Mandate Matters: Evolving Views and Counter-cyclical Surprises from the World’s Newest, Southern-led, Multilateral Development Banks

This article examines the responses of Southern-owned and led MDBs to the complex and multi-faceted shocks caused by Covid-19, through the lens of mandate and public purpose. It finds that public banks with a clear sense of this quickly met the needs of their members — flexibly switching to policies or strategies that are different from what they were designed for and what they are used to doing. It helps to have available resources; but if these are lacking political will can create them. Similarly, resources may be available but under-utilized if public purpose is unclear. These findings stem from quantitative and qualitative research into the surprisingly rapid and large-scale counter-cyclical lending by the world’s two newest MDBs and seeks lessons for the long-term lending needed for climate change adaptation and mitigation. The paper finds that the Asian Infrastructure Investment Bank and the New Development Bank had a clear sense of what was required of them to meet their members’ needs in a time of crisis and had the space in which to provide it. These new banks provided a service that was lacking from private or commercial banks and were also more responsive and resilient than the historic global lenders of last resort.