Humphrey, Chris
(2012)
The business of development: borrowers, shareholders, and the reshaping of multilateral development lending.
PhD thesis, London School of Economics and Political Science.
Abstract
This thesis seeks to understand how shifts in global economic power affect the policies
and practices of multilateral development banks (MDBs). The study proposes three
hypotheses. First, the “business” of development lending has changed radically in recent
years as a result of the rise of middle income economies that now have a variety of
options for sovereign borrowing—a reality thus far largely overlooked in academic
research on MDBs. Second, a key factor defining the operational characteristics of the
20-odd MDBs in existence is the relative balance of power between borrower and nonborrower shareholders in MDB governance. Third, the financial pressures inherent in
MDBs’ organizational models limit the options for MDB operations and shape how they
will react to evolving market conditions.
To test these hypotheses, the study examines several inter-related areas of MDB history
and current operations, using as cases the World Bank (controlled by non-borrowing
countries), the Inter-American Development Bank (control divided between borrowers
and non-borrowers) and the Andean Development Corporation (controlled by borrowing
countries). The analysis of the MDBs is complemented with case studies of Colombia
and Ecuador, two countries with extensive borrowing histories with all three MDBs, to
understand the demand side of development lending from the point of view of borrowing
country government officials.
The thesis finds compelling evidence in support of all three hypotheses, which suggests
that the prevailing academic view that MDBs can be understood by focusing on the
organization itself while ignoring the views of borrowers is not sufficient to understand
the complexities of multilateral lending. MDBs are not all-powerful, but rather one
resource among many at the disposal of governments to further their development, with
varying competitive characteristics that impact the demand for their loans by borrowing
countries in the current global context.
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