World is waking up to how multilateral development banks can fund social good

Calls are growing for MDBs to play a bigger role in tackling global challenges, from climate change to infrastructure renewal, as an elegant solution to channelling savings into long-term investment

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The World Bank Group headquarters in Washington on September 27. The bank is at the centre of the MDB system. Photo: Bloomberg

Anthony Rowley

Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs.

Published: 3:30am, 24 Oct 2022

Stock markets have been the king of the castle – in terms of influence, if not size, relative to other forms of financing – for longer than is good for the global economy and the financial system. They may not be about to be toppled completely but they face the prospect of being cut down to size.

This has less to do with the latest bear market (one of a depressingly long series of such slides) as with the dawning realisation that stock markets have not been doing a good job of converting savings into long-term investment, and that new financial intermediaries are needed.

We see this in the growing calls for a boost to the capital of government-owned multilateral development banks (MDBs) such as the World Bank, so they can play a bigger role in financing the battle against climate change, infrastructure renewal, fighting pandemics, and so on.

MDBs are an elegant concept and, if they had not existed for decades, we would certainly need to invent them now. But they have been greatly underused, owing largely to an ideological bias in Western economies in favour of market financing and private-sector solutions.

Yet stock markets have fallen down on the job of providing finance for multitrillion-dollar socio-economic priorities. Instead, they have funnelled savings on a massive scale into consumer-oriented “tech” situations – a boom now gone bust.

The calls for development banks to assume a greater role in financing have been heard widely of late, from the Asian Development Bank (ADB) meeting in Manila last month to the recent World Bank meeting in Washington. And they are likely to be echoed at November’s G20 summit in Bali.