Regional Development Bank – Definition

Cite this article as:"Regional Development Bank – Definition," in The Business Professor, updated April 8, 2019, last accessed October 20, 2020, https://thebusinessprofessor.com/lesson/regional-development-bank-definition/.

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Regional Development Bank Definition

The Regional Development Bank, RDB is a financial institution established to provide investment capital for startup businesses and businesses in low or middle-income countries. Regional Development Banks therefore provide financial assistance to businesses through the allocation of low-interest loans and grants for developing businesses. Also, RDBs are multilateral financial institutions established by a country or group of countries to help developing businesses both financially and technically. Four institutions are summed up to RDB, these are; African Development Bank (AfDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD) and Inter-American Development Bank (IDB).

A Little More on What is a Multilateral Development Bank

Investment capital is crucial for any business to succeed, in fact, unavailability of funds can cripple businesses. RDBs help businesses financially and technically without seeking to maximise profits for shareholders.The development of business is importance to RDBs, this is why these Multilateral Development Banks, MDBs offer loans with low or no interest to developing businesses. They also offer grants to developmental projects in the major sectors of an economy such as agriculture, education, health and others.

There are two main type of MDBs, the first form is made up of famous institutions while the other type is formed by governments of low-income countries.

Multilateral Development Banks by Assets

Multilateral Development Banks are listed according to their valuable possessions otherwise called assets. In MDBs or institutions, assets refer to tangible or intangible resources owned by these banks. In this segment, MDBs are listed in line with the size of their holdings and their balance sheets at the of 2016.

European Investment Bank – €573.2 billion ($666.3 billion)

World Bank – $307.3 billion

Asian Development Bank – $125.9 billion

Inter-American Development Bank – $113.3 billion

European Bank for Reconstruction and Development – €56.2 billion ($65.3 billion)

African Development Bank – 29.7 billion XUA ($21.6 billion, as of Sept. 2017)

Asian Infrastructure Investment Bank – $17.8 billion

Islamic Development Bank – 18.1 billion Islamic dinars ($12.9 billion)

New Development Bank – $10.0 billion

Central American Bank for Economic Integration – $9.2 billion

References for Multilateral Development Banks

Academic Research on Regional Development Banks (RDBs)

Power structures and regional development banks, Krasner, S. D. (1981). International organization, 35(2), 303-328. This paper discusses that influence and resources that the three major regional financial institutions have secured. The Inter-American, Asian, and African Development Banks are the three major RDBs and this paper evaluates their impacts on developing countries in terms of influence and resources. The variation of influence and resources of these banks and the way they function are discussed in this paper. This paper also examines the differences in structure of these regional banks. The Inter-American Development Bank has a dominant structure and has pursued both financial and political objectives to develop economies within the bank. The structures and impacts of the Asian Development Bank and African Development Bank are treated.

The determinants of aid allocation by regional multilateral development banks and United Nations agencies, Neumayer, E. (2003). International Studies Quarterly, 47(1), 101-122. The four RDBs as well as the three United Nations agencies do not just allocate financial aids, there are some cogent factors that determine the allocation of aid. The paper studies these factors and how they influence the allocation of aids. Findings reveal that there are noticeable biases in allocation of aid. While some bilateral donors display prejudice in giving aid to less populous economies, some donors give more aid to their former colonies and the others exhibit a third bias of allocating more aid in favor of geographically distant Western countries. This paper examines these biases and factors that donors generally consider before aid allocation.

Regional public goods: The comparative edge of regional development banks, Ferroni, M. (2002, February). In a conference on Financing for Development: regional Challenges and the regional Development Banks at the Institute for International Economics. Developmental challenges in terms of finances differ from one region to another, this is why financial developmental issues should be tackled at regional levels. This paper examines the roles of Regional Development Banks in the provision of regional public goods as this is an effective way to deal with development challenges regionally. Regional Public Goods, RPGs are vital for economic development, this paper however examines the challenges that RDBs face in financing RPGs. This examination will give rise to discussions of how international assistance can aid the financing of RPGs.

Governance and accountability: The regional development banks, Carrasco, E. R., Carrington, W., & Lee, H. (2017). In Globalization and International Organizations (pp. 81-140). Routledge. The impacts of accountability and good governance on the performance of RDBs cannot be overemphasised. Both governance and accountability are two concepts that are intertwined because it is the type of viverance that operates in a multilateral financial institution that determines whether the institution will be financially accountable or not. This paper examines governance and accountability as important concepts in multilateral financial institutions, issues relating to these terms are also discussed. Using the four RDBS, this paper carries out a survey of the current state of governance and accountability in these institutions and how the structures and policies of these banks contribute to the quality of their governance and accountability.

