MULTILATERAL DEVELOPMENT AGENCIES: WHAT ARE THEY?

During recent years, the importance of MULTILATERAL DEVELOPMENT AGENCIES (MDA) has grown of significantly. They are a basic component of the cooperative development system. This is so because many of the short- and mid-term challenges facing the international community raises are difficult to meet without their participation. Among their contributions, until now, the following are worth a mention (1)

  • Firstly, they favour significant regulatory activity and the creation of principles, priorities and targets in the field of development aid, which are valid for the entire international community.
  • Secondly, they encourage international dialogue and stimulate consultation processes and dialogue for resolving conflicts and processing problems that are difficult to approach within a solely bilateral framework.
  • Thirdly, they contribute their capacity for mobilising economic resources, which is greater than that of any specific donor.
  • Finally, some institutions have carried out decisive work coordinating donors, which  in many receiving countries is essential for the success of international cooperation.

There are two types of bodies of this kind: Non-finance and Finance agencies.

1. International non-finance agencies:

This group is made up of three types of institution which differ in terms of their nature and objectives: specialist agencies, funds and programmes, and institutions focusing on providing humanitarian aid. The majority of them are part of the United Nations system.

  • The specialised agencies exist to provide technical assistance to developing countries in defined, themed areas, and are financed by contributions from their member states and voluntary contributions they make to finance specific actions or the programmes agreed.
  • The programmes and funds are financed exclusively with voluntary contributions and are subject to the authority of the main decision-making body of the United Nations, the General Assembly.
  • Lastly, humanitarian aid Agencies, financed by the United Nations through voluntary contributions from the member states, which are essentially designed to support human groups in emergency situations as a result of wars or natural disasters.

The list of non-financing agencies is not limited, of course, to those operating within the United Nations system. There are a whole host of private and public agencies, which belong to different sectors or regions.

2. Multilateral Financial Institutions (MFI).

The multilateral financial institution system comprises three types of organisations: Development Banks, Special Development Funds and private sector institutions specialising in development. These institutions are connected, but have different objectives, financing methods and ways of operating.

  • The mission of the Development Banks is to provide borrower countries with the capital they need to enable them to be able to undertake development projects. These bodies therefