Financing for development series: Development finance by regional development banks - combining regional ownership with multilateral governance

The development finance system is becoming increasingly complex. New actors and instruments are being created with enormous speed and ingenuity. Yet the multilateral development banks still account for a large share of the public resources used for development finance. Of these, the World Bank and the three regional development banks (RDBs) – the Asian Development Bank (AsDB), the Inter-American Development Bank (IDB) and the African Development Bank (AfDB) – play the most important roles. Multilateral development banks are major providers of finance, knowledge and convening services to developing countries. The RDBs have the additional advantage of a high degree of regional ownership. In an ever more complex global governance system, they can play an important role in regional governance, supporting the provision of regional public goods. However, the RDBs cannot take this role for granted. In today’s diverse development finance system, there is no shortage of competent financing and consulting institutions. The RDBs must make a difference in this system if they are to convince their members of their necessity and usefulness. One way to achieve this is through concentration on fewer areas of activity. In the current financial crisis the RDBs should play a strong countercyclical role by extending larger volumes of investment and policy loans, particularly to middleincome countries.