A+| A| A-
Banking with a Difference
The establishment of the New Development Bank by the BRICS countries is a significant development which could have some impact on multilateral lending for infrastructure in the countries of the South. But if the new bank is to make a difference and alter the international development finance landscape, democratic forces in the BRICS countries and elsewhere should pressurise their governments to act in ways that differentiate the NDB from the currently dominant global institutions in terms of funding patterns, rules and terms.
The world has one more multilateral development bank, the New Development Bank (NDB) that was established on 15 July 2014. With authorised capital of $100 billion and initial subscribed capital of $50 billion, the bank’s founding partners are the countries in the BRICS grouping (Brazil, Russia, India, China and South Africa). These five countries, which share equally the paid-up capital in the form of actual equity ($10 billion) and guarantees ($40 billion), will remain dominant in perpetuity with their aggregate shareholding never falling below 55%. Organisationally too the BRICS bank seeks to be even-handed: India gets the first chair of a rotating presidentship, China gets to host the bank’s headquarters in Shanghai, South Africa gets to host the first regional office, the first chair of the board of governors is from Russia and the first chair of the board of directors from Brazil.
In itself, the creation of a new multilateral development bank should not be considered out of the ordinary. A 2009 study from the Association of Development Financing Institutions in Asia and the Pacific estimated that there were over 550 development banks worldwide, of which 32 were in the nature of international, regional or subregional (as opposed to national) development banks. The news that one more has been added to the list should not elicit much excitement.
Dear Reader,
Or
To gain instant access to this article (download).
(Readers in India)
(Readers outside India)
