Ajay Banga: An early progress report on the World Bank president

Ajay Banga has been shaking up the World Bank in the four months since he took over as president. The former Mastercard CEO says it’s time to “write a new playbook” for the lender, one which tackles poverty and creates jobs while also addressing the “intertwined” and “perfect storm” of global crises, including widening inequality, pandemics, food insecurity, and of course, climate change. One of his first moves has been expanding the bank’s mission statement, which refers to the twin goals of alleviating poverty and boosting shared prosperity. Instead Banga, who was born in India and is the first person of color to lead the institution, wants the bank “to create a world free of poverty on a livable planet,” he wrote in his first email to staff in June. The nod to climate change — which some critics say clashes with the lender’s anti-poverty mission — represents a big win for Banga, insiders told Devex, and underscores his commitment to modernizing the 79-year-old institution. Shareholders still need to sign off on the change, which is likely to happen at the bank’s annual meetings in Marrakech, Morocco, set to start Monday. Banga heads into those meetings, his first as president, having taken up shareholders’ call to reform the bank to vastly expand its lending and focus more on “global public goods,” such as climate change and pandemic preparedness. It’s a tough gig, especially since shareholders seem reluctant to give the bank more cash to make the changes. The bank’s proposed strategy, known as the “evolution” plan, will be presented to the board of governors during the meetings. Meanwhile, the real challenge for Banga at the gathering will be building momentum for the idea of a capital increase and a large replenishment for the International Development Association, or IDA, the bank’s concessional lending arm for the poorest countries. Asked recently to describe the imprint he’d like to leave on the presidency, Banga said: “I want people to say when I’m gone that I left the bank working much better than when I got it.” So what else has Banga done so far, and can he live up to expectations? Mixed reception So far, Banga has mostly been well received by staff, insiders told Devex, speaking on the condition of anonymity. He is said to have impressed them with his strong public speaking skills and his engaged, more informal, and upfront approach to managing the institution, including telling staff to copy fewer people on emails, and taking all questions and cracking jokes at town hall meetings. However, while his predecessor, David Malpass, was keen not to ruffle staff feathers, Banga has already crossed swords with his employees thanks to a controversial back-to-work policy, which required staff to be in their respective offices four days a week. The move was met with resistance when it was announced in July, with the staff association branding it “deeply troubling” over concerns about high commuting and childcare costs. Banga has since taken steps to address these concerns by offering increased commuting and child care allowances, bank sources said. However, the policy, and the way it was announced, has reinforced staff concerns about a possible clash between Banga’s corporate background and the bank’s way of doing things. “I want people to say when I’m gone that I left the bank working much better than when I got it.” --—Ajay Banga, president, World Bank “It was top down, there was no consultation or engagement with staff. It seems to embody a very American corporate culture,” one staffer, who has worked at the institution for 10 years, told Devex. External relations Banga, who has been on an intensive global tour of countries where the bank operates since he started in June, has also been well received outside of the institution, according to experts. “Banga has brought a shift in attitude towards embracing change and being more forward leaning at the bank which is very positive,” Amy Dodd, policy director of development economics at ONE Campaign, told Devex. The bank appears to be “more engaged” on issues like climate change under Banga’s watch, she said. However, things are still moving too slowly, Dodd said. “If we are talking about reforming the World Bank as a central part of how we finance the huge climate change and development needs then we aren’t seeing concrete action at the scale and urgent pace we need to,” Dodd said. Dodd hopes the bank and its shareholders will offer a “clear path forward” at the annual meetings in Marrakech, she said. ‘Fixing the plumbing’ Banga has also started a campaign to make the bank more efficient and effective, having described the institution as “dysfunctional” during an event at the Center of Foreign Relations. He described his plan to “fix the plumbing,” which includes streamlining operational processes to speed up project approval times while also moving away from bespoke project design to more scaling and replicating of successful projects. Banga is also trying to shake up the board and to “fix things with our governance processes,” which are currently cumbersome and create too much work for bank management, he said during the CFR event. Currently the bank’s board has to approve every project, which inevitably slows things down. Banga is trying to change this, insiders told Devex. Countries have been lamenting the bank’s slowness for years, and it is one of the reasons that Chinese lending, which is relatively quick to acquire, has proved so attractive to low- and middle-income countries, according to Clemence Landers, senior