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
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