Context
The Multilateral Development BanksResponding to global development challenges
Poverty and inequality, climate change, pandemics, economic crises, migration and loss of biodiversity; humanity today faces complex challenges which transcend national borders.
Addressing these challenges requires a coordinated response from the international community. The multilateral development banks (MDBs) are key to this response.
Addressing these challenges requires a coordinated response from the international community. The multilateral development banks (MDBs) are key to this response.
The Framework of International Cooperation
The efforts of the international community towards sustainable development are guided by two frameworks:
The United Nations 2030 Agenda for Sustainable Development is a global frame of reference for national and international efforts to jointly solve major global challenges.
The Paris Climate Agreement is a legally binding instrument that aims to limit average global warming to considerably less than two degrees Celsius compared to the pre-industrial period.
The United Nations 2030 Agenda for Sustainable Development is a global frame of reference for national and international efforts to jointly solve major global challenges.
The Paris Climate Agreement is a legally binding instrument that aims to limit average global warming to considerably less than two degrees Celsius compared to the pre-industrial period.
Progress and challenges ahead
The international community has made encouraging progress in several areas of sustainable development over the last decades. Millions of people have escaped poverty and gained access to education, health services and clean energy.
The impact of the COVID-19 pandemic, climate change and the Russian invasion of Ukraine threaten to reverse this progress.
Multilateral development banks are active in the following areas:
The impact of the COVID-19 pandemic, climate change and the Russian invasion of Ukraine threaten to reverse this progress.
Multilateral development banks are active in the following areas:
MDBs
Strengths and advantages
MDBs offer advantages to address development challenges:
Governance of the MDBs The Board of Governors
The Board of Governors, composed of ministers or high-ranking officials of the member countries, is the supreme decision-making body of an MDB. It makes decisions on important strategic and financial matters, such as capital increases.
At the World Bank, Federal Councillor Guy Parmelin serves as Switzerland's Governor, while Federal Councillor Ignazio Cassis serves as Alternate Governor.
At the World Bank, Federal Councillor Guy Parmelin serves as Switzerland's Governor, while Federal Councillor Ignazio Cassis serves as Alternate Governor.
The Board of Directors
The day-to-day management of the MDBs' affairs is entrusted to the Board of Directors. It oversees bank activities and approves projects and strategies.
The largest shareholders have a permanent seat in the board, while smaller shareholders are grouped in constituencies.
Switzerland leads its constituencies at the European Bank for Reconstruction and Development, the World Bank Group and the Asian Infrastructure Investment Bank.
The largest shareholders have a permanent seat in the board, while smaller shareholders are grouped in constituencies.
Switzerland leads its constituencies at the European Bank for Reconstruction and Development, the World Bank Group and the Asian Infrastructure Investment Bank.
Management
Management conducts the daily business and operations of the bank. It prepares and submits projects, policies, strategies and financial reports to the Board of Directors and Governors for approval. Management also supervises the human resources of the bank and its budget.
Functioning
Country membership
In order to become a member and shareholder of an MDB, countries buy shares. Shareholders’ voting power is calculated on the basis of the shares of capital held by each country.
Thanks to the financial backing of their member countries, the MDBs of which Switzerland is part of consistently receive the highest rating from credit agencies. This rating allows MDBs to borrow and lend capital to their borrowers at favorable conditions.
Thanks to the financial backing of their member countries, the MDBs of which Switzerland is part of consistently receive the highest rating from credit agencies. This rating allows MDBs to borrow and lend capital to their borrowers at favorable conditions.
More than just loans
Backed by their shareholders, MDBs turn to international bond markets to obtain long-term financing, which they re-invest in development projects. This financing model provides good value for money because the shareholders’ capital is maintained over time.
MDBs activities go far beyond their lending services. They possess significant technical expertise, extensive in-country presence and operational capacities.
MDBs also provide a complete advisory package to their clients. This improves the sustainability of project results.