policy fellow at the Center for Global Development. It is also not the first time a bank president has tried to slash red tape and speed up lending, and it won’t be easy, she added. “Streamlining won’t be a streamlined process but it’s really important to do and it’s good that Banga is signaling early on that he’s taking this seriously,” Landers said. Banga has also vowed to make the bank more focused on results rather than money spent. “Impact is our new measuring stick,” he said during the recent meeting of Group of 20 world leaders in New Delhi, India. He has also talked about reorganizing the bank — but nothing on the scale of the unpopular Jim Kim restructuring in 2015. At the Clinton Global Initiative in New York last month, Banga talked about organizing the institution's work under 5 "verticals": people, prosperity, planet, physical infrastructure, and digital, with someone across all five “who holds our feet to the fire to measure output,” Banga said. With the exception of digital, which may require a new vice presidency, Banga’s priority areas map to the bank’s existing structure and so can be accommodated without a major structural shake up, insiders told Devex. Optimizing the balance sheet Banga’s first months have seen significant progress on updating the bank’s capital adequacy policies so that it can lend more with its existing capital. To do this, the bank has proposed a range of new products to expand lending, including loan guarantees and hybrid capital. Speaking at the CFR event, Banga said these new products could boost the bank's lending capacity by $100 billion to $125 billion over a decade. However, he was also clear that the bank will need a general capital increase. But he wants to make the bank “better” before trying to make it “bigger,” he said. Charles Kenny, a senior fellow at the Center for Global Development said the new president needs to be more assertive on the need for a capital increase. “Banga has been set up with great expectations by shareholders but he’s not being given the tools to deliver,” Kenny said, before going on to add, “it’s about time he stepped out from behind the coattails of the people who appointed him and demands more money.” Billions to trillions (again) As the former CEO of MasterCard, Banga’s main calling card is his private sector experience, something which shareholders hope will enable him to make progress on unlocking international private sector financing for development. Known as the “billions to trillions” agenda under former World Bank President Jim Kim, the idea is that billions of dollars in World Bank group finance, channeled through the International Finance Corporation, for example, can unlock trillions in additional private investment. However, after years of hype, lofty plans to leverage the private sector for development have yet to yield results. Banga has talked up the need for private sector financing, but so far appears to have done little about it, bank insiders said. His main action to date has been to form a “private sector investment lab,” announced in June, comprising 15 finance chief executives. They are tasked with finding new ways for the bank to entice private investment into low- and middle-income countries. The lab met for the first time in New York last week. Talking about the lab at the CFR event, Banga said: “The idea is to pick topics off one by one and get from them what could the bank do better for them to feel reassured about the kind of risks that they cannot possibly cater to in their business models.” While the bank can certainly improve how it works with the private sector, expectations about mobilizing private capital need to be realistic, especially given current higher interest rates, Landers said. “I’m a little bit skeptical of the very lofty aspirations around the billions to trillions agenda. We need a strategy which is clear eyed about the kind of numbers which could potentially be mobilized,” she told Devex. Meanwhile, Banga’s private sector emphasis is making some civil society groups uncomfortable. “We are deeply concerned about Banga’s continued emphasis on private finance as a solution to the daunting resource gap low- and middle-income countries are facing,” Kate Donald, Oxfam International's D.C. office head, told Devex in an email. “Firstly, previous efforts by the Bank to leverage private finance have hugely under-delivered. Secondly and more importantly, over-reliance on private finance to achieve development goals and fund essential services has often exacerbated inequalities, and led to human rights abuses from unaccountable private providers,” Donald continued. Playing nice with other IFIs Another area where Banga seems to be making progress is in getting the bank to be less isolated and working more closely with other international finance institutions. For example, in September, the bank signed a memorandum of understanding with the Inter-American Development Bank to work together on addressing deforestation and the livelihoods of communities in the Amazon, digitization to improve education, and bolstering the Caribbean's resilience to natural disasters. The agreement was predated by a joint trip by Banga and IDB President Ilan Goldfajn to Peru and Jamaica. Banga says he plans to come to a similar agreement with the African Development Bank and Islamic Development Bank. “We need to be willing to partner. Otherwise, people see us as the one who’s the big gorilla in the room,” Banga said during the CFR event. “I’m trying to find ways for us to create areas where we can be, you know, two plus two equal to five,” he added.