The Bill & Melinda Gates Foundation, Open Society Foundations, and The Rockefeller Foundation launched a new $5 million grant fund to spur reforms in multilateral development banks, particularly to prompt them to increase their lending to low- and middle-income countries.
The new philanthropic initiative — called the Multilateral Development Bank Challenge Fund — was launched early Wednesday and aims to help MDBs “expand capacity” and “scale up lending” in LMICS, according to a press release. The launch comes amid the World Bank and International Monetary Fund annual meetings in Washington this week, along with growing calls for MDBs to do more to help countries through overlapping crises.
Though MDBs cannot provide financing on the scale that is needed, they can “evolve” beyond country lending and do more to support publicly beneficial global and regional initiatives, U.S. Treasury Secretary Janet Yellen said last week. Former U.S. Treasury Secretary Larry Summers also said during a conversation with World Bank President David Malpass on Tuesday that the bank could use its balance sheet “more aggressively.”
The foundations jointly made an initial $5.25 million pledge to the fund. They expect to issue a request for proposals to help the banks with technical assistance, operational funding, and policy analysis before the end of this year. The fund will be managed by the New Venture Fund, a public charity that promotes equity in the U.S. and in global development.
The goal of the fund is to push banks to do more and serve as a vehicle for foundations to better partner with banks in this effort, according to Mike Muldoon, the chief of staff at The Rockefeller Foundation.
Muldoon was part of an independent panel commissioned by the Group of 20 major economies that found that MDBs could potentially unleash hundreds of billions of dollars in new lending if they took on calculated new risk.
The foundation funding will be aligned around the panel’s recommendations, which the World Bank has said it is reviewing “very carefully.”
“Really the impetus behind it is to do what philanthropy can do best, which is to use our convening power, our flexible funding, and our ability to push the envelope to say there is a great set of recommendations here … And basically removing any and all barriers to getting some of these recommendations off the page and into implementation,” Muldoon told Devex in an interview.
The shareholders also could provide a more clear message to bank management that “this is the direction we want you to go,” he added.
The fund is an extension of the foundations’ ongoing engagement with MDBs’ work. The banks play a “critical role” in the global development finance system, and financing demands to address issues such as child mortality, building climate resilient agriculture, and advancing gender equality, said Kalpana Kochhar, director of development policy and finance at the Gates Foundation, in a statement.
“We are confident that the MDB Challenge Fund will surface new ideas and thinking on how to more efficiently use MDB resources without compromising financial integrity,” Kochhar said.
Shabtai Gold contributed reporting.