This makes them credible partners and enables them to respond with speed and at scale by combining a global agenda with country specific approaches.
MDBs activities go far beyond their lending services. They possess significant technical expertise, extensive in-country presence and operational capacities.
MDBs also provide a complete advisory package to their clients. This improves the sustainability of project results.
This makes them credible partners and enables them to respond with speed and at scale by combining a global agenda with country specific approaches.
Grants for the poorest countries
Some MDBs have development funds providing subsidized financial resources to the world’s poorest countries.
The funds must be replenished regularly, because their resources are partly allocated in the form of grants.
For example, the International Development Association (IDA), the World Bank Group's fund for the poorest, is usually refinanced every three years. In 2022, the Federal Council allocated USD 725 million to the 20th replenishment of this fund for the period 2022-2025.
This contribution will be used to fight poverty and the consequences of the multiple crises in the 74 poorest countries of the world.
The funds must be replenished regularly, because their resources are partly allocated in the form of grants.
For example, the International Development Association (IDA), the World Bank Group's fund for the poorest, is usually refinanced every three years. In 2022, the Federal Council allocated USD 725 million to the 20th replenishment of this fund for the period 2022-2025.
This contribution will be used to fight poverty and the consequences of the multiple crises in the 74 poorest countries of the world.
The project life-cycle
At the outset, the aim is to identify projects with potential that could have a positive impact on development. Together with the borrowers, MDB draft a project proposal. If the Executive Board approves it, the Bank disburses a loan or provides a grant so the project can be implemented.
Risk monitoring
MDBs oversee their projects with a proactive approach to risk management, including technical, fiduciary, governance, environmental and social risks.
Site visits are organized several times a year. Public complaint mechanisms are built into projects to strengthen monitoring. Internal and external financial audits are conducted annually.
Verified cases of violations of a bank’s standards are brought to the attention of the Board of Directors, which can demand remedial actions and compensations for the affected parties or suspend the project.
Site visits are organized several times a year. Public complaint mechanisms are built into projects to strengthen monitoring. Internal and external financial audits are conducted annually.
Verified cases of violations of a bank’s standards are brought to the attention of the Board of Directors, which can demand remedial actions and compensations for the affected parties or suspend the project.
Cooperation between MDBs and member countries
Beside their role of shareholder, member countries also engage as donors and partners in MDB projects. These projects in which bilateral development agencies cooperate with MDBs are known as multi-bi activities.
Switzerland also supports such activities at the regional, national or global level. It can thus strengthen its influence in MDBs. In this way, the expertise and experience of other donors and MDBs flow into Switzerland's bilateral cooperation.
Switzerland also supports such activities at the regional, national or global level. It can thus strengthen its influence in MDBs. In this way, the expertise and experience of other donors and MDBs flow into Switzerland's bilateral cooperation.
Swiss Priorities
Switzerland's cooperation with MDBs – shared responsibility
The Federal Department of Economic Affairs, Education and Research (EAER) and the Federal Department of Foreign Affairs (FDFA) are responsible for the cooperation with MDBs.
The EAER leads Switzerland's coordination and holds the governor position. Both departments jointly determine the Swiss positions in the governing bodies of the MDBs.
The EAER leads Switzerland's coordination and holds the governor position. Both departments jointly determine the Swiss positions in the governing bodies of the MDBs.
Swiss priorities as a shareholder
Switzerland insists that MDBs remain results-oriented and concentrate their efforts selectively and efficiently in their areas of core expertise.
Switzerland also encourages MDBs to develop, improve and comply with the highest international environmental, social and governance standards.
A further priority of Switzerland is to ensure that MDBs are adequately capitalized and that they safeguard their high credit ratings.
Switzerland also encourages MDBs to develop, improve and comply with the highest international environmental, social and governance standards.
A further priority of Switzerland is to ensure that MDBs are adequately capitalized and that they safeguard their high credit ratings.
