The Multilateral Development BanksResponding to global development challenges
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 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 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:
Strengths and advantages
Governance of the MDBs The Board of Governors
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 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.
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
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
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
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
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's cooperation with MDBs – shared responsibility
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 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
MDBs at a glance
Three guiding strategies
Foreign policy strategy
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
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 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
The chart on the right indicates the volumes of loans made by MDBs in the year 2021.
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
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
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 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 International Finance Corporation's Performance Standards have been adopted by more than a hundred financial institutions and countries.
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.
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.
Countries need to invest huge sums in climate adaptation and mitigation. MDBs play a pivotal role in providing climate financing and expertise.
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 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
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
The African Development Bank (AfDB)
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
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.
The European Bank for Reconstruction and Development
For example, Switzerland and the EBRD have improved dual training opportunities for young people in Egypt by supporting the Sewedy Technical Academy in Cairo.
The Asian Infrastructure Investment Bank
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.
The Asian Development Bank
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
The Inter-American Development Bank
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.