This paper looks at the role, evolution and regional coverage of the system of multilateral and national development banks (MDBs and NDBs) and international climate change funds. It analyzes the roles that development banks should play to correct the market failures that characterize financial systems, particularly in emerging and developing countries. It concludes that MDBs should be capitalized to better support the recovery of emerging and developing countries after the COVID-19 crisis. They should also be aligned with the Sustainable Development Goals, and enhance the role they play in promoting innovation and structural transformation, and in supporting climate change mitigation and adaptation. It underscores that the development banks should work as a system, and that better networking between MDBs and NDBs is essential and should be systematically monitored. Finally, it points out that MDBs should support the development of strong NDBs in the regions where these institutions are underrepresented.
This Research Paper is published in the framework of the International Research Initiative on Public Development Banks working groups and released for the occasion of the 14th AFD International Research Conference on Development.
It is part of the pilot research program “Realizing the Potential of Public Development Banks for Achieving Sustainable Development Goals”. This program was launched, along with the International Research Initiative on Public Development Banks (PDBs), by the Institute of New Structural Economics (INSE) at Peking University, and sponsored by the Agence française de développement (AFD), Ford Foundation and International Development Finance Club (IDFC).
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