Switzerland's engagement as donor partner
Switzerland regularly chooses MDBs as implementing partners for its bilateral initiatives. Switzerland relies on MDBs for their leverage, knowledge, operational delivery capacity and implementation standards. MDBs allow Switzerland to boost the impact of its bilateral cooperation program by scaling up new and innovative approaches, exploiting synergies and providing leverage for policy and institutional reforms that could otherwise not be delivered through bilateral means.
MDBs at a glance
Switzerland is an active shareholder and donor-partner of the World Bank Group and five regional MDBs.
Three guiding strategies
Switzerland's cooperation with MDBs is guided by its foreign policy strategy, its foreign economic policy strategy, and its international cooperation strategy. Switzerland focuses on those MDBs that best align with the geographic and thematic objectives of these three strategies.
Foreign policy strategy
Pluralism, the rule of law, sustainability, and economic and political freedom are the fundamental values of Switzerland's foreign policy strategy. MDBs are important platforms within which these values are defended and promoted.
Through alliances with other countries, Switzerland can create leverage and increase its influence. Switzerland engages with like-minded countries in the decision-making bodies of MDBs to promote standards in areas such as climate, human rights and gender equality.
Switzerland also wants to deepen strategic partnerships and adapt the multilateral system to new conditions and technologies.
Through alliances with other countries, Switzerland can create leverage and increase its influence. Switzerland engages with like-minded countries in the decision-making bodies of MDBs to promote standards in areas such as climate, human rights and gender equality.
Switzerland also wants to deepen strategic partnerships and adapt the multilateral system to new conditions and technologies.
International cooperation strategy
Switzerland's international cooperation strategy for the period 2021-2024 underlines Switzerland's commitment to a strong, rules-based multilateral system and a more efficient management of resources in international organizations. Switzerland promotes international norms and standards in MDBs, and calls a closer coordination between MDBs for greater impact in developing countries.
Thanks to their financial capacity and expertise, MDBs allow Switzerland to engage in development initiatives at scale. They extend and complement Switzerland’s international cooperation actions.
Thanks to their financial capacity and expertise, MDBs allow Switzerland to engage in development initiatives at scale. They extend and complement Switzerland’s international cooperation actions.
Foreign economic policy strategy
Switzerland’s prosperity benefits from a reliable and rule-based global economy. The foreign economic policy strategy highlights Switzerland’s commitment to promote a reliable multilateral international system that is open to developing economies and consistent with the Agenda 2030.
Switzerland promotes good governance in all MDBs activities in order to fight corruption, support social inclusion and equal opportunities.
MDBs’ projects also offer opportunities for Swiss companies to enter new markets. As a facilitator, Switzerland helps relevant Swiss actors connect with MDBs, promotes Swiss staffing in the institutions and fosters linkages with Swiss scientific and technological expertise.
Switzerland promotes good governance in all MDBs activities in order to fight corruption, support social inclusion and equal opportunities.
MDBs’ projects also offer opportunities for Swiss companies to enter new markets. As a facilitator, Switzerland helps relevant Swiss actors connect with MDBs, promotes Swiss staffing in the institutions and fosters linkages with Swiss scientific and technological expertise.
A unique financing model
MDBs are able to raise significant amounts of capital in the financial markets and thus to fund development activities. With a total share capital of USD 46 billion, the five MDBs in which Switzerland is represented have cumulatively lent USD 1.7 trillion since their inception.
The chart on the right indicates the volumes of loans made by MDBs in the year 2021.
The chart on the right indicates the volumes of loans made by MDBs in the year 2021.
Thematic expertise
MDBs share knowledge. Their research contributes to understanding and finding solutions to the most pressing development challenges.
For example, MDBs have aligned their activities with the objectives of the Paris Climate Agreement. They created a climate finance framework facilitating private and public sector investment.
