countries through the provision of financial assistance. However, over time, most of the regional development banks are providing, increasingly, technical assistance in the implementation of the project, as well. Although regional development banks are regarded as regional (public) financial institutions, they are still banks. They may not be profit-driven organizations, but they have to ensure that their operations have some surpluses that can be reinvested in the bank. These banks are characterized by a broad membership, including both borrowing developing countries and developed donor countries, and are not limited to member countries from the region.

All regional development banks are multilateral organizations that are established by both countries that are beneficiaries (clients) and those countries that have interests in promoting economic development, and are usually providers of finance, rather than users of the banks' funds. All the banks have a separate legal structure, although a closer look at their internal organization and modus operandi suggests that IBRD was the blueprint for designing their internal infrastructure.

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