Multilateral Development Banks (MDBs) are supranational institutions established by multiple sovereign states, which act as their shareholders, under international law. The concept originated with the creation of the World Bank, formally the International Bank for Reconstruction and Development, at the Bretton Woods conference in 1944. The initial problem it solved was financing the reconstruction of war-torn countries after World War II, but by the 1950s, its focus shifted to providing financial assistance to the developing world.
MDBs work by raising a large volume of funds primarily by borrowing from international capital markets, secured by the backing of their member governments. They also receive donor commitments from member nations. The mechanism of assistance is mainly through direct loans, but also includes grants, equity investments, loan and equity guarantees, and technical assistance to developing countries. Unlike commercial banks, MDBs do not seek substantial profits but aim to foster economic and social progress and reduce poverty.
Key institutions connected to this concept include the World Bank Group (WBG) and regional banks like the Asian Development Bank (ADB), the African Development Bank (AfDB), and newer institutions such as the Asian Infrastructure Investment Bank (AIIB) and the BRICS New Development Bank (NDB). The MDB system is currently undergoing significant change, with reform efforts focused on balance sheet optimisation to expand lending capacity. The Heads of MDBs Group committed to delivering an additional $650 billion in lending capacity over the next decade, as of 2024. Furthermore, there is a push to reform operational policies, such as environmental and social safeguards, and a shift toward providing more grants to break the "lend-and-forgive" cycle. This reform agenda is guided by the G20 Roadmap Towards Better, Bigger and More Effective MDBs, endorsed under the G20 Brazilian Presidency in 2024.