MULTILATERAL DEVELOPMENT BANKS (Syllabus: GS Paper 3 – Economy)

Context: A road map to regulate cryptocurrency, along with a path to reform multilateral development banks, is expected to figure prominently at the G20 Summit, with the leaders expected to provide guidance on the future course of action.

Multilateral Development Banks

• Meaning: It is an international financial institution established by two or more countries with the aim of promoting economic development in less affluent nations.
• Function: MDBs extend financial support to their member nations through loans and grants, which are utilized for projects that foster social and economic development, such as constructing infrastructure or providing clean water to communities.
• Origin: The roots of MDBs can be traced back to the post-World War II era when they were created to reconstruct war-torn countries and stabilize the global financial system.
• Objectives: Unlike commercial banks that prioritize profit generation from loans and financial services, MDBs focus on offering grants and low-interest loans to enhance the economic well-being of underprivileged or developing countries.
• Major Multilateral Development Banks: World Bank Group, International Monetary Fund, Asian Development Bank, New Development Bank, etc.