Regional Development Bank

Regional development banks are membership-based multilateral development finance institutions intended to assist with economic growth, poverty reduction, industrialization, and social progress in specific regions of the developing world. Their overarching goal is to reduce poverty in the developing countries in their region, and they pursue this objective by financing loans and technical assistance across a range of development activities, including agriculture projects, infrastructure building, social sector improvement, and good governance projects and policy reform. Regional development banks pursue many of the same projects and promote similar objectives at the regional level that the World Bank does for developing countries all over the world.

Regional development banks are a major source of multilateral funds for socio-economic development, poverty reduction, and institutional capacity building in their regions. They provide financing to governments and to enterprises in both the private and public sectors in their developing member countries, which are also their shareholders. Their principal instruments are loans, grants, and technical assistance, intended to support governments in identifying high-priority development programs and carrying out specific development projects. Country assistance strategies are designed in conjunction with government counterparts in member countries to ensure that assistance from regional development banks support development investments that are based on a country's own priorities. The regional development banks also provide differing degrees of policy advice to their member countries, and carry out policy and economic analysis that forms the basis of ongoing dialogue with governments. Some of them provide investment guarantees. In addition, regional development banks facilitate regional integration, promoting cooperation around development issues and helping countries learn from others in their region and at their level of development.

Major regional development banks include: the African Development Bank (AfDB), the Asian Development Bank (ADB), the Caribbean Development Bank (CDB), the European Bank for Reconstruction and Development (EBRD), the Inter-American Development Bank (IDB or IADB), and the Islamic Development Bank (IsDB). These all have slightly differing mandates and operating structures, but the similarities across the group allow us to understand the concept of the regional development bank.

While they work in partnership with the International Bank for Reconstruction and Development (IBRD, commonly known as the World Bank) and bilateral aid agencies, regional development banks are separate and independent institutions. The International Monetary Fund (IMF) and the World [Page 807]Bank were created at the Bretton Woods Conference in 1944 and are part of the United Nations system. Regional development banks, on the other hand, were created by their regional shareholders at different points in time. Their shareholder membership overlaps partly with that of the Bretton Woods institutions. But, unlike the IMF and World Bank, the majority of regional development bank funds and shareholder power belongs to their developing country members rather than the world's developed countries.

Furthermore, while regional development banks do provide some lending at concessional rates, most of their development loans are made at interest rates based on the cost of raising funds in international capital markets. This differentiates them from the concessional lending that the World Bank's International Development Association provides to the world's poorest countries. It also differentiates them from the bilateral foreign aid programs of governments, such as those managed by the U.S. Agency for International Development, the United Kingdom's Department for International Development, and the Japan International Cooperation Agency, which provide grants for development purposes. The aims of regional development bank and the recipients of their financing are also different from those of institutions that promote a country's exports, such as the Export Import Bank of the United States (Ex-Im Bank).

...