UZH-Logo

Maintenance Infos

The politics of loan pricing in multilateral development banks


Humphrey, Christopher (2014). The politics of loan pricing in multilateral development banks. Review of International Political Economy, 21(3):611-639.

Abstract

This paper explores the political factors that determine the price of loans offered to borrowing countries by multilateral development banks (MDBs). The reasons why MDBs set their prices at a given level and why those prices might vary from one MDB to another has received scant attention in academia, even though inexpensive loan costs are the primary reason countries borrow from MDBs. The paper explores these issues in three MDBs, each with a different composition of shareholding countries – the World Bank (controlled by wealthy non-borrowing countries), the Inter-American Development Bank (IADB) (more evenly balanced between non-borrowing and borrowing countries) and the Andean Development Corporation (CAF) (controlled by borrowing countries). Evidence indicates that MDB shareholder composition has a major impact on loan prices, in sometimes unexpected ways. While the backing of wealthy countries allows the World Bank and IADB to raise resources on capital markets more cheaply than the CAF, the interests of those same non-borrowing countries in using MDB net income make loan costs significantly higher at those MDBs – especially the World Bank – than they would be otherwise. These results provide support to an institutionalist approach in focusing on the importance of shareholding and voting rules to better understand MDB activities.

This paper explores the political factors that determine the price of loans offered to borrowing countries by multilateral development banks (MDBs). The reasons why MDBs set their prices at a given level and why those prices might vary from one MDB to another has received scant attention in academia, even though inexpensive loan costs are the primary reason countries borrow from MDBs. The paper explores these issues in three MDBs, each with a different composition of shareholding countries – the World Bank (controlled by wealthy non-borrowing countries), the Inter-American Development Bank (IADB) (more evenly balanced between non-borrowing and borrowing countries) and the Andean Development Corporation (CAF) (controlled by borrowing countries). Evidence indicates that MDB shareholder composition has a major impact on loan prices, in sometimes unexpected ways. While the backing of wealthy countries allows the World Bank and IADB to raise resources on capital markets more cheaply than the CAF, the interests of those same non-borrowing countries in using MDB net income make loan costs significantly higher at those MDBs – especially the World Bank – than they would be otherwise. These results provide support to an institutionalist approach in focusing on the importance of shareholding and voting rules to better understand MDB activities.

Citations

6 citations in Web of Science®
6 citations in Scopus®
Google Scholar™

Altmetrics

Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:06 Faculty of Arts > Institute of Political Science
Dewey Decimal Classification:320 Political science
Uncontrolled Keywords:Development, multilateral, World Bank, Inter-American Development Bank, Andean Development Corporation, institutionalist
Language:English
Date:2014
Deposited On:07 Jan 2015 12:39
Last Modified:05 Apr 2016 18:44
Publisher:Taylor & Francis Inc.
ISSN:0969-2290
Additional Information:Article was awarded the Swiss Network for International Studies Geneva Prize in 2013
Publisher DOI:https://doi.org/10.1080/09692290.2013.858365

Download

Full text not available from this repository.
View at publisher

TrendTerms

TrendTerms displays relevant terms of the abstract of this publication and related documents on a map. The terms and their relations were extracted from ZORA using word statistics. Their timelines are taken from ZORA as well. The bubble size of a term is proportional to the number of documents where the term occurs. Red, orange, yellow and green colors are used for terms that occur in the current document; red indicates high interlinkedness of a term with other terms, orange, yellow and green decreasing interlinkedness. Blue is used for terms that have a relation with the terms in this document, but occur in other documents.
You can navigate and zoom the map. Mouse-hovering a term displays its timeline, clicking it yields the associated documents.

Author Collaborations