Regional development banks: Exploiting their specificity, Culpeper, R. (1994). Third World Quarterly, 15(3), 459-482. This paper discusses how the specificity of the four RDBs can positively influence their performances and impacts. As the name implies, RDBs are region focused, for instance, African Development Bank (AfDB) operates within the African region while Asian Development Bank (ADB) manages countries in Asia. RDBs are saddled with the responsibility of allocating low or no-interest loans and grants for developing businesses. This paper finds out that if regional development banks can use their regionality to the advantage, they can drive insurmountable developments in their regions. If RDBs utilize or capitalize on their regions, there will be a huge record of regional development across diverse regions.

Regional development banks, Singh, M. (1969). Int’l Conciliation, 38, 1. This paper on Regional Developments banks as written by Singh M in 1969 talks extensively about RDBs as multilateral financial institutions and the roles they play in stimulating regional development. The four institutions which make up RDBs are discussed. These institutions are African Development Bank (AfDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD) and the Inter-American Development Bank (IDB).

Regional development banks: A comparative perspective, Sagasti, F. R., & Prada, F. (2006). En: Regional financial cooperation-Washington, DC: ECLAC/Brookings Institution Press, 2006-p. 68-106. This paper draws a comparison of the roles of RDBs and MDBs in driving financial developments in regions where they operate and the responsibilities they are saddled with. This paper also dwells on the specific characteristics of regional and subregional multilateral development banks (MDBs) and the major actors in both institutions.  Multilateral development banks are financial intermediaries on an international platform, their shareholders can either be from countries that borrow from them and countries that do not. Both RDBs and MDBs provide not only financial aid but also technical assistance for young businesses in developing countries. This paper presents a comparative perspective of regional and subregional financial institutions and their functions.

Implications of accommodating rising powers for the regional development banks, Strand, J. R., & TREVATHAN, M. (2015). In Global economic governance and the development practices of the multilateral development banks (pp. 145-166). Routledge. Regional Development Banks have the tendency of accommodating rising powers and there are certain implications for doing so. Rising powers is a term used to refer to countries with increased presence at the international level. Due to their status, powerful position, increased resources and material capabilities, these countries or regions have the potential of  influencing the international system or relations. This paper is a study of the implications of accommodating rising or emerging powers by regional development banks. The systemic consequences of the rising of these emerging powers on Regional Development Banks are discussed.

International Standards for Strenghtening Financial Systems Can Regional Development Banks Address Developing Country Concerns?, Rojas-Suarez, L. (2002, February). In Conference on Financing for Developing: Regional Challenges and the Regional Development Banks, held at the Institute for International Economics, Washington DC, February. Due to the effects of the Asian financial market crisis in 1997, regional development banks as well as the international community paid attention in devising more effective techniques to prevent financial crises. One of the mechanisms is the creation of international standards for strengthening financial systems which will give rise to sustainable financial policies.  This paper examine whether Regional Development Banks, RBDs have the capability to address the financial concerns of countries using the international standards. It highlights how RDBs are able to deal with regional economic vulnerability and financial weaknesses or otherwise. This study presents findings on whether RDBs address the concerns of developing countries or not.

Anti-Corruption Policies: Eligibility and Debarment Practices at the World Bank and Regional Development Banks, Deming, S. H. (2010). Int’l Law., 44, 871. Corruption and its relationship with procurement practices started to receive the attend of World bank and the four Regional Development Banks in 1990. This gave rise to the formulation of anti-corruption policies by these institutions, these policies against corruption will help to eradicate loopholes for corruption in the institutions. These anti-corruption policies took meaningful approaches and their aim is to serve as a deterrent to corrupt and fraudulent practices at the world bank and regional development banks. Eligibility and debarment are part of the anti-corruption policies employed by the World Bank and RDBs. Debarment means the exclusion on an institution from certain rights, privileges, or practices.

Regional development banks and the objectives of the Bretton Woods institutions, Rwegasira, D. G., & Kifle, H. (1996). In The International Monetary and Financial System (pp. 383-420). Palgrave Macmillan, London. This paper basically studied Regional Development Banks, RDBs and the objectives of the Bretton Woods institutions as these institutions help drive economic growth globally. For the emerging or new world order to thrive, two types of financial institutions are required to enhance both global and regional economic development. These institutions are regional development banks and the Bretton Woods institutions which are otherwise called the world bank and the IMF, International Monetary Fund. These institutions will help tackle economic problems and also create diverse opportunities for dynamic global development. With the help of RDBs, the integration of region which will enhance regional liberalization can be achieved.

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