Multilateral Development Banks: Overview and Issues for Congress, Rebecca M. Nelson, Analyst in International Trade and Finance, April 9, 2010
“The multilateral development banks (MDBs) include the World Bank and four smaller regional development banks: the African Development Bank (AfDB), the Asian Development Bank (AsDB), the European Bank for Reconstruction and Development (EBRD), and the Inter-American Development Bank (IDB). The United States is a member of each of the MDBs. The MDBs provide financial assistance to developing countries to promote economic and social development. They primarily fund large infrastructure and other development projects and, increasingly, provide loans tied to policy reforms by the government. Most of the MDBs have two facilities from which they make loans (loan windows): a non-concessional lending window that provides loans to middle-income countries at market-based interest rates, and a concessional lending window that provides loans at below-market interest rates and grants to low-income countries. Debate over the effectiveness of MDB financial assistance is contentious. Critics argue that the MDBs focus on getting money out the door (rather than delivering results in developing countries), are not transparent, and lack a clear division of labor. They also argue that providing aid multilaterally relinquishes U.S. control over where and how the money is spent. Proponents argue that providing aid to poor countries is the right thing to do and has been successful in helping developing countries make strides in health and education over the past four decades. They also argue that providing foreign aid to the MDBs is important for leveraging funds from other donors, tying policy reforms to financial assistance, and enhancing U.S. leadership. Most U.S. aid for economic and social development is provided directly to projects and programs in developing countries (bilateral aid) rather than to multilateral organizations, like the MDBs (multilateral aid).”
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