Opinion: 3 items for the next World Bank leader’s to-do list

Another reorganization of the World Bank will be time wasted and set the institution on a path to irrelevance — instead, the new president, likely U.S. nominee Ajay Banga, can get it right by ensuring the bank leads other development finance institutions by example on ideas and transparency around impact. What happens at the World Bank when the new president takes over matters for the world’s poorest communities and for the struggle against climate change. Yet the bank has been in hot water after outgoing President David Malpass’ climate gaffe, and recent calls have been for the World Bank to do more on climate issues. Given this, many have pressed the bank to increase its lending capability. Yet the erosion of the bank’s relevance is much more profound and also true for other multilateral and regional development banks. Shifting geopolitics are weakening the legitimacy of institutions like these, which are seen as Western-dominated. To regain its weight, the World Bank should not just lend more as many commentators have advocated, but ensure it does lead the pack on ideas and execute right. The World Bank was founded in 1944 by Western powers and its first loan was to France for reconstruction. Its mandate has since evolved greatly and refocused on poverty alleviation, while the size of lending by development banks in general relative to private capital flows has shrunk compared to what it was in the aftermath of World War II. In this context, here are three dos and don’ts which Banga, a renowned executive in the financial industry, should consider when he is likely appointed to lead the World Bank. 1. Don’t reorganize the institution Past experiences suggest that reorganizations have been protracted, reduced morale among staff, and were later reversed. The last major reorganization at the World Bank took place under Jim Kim who was appointed president in 2012. Kim introduced global practices largely inspired by the organizational structure of global consulting firms. The reorganization was distractive and polarized management and staff and was reversed several years later. While another reorganization will reduce staff morale, a new senior management team could help reignite it. Indeed, the new president, like others before, can bring a new senior management team, which would have the opportunity to recalibrate the agenda ahead. That would be understandable and even desirable. 2. Rekindle bank leadership on poverty reduction and climate issues With over 15,000 staffers, the majority of them decentralized in field offices, the World Bank has to get the balance between ideas and operations right. Like in other development banks, the World Bank has communicated extensively on lending volumes in a contest over which institution lends more. These numbers however often hide a complex reality — between the announcement and what is actually disbursed — and have been plagued with greenwashing. While lending volumes are an important dimension of development finance, balancing volumes with the power of ideas has been lacking. The World Bank has been criticized for doing too little on climate and for also having a rather muted response to COVID-19. The lesser focus on ideas to anticipate challenges such as climate change could help explain these criticisms. While there are constraints to ramp up lending, due for example to environmental and social safeguards, the bank has a reservoir of talented staff that can help the institution regain its intellectual leadership on ideas around climate and poverty reduction, including on how to catalyze private sector investment. The new president should empower staff on ideas that would feed operations and not narrowly focus on lending volumes. That shift toward a “bank of ideas” could have an enormous influence on other development banks which look up to the World Bank for direction. 3. Lead the way on impact transparency The World Bank has made good progress on disclosure. The current state of affairs, however, is an information overload of documents in certain areas, such as procurement, but a dearth of information about results, without a consistent approach to measuring impact. The level of transparency and consistency needed from development banks that use taxpayers’ monies, such as the World Bank, should involve granting these very taxpayers, recipients, NGOs, and academicians access to comprehensive information about the results of the interventions of the institution. That would stimulate engagement and allow many more to weigh in on whether the World Bank’s loans have impact and are leveraged appropriately. In a world where misinformation spreads easily and geopolitics is shifting, the World Bank should lead in showing the world its spending has true impact. That would catalyze change in other development finance institutions and allow to bring a lot more support from all parties on capital increase and increase in effective lending volumes. The new president should embrace a revolution on impact transparency for the World Bank to regain trust of all its stakeholders.