The World Bank Group publishes the Country Climate and Development Reports, providing concrete analyses on how to respond to climate change whilst achieving high development impact.
For example, MDBs have aligned their activities with the objectives of the Paris Climate Agreement. They created a climate finance framework facilitating private and public sector investment.
The World Bank Group publishes the Country Climate and Development Reports, providing concrete analyses on how to respond to climate change whilst achieving high development impact.
A global footprint
MDBs have the capacity to engage swiftly and at scale to address global challenges.
From the beginning of the spread of COVID-19, they have committed significant resources to help developing countries cope with the impact of the pandemic. For example, the World Bank Group WBG committed more than USD 200 billion to its clients.
From the beginning of the spread of COVID-19, they have committed significant resources to help developing countries cope with the impact of the pandemic. For example, the World Bank Group WBG committed more than USD 200 billion to its clients.
Bringing stakeholders together
MDBs bring together relevant actors to address development challenges.
For example, the World Bank Group acts as trustee of the Climate Investment Funds (CIF). The CIF is one of the world's largest multilateral funds dedicated to climate adaptation and mitigation in low and middle-income countries. The CIF convenes major MDBs, governments, private sector, civil society and local communities.
Since inception, the CIF has approved 398 climate-related projects for a total financing of USD 7.5 billion.
For example, the World Bank Group acts as trustee of the Climate Investment Funds (CIF). The CIF is one of the world's largest multilateral funds dedicated to climate adaptation and mitigation in low and middle-income countries. The CIF convenes major MDBs, governments, private sector, civil society and local communities.
Since inception, the CIF has approved 398 climate-related projects for a total financing of USD 7.5 billion.
Policy dialogue
MDBs engage in policy dialogue with governments, private sector representatives and development actors.
For example, the World Bank engages in policy dialogue with heavily indebted countries to reschedule their debt maturities and reduce pressure on public finances.
The Debt Management Facility is a multi-donor trust fund of the World Bank. It provides advisory, training and learning services to strengthen debt management capacities, processes and institutions. This mechanism has been successful in improving debt management in over 75 low- and middle-income countries.
For example, the World Bank engages in policy dialogue with heavily indebted countries to reschedule their debt maturities and reduce pressure on public finances.
The Debt Management Facility is a multi-donor trust fund of the World Bank. It provides advisory, training and learning services to strengthen debt management capacities, processes and institutions. This mechanism has been successful in improving debt management in over 75 low- and middle-income countries.
standards
MDBs have pioneered the use of environmental, social and governance (ESG) standards in development projects. These standards prevent risks, promote integrity and protect vulnerable populations. Projects that include social and environmental components have a stronger and more positive development impact.
For example, the International Finance Corporation's Performance Standards have been adopted by more than a hundred financial institutions and countries.
For example, the International Finance Corporation's Performance Standards have been adopted by more than a hundred financial institutions and countries.
Poverty
Poverty reduction
MDBs support programs aiming at reducing extreme poverty. In the past decades, extreme poverty has steadily declined.
The impact of the COVID-19 pandemic has pushed millions back into poverty. The energy and food crises caused by the Russian invasion of Ukraine reinforce this negative trend. With multilaterally coordinated measures, these crises can be overcome and regressive development avoided.
The impact of the COVID-19 pandemic has pushed millions back into poverty. The energy and food crises caused by the Russian invasion of Ukraine reinforce this negative trend. With multilaterally coordinated measures, these crises can be overcome and regressive development avoided.
Electricity access
Electricity access
In the year 2000, many people in Sub-Saharan Africa, South Asia and parts of Southeast Asia and Latin America had no or limited access to electricity.
Today, more people have access to electricity than ever before. In Asia, almost 1.2 billion people have gained access to electricity since 2000. In Africa, an average of 24 million people gained access to electricity every year between 2014 and 2019.
MDBs support the deployment of renewable energy and energy efficiency measures in order to promote energy access while adhering to the objectives of the Paris Agreement.
