or decades, multilateral development banks (MDBs) were the workhorses of the global economy. From the 1950s through the 1980s, the World Bank and regional banks financed massive infrastructure projects, reduced poverty, and shaped postwar economic policy. The World Bank’s loans built Europe’s dams and power plants, while the Asian and African Development Banks invested in education, health, and rural development. They were engines of modernization, most visibly through projects such as the Green Revolution, which transformed agriculture in India and Mexico.
But the “golden era” of MDBs has long passed. Today these institutions are beset by debt crises, sclerotic bureaucracies, and growing competition. Africa’s infrastructure financing gap—estimated at $68–$108 billion annually—remains far beyond the reach of sovereign loans. The African Development Bank has tried to fill the void, but struggles to attract private capital, deploy risk-sharing mechanisms, and overcome investor fears of political instability.
The Asian Development Bank has modernized—introducing digital workflows and AI–driven risk tools all while aligning its operations with the Paris Agreement. Its $100 billion capital adequacy reforms and expanded co–financing have made it a key climate financier. Yet it has failed to mobilize private investment at scale, even as Asia faces an infrastructure gap of over $1.7 trillion annually.
New institutions such as the Asian Infrastructure Investment Bank (AIIB) promised speed and innovation, but have often replicated the sluggishness of its older peers. Its credit guarantee program arrived years late, its private capital mobilization remains weak, and its perceived ties to Beijing have limited its global reach and impact. Nearly half its projects fall outside its own accountability mechanism, raising concerns about governance. For many observers, it is not yet clear why the AIIB exists alongside the World Bank and ADB—beyond serving as a platform for China’s geopolitical ambitions
What unites these examples is a simple truth: MDBs must change or fade into irrelevance. They need to harness blended finance, expand guarantees, and de–risk investment to mobilize trillions in private capital. They must prove they can deliver faster, smarter, and greener development, or else lose ground to bilateral lenders and ad hoc coalitions.
The MDBs were built to help societies rebuild from catastrophe. Today, climate change, pandemics, and mounting debt demand an equally bold reinvention—not simply reform. Their legitimacy—and utility—depends on whether they can rediscover the spirit of ambition that once made them indispensable to global development.
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Multilateral development banks at a crossroads
Image via Adobe Stock.
October 8, 2025
Multilateral development banks were the global economy’s workhorses for decades, but their golden era has passed. To remain relevant, they must not simply reform but reinvent themselves to meet today’s challenges, writes Daniel Wagner.
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or decades, multilateral development banks (MDBs) were the workhorses of the global economy. From the 1950s through the 1980s, the World Bank and regional banks financed massive infrastructure projects, reduced poverty, and shaped postwar economic policy. The World Bank’s loans built Europe’s dams and power plants, while the Asian and African Development Banks invested in education, health, and rural development. They were engines of modernization, most visibly through projects such as the Green Revolution, which transformed agriculture in India and Mexico.
But the “golden era” of MDBs has long passed. Today these institutions are beset by debt crises, sclerotic bureaucracies, and growing competition. Africa’s infrastructure financing gap—estimated at $68–$108 billion annually—remains far beyond the reach of sovereign loans. The African Development Bank has tried to fill the void, but struggles to attract private capital, deploy risk-sharing mechanisms, and overcome investor fears of political instability.
The Asian Development Bank has modernized—introducing digital workflows and AI–driven risk tools all while aligning its operations with the Paris Agreement. Its $100 billion capital adequacy reforms and expanded co–financing have made it a key climate financier. Yet it has failed to mobilize private investment at scale, even as Asia faces an infrastructure gap of over $1.7 trillion annually.
New institutions such as the Asian Infrastructure Investment Bank (AIIB) promised speed and innovation, but have often replicated the sluggishness of its older peers. Its credit guarantee program arrived years late, its private capital mobilization remains weak, and its perceived ties to Beijing have limited its global reach and impact. Nearly half its projects fall outside its own accountability mechanism, raising concerns about governance. For many observers, it is not yet clear why the AIIB exists alongside the World Bank and ADB—beyond serving as a platform for China’s geopolitical ambitions
What unites these examples is a simple truth: MDBs must change or fade into irrelevance. They need to harness blended finance, expand guarantees, and de–risk investment to mobilize trillions in private capital. They must prove they can deliver faster, smarter, and greener development, or else lose ground to bilateral lenders and ad hoc coalitions.
The MDBs were built to help societies rebuild from catastrophe. Today, climate change, pandemics, and mounting debt demand an equally bold reinvention—not simply reform. Their legitimacy—and utility—depends on whether they can rediscover the spirit of ambition that once made them indispensable to global development.
