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The business of development: borrowers, shareholders, and the reshaping of multilateral development lending

Humphrey, Chris (2012) The business of development: borrowers, shareholders, and the reshaping of multilateral development lending. PhD thesis, The London School of Economics and Political Science (LSE).

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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.

Item Type: Thesis (PhD)
Additional Information: © 2012 Chris Humphrey
Library of Congress subject classification: H Social Sciences > HG Finance
Sets: Departments > International Development
Supervisor: Shadlen, Kenneth C.
URI: http://etheses.lse.ac.uk/id/eprint/587

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