Today, more people have access to electricity than ever before. In Asia, almost 1.2 billion people have gained access to electricity since 2000. In Africa, an average of 24 million people gained access to electricity every year between 2014 and 2019.
MDBs support the deployment of renewable energy and energy efficiency measures in order to promote energy access while adhering to the objectives of the Paris Agreement.
Climate change
Climate change
Climate change threatens the lives and livelihoods of billions of people. It leads to more frequent and intense weather events, damages infrastructure, disrupts food supplies, and contributes to irreversible losses of natural habitats.
Countries need to invest huge sums in climate adaptation and mitigation. MDBs play a pivotal role in providing climate financing and expertise.
Countries need to invest huge sums in climate adaptation and mitigation. MDBs play a pivotal role in providing climate financing and expertise.
Women education
Women education
Providing girls and young women with quality education is a key development priority.
The global literacy rate among women aged older than 15 increased from 60 to 80 percent between 1970 and 2020.
Today, it is estimated that around 129 million girls are still out of school. The COVID-19 pandemic has affected school attendance and quality education around the world.
MDBs contribute to helping millions of women access education.
The global literacy rate among women aged older than 15 increased from 60 to 80 percent between 1970 and 2020.
Today, it is estimated that around 129 million girls are still out of school. The COVID-19 pandemic has affected school attendance and quality education around the world.
MDBs contribute to helping millions of women access education.
World Bank Group
The World Bank Group
The World Bank Group (WBG) is the world's largest source of knowledge and development finance. Its mandate is to reduce extreme poverty and promote shared prosperity, while addressing global challenges. It is composed of five entities:
The International Bank for Reconstruction and Development (IBRD) provides technical support and loans to middle-income countries.
The International Development Association (IDA) provides technical support, grants and highly subsidized loans to the poorest countries.
The International Finance Corporation (IFC) invests in the private sector in developing countries.
Furthermore, the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID) are part of the WBG.
The International Bank for Reconstruction and Development (IBRD) provides technical support and loans to middle-income countries.
The International Development Association (IDA) provides technical support, grants and highly subsidized loans to the poorest countries.
The International Finance Corporation (IFC) invests in the private sector in developing countries.
Furthermore, the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID) are part of the WBG.
International Finance Corporation
Switzerland is an important partner for the advisory services of the International Finance Corporation (IFC). It is particularly active in the areas of investment climate, financial infrastructure and sustainable urban planning.
For example, Switzerland supported the Crop Receipts project in Ukraine, which allows small-scale farmers to access funds at the beginning of the season. It has provided USD 1.2 billion in financing to Ukrainian farmers so far.
For example, Switzerland supported the Crop Receipts project in Ukraine, which allows small-scale farmers to access funds at the beginning of the season. It has provided USD 1.2 billion in financing to Ukrainian farmers so far.
Freeing Uzbek cotton from systemic forced labor
Uzbekistan is the sixth largest cotton producer in the world. Toward 2010, strong criticism was raised because child and forced labor were systematically found during the harvest. As part of a monitoring exercise by the International Labor Organization, the IFC and the World Bank, child and forced labor was completely eliminated.
AfDB
The African Development Bank (AfDB)
The African Development Bank (AfDB) is majority owned by African countries, and provides financial resources, advice and technical assistance to countries on the continent.
The Bank consists of two main entities:
The African Development Bank provides long-term financing and advice to middle-income countries and the private sector.
The African Development Fund (AfDF) provides technical assistance and financing to the poorest African countries in the form of grants and subsidized loans.
The Bank consists of two main entities:
The African Development Bank provides long-term financing and advice to middle-income countries and the private sector.
The African Development Fund (AfDF) provides technical assistance and financing to the poorest African countries in the form of grants and subsidized loans.
Boosting sustainable growth in Africa
The AfDB's mission is to support the green and inclusive development in Africa. It focuses on energy, food security, integration, industrialization and improving quality of life.
