World leaders and more than 450 development banks met in Abidjan, Cote d’Ivoire, for two days to reflect on how to avail loans with crisis recovery and tackle environmental challenges.
The third yearly Finance in Common Summit takes place amidst a world economy facing multiple shocks and calls for increasing lending capacity for development banks. “What distinguishes this third Finance in Common from the two previous ones, is that now there are proposals to push development banks to do more,” said Eric LeCompte, Executive Director of the religious development group Jubilee USA Network. “Development banks play an important role in crises. With the pandemic, Ukraine war, inflation, food prices and climate challenges, we will demand more of them.”
In July, a G20-established panel of experts proposed changes to the way banks determine loan risk, assess available capital, and communicate with credit rating agencies. Frannie Léautier, Senior Partner at SouthBridge Group and CEO of SouthBridge Investments, chaired the group, comprising fourteen experts from a variety of backgrounds. According to the panel, global development banks can lend hundreds of billions more to poor countries. G20 officials met on the proposals last week.
“The report shows a pathway to expand development bank lending dramatically,” noted LeCompte who tracks G20 policies. Earlier this month, Treasury Secretary Janet Yellen called for multilateral development banks to devise new approaches to respond to global challenges. “Development banks require reforms of their operations, practices and lending models in order to deal effectively with the current crises,” stated LeCompte.
African Catholic bishops and religious leaders met in Accra, Ghana, last month and asserted that development banks can use more capital to provide loans in times of crisis, but they lack the resources to meet 21st century challenges. In a letter to President Biden early last year, Jubilee USA Network and the US Conference of Catholic Bishops called for significantly increasing multilateral development banks lending volumes, through a mix of increasing and improving use of capital. A similar letter was sent with more than 200 religious groups echoing the need for boosting development bank capacity.
The G20 is working on processes for wealthy countries to disburse some of their pandemic emergency currency, or Special Drawing Rights to poor countries. The IMF created $650 billion in SDRs, to help countries respond to the pandemic, of which advanced economies received more than $400 billion. This month, the IMF initiated operations for a new lending window, the Resilience and Sustainability Trust, that will fund its loans with Special Drawing Rights aid that wealthy countries share.
“We need to find ways to get more funding for development banks,” shared LeCompte. “Special Drawing Rights donations from wealthy countries to development banks can help us narrow the current funding gap.”
The 3rd edition of the Finance in Common Summit (FiCS) is co-organised by the African Development Bank and the European Investment Bank and is being held from 18-20 October 2022 in Abidjan, Côte d’Ivoire as a hybrid event, allowing virtual and in person participation.