DEFINITION of 'Multilateral Development Bank - MDB'

A multilateral development bank (MDB) is an international financial institution chartered by two or more countries for the purpose of encouraging economic development.

BREAKING DOWN 'Multilateral Development Bank - MDB'

Unlike commercial banks, MDBs do not seek to maximize profits for their shareholders, but prioritize development goals such as ending extreme poverty and reducing economic inequality. They often lend at low or no interest or provide grants to fund projects in infrastructure, energy, education and other areas that promote development. MDBs are subject to international law.

There are two main forms of MDB. The first, which includes the largest and most famous institutions, makes loans and grants; these banks often distinguish between poorer, borrowing members and wealthier, non-borrowing members. Examples include the World Bank and the Inter-American Development Bank.

The second type is formed by governments of low-income countries that borrow collectively via the MDB in order to secure more favorable rates. The Caribbean Development Bank is an example of this type.

MDBs – and other international financial institutions, such as the International Monetary Fund (IMF) – originated after World War II, when the U.S. and its allies founded the Bretton Woods institutions to stabilize the post-war financial system. The World Bank, which has been semi-officially dominated by the U.S. since its founding, is one of these institutions.

Many countries have chafed at the U.S.'s influence over the World Bank and regional MDBs, such as the Asian Development Bank. In October 2013 Chinese President Xi Jinping proposed the Asian Infrastructure Investment Bank as an alternative to these American-dominated institutions. The U.S. reportedly attempted to discourage allies from signing on to the project, putting pressure on South Korea and Australia in particular. Both ended up joining, along with 58 other members and 22 prospective members.

Multilateral Development Banks by Assets

The following is a list of major multilateral development banks, ordered by the size of their balance sheets at the end of 2016 (exchange rates as of Nov. 9, 2017, unless otherwise noted):

  • European Investment Bank – €573.2 billion ($666.3 billion)
  • World Bank – $307.3 billion
  • Asian Development Bank – $125.9 billion
  • Inter-American Development Bank – $113.3 billion
  • European Bank for Reconstruction and Development – €56.2 billion ($65.3 billion)
  • African Development Bank – 29.7 billion XUA ($21.6 billion, as of Sept. 2017)
  • Asian Infrastructure Investment Bank – $17.8 billion
  • Islamic Development Bank – 18.1 billion Islamic dinars ($12.9 billion)
  • New Development Bank – $10.0 billion
  • Central American Bank for Economic Integration – $9.2 billion
  1. The World Bank

    The World Bank is an international organization dedicated to ...
  2. International Bank Of Reconstruction ...

    The International Bank Of Reconstruction and Development is one ...
  3. National Bank

    In the United States a national bank is a commercial bank, while ...
  4. Universal Banking

    Universal banking is a system in which banks provide a wide variety ...
  5. Chartered Bank

    A chartered bank is a financial institution, whose primary roles ...
  6. Central Bank

    The entity responsible for overseeing the monetary system for ...
Related Articles
  1. Insights

    A Brief History of U.S. Banking Regulation

    From the establishment of the First Bank of the United States to Dodd-Frank, American banking regulation has followed the path of a swinging pendulum.
  2. Insights

    A Brief History of International Trade Agreements

    Since the mercantilist era, world trade has become increasingly multilateral, but since WW2 there has been a definite rise in regional trade agreements.
  3. Insights

    The 4 Biggest Chinese Banks

    Learn how the Chinese banking system is operated and managed, and get information about the top four largest banks in the country.
  4. Tech

    The Pros And Cons Of Internet Banks

    Learn how internet banking services stack up against their brick-and-mortar peers. Find out what internet banks have to offer and where they fall short.
  5. Personal Finance

    How Will Bank Regulation Affect British Banks?

    We look at the proposed changes to Britain's banking system, and see whether it will be able to stay competitive.
  6. Investing

    Analyzing a bank's financial statements

    In this article, you'll get an overview of how to analyze a bank's financial statements and the key areas of focus for investors who are looking to invest in bank stocks.
  7. Investing

    How Do Financial Regulations Affect Smaller Banks?

    Not to big to fail? We explain how US financial regulations affect smaller banks.
  1. What is the difference between an investment and a retail bank?

    Learn the primary differences between retail banks and investment banks by examining the business activities, type of clients ... Read Answer >>
  2. How do investment banks help the economy?

    Learn more about the functions of investment banks in a modern economy and how investment banks have been treated differently ... Read Answer >>
  3. How do interest rate changes affect the profitability of the banking sector?

    Learn how interest rates affect the banking sector. When interest rates rise, the profitability of the banking sector increases. Read Answer >>
Trading Center