Switzerland has contributed CHF 3 million to the AfDB's Boost Africa Innovation and Entrepreneurship Lab. The lab strengthens collaboration between regional and local private sector actors and networks to foster innovation and generate investment opportunities.
Switzerland has contributed CHF 3 million to the AfDB's Boost Africa Innovation and Entrepreneurship Lab. The lab strengthens collaboration between regional and local private sector actors and networks to foster innovation and generate investment opportunities.
EBRD
The European Bank for Reconstruction and Development
The European Bank for Reconstruction and Development (EBRD) contributes to the transition to a market economy and liberal democracy in its countries of operation.
For example, Switzerland and the EBRD have improved dual training opportunities for young people in Egypt by supporting the Sewedy Technical Academy in Cairo.
For example, Switzerland and the EBRD have improved dual training opportunities for young people in Egypt by supporting the Sewedy Technical Academy in Cairo.
AIIB
The Asian Infrastructure Investment Bank
The Asian Infrastructure Investment Bank (AIIB), founded in 2015, is the youngest MDB. The bank aims to foster sustainable development, promote prosperity and improve connectivity in Asia through sustainable infrastructure projects. Its projects focus primarily on transport, energy, water, urban development and digital connectivity.
AIIB has set an ambitious climate finance target of 50% of approved projects until 2025, and is on track to achieving it.
For example, AIIB financed the Ibri II Solar Photovoltaic Project in Oman. The plant will generate 500 mega-watt solar power, helping Oman reduce its dependency on oil and gas for power generation.
AIIB has set an ambitious climate finance target of 50% of approved projects until 2025, and is on track to achieving it.
For example, AIIB financed the Ibri II Solar Photovoltaic Project in Oman. The plant will generate 500 mega-watt solar power, helping Oman reduce its dependency on oil and gas for power generation.
AsDB
The Asian Development Bank
The Asian Development Bank (AsDB) aims to eradicate extreme poverty and promote sustainable, inclusive and resilient growth in the Asia-Pacific region. It is majority-owned by Asian countries and consists of two main entities:
The Asian Development Bank provides loans to the public and private sectors.
The Asian Development Fund (AsDF), which provides grants and subsidized loans to the poorest and most fragile member countries.
The Asian Development Bank provides loans to the public and private sectors.
The Asian Development Fund (AsDF), which provides grants and subsidized loans to the poorest and most fragile member countries.
Switzerland and the Asian Development Fund
Switzerland has committed CHF 25.5 million to the Asian Development Fund (AsDF) for the years 2021 to 2024 to support the most vulnerable and poorest countries in the Asia-Pacific region.
IDB
The Inter-American Development Bank
The Inter-American Development Bank (IDB) is the largest multilateral source of financing in Latin America and the Caribbean. The IDB comprises the following entities:
The IDB provides loans, grants and technical support to governments.
IDB Invest provides financing and technical support to the private sector.
IDB Lab promotes high-risk innovation and pilot activities to stimulate the private sector.
For example, the IDB and Switzerland have worked together since 2021 to address the urgent challenges of Venezuelan migration in Colombia. A Swiss grant of USD 7.5 million is helping to improve employment services and develop water and sanitation networks for vulnerable communities.
The IDB provides loans, grants and technical support to governments.
IDB Invest provides financing and technical support to the private sector.
IDB Lab promotes high-risk innovation and pilot activities to stimulate the private sector.
For example, the IDB and Switzerland have worked together since 2021 to address the urgent challenges of Venezuelan migration in Colombia. A Swiss grant of USD 7.5 million is helping to improve employment services and develop water and sanitation networks for vulnerable communities.
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The Multilateral Development Banks
The World Bank Group
The African Development Bank (AfDB)
The European Bank for Reconstruction and Development
The Asian Infrastructure Investment Bank
The Asian Development Bank
The Inter-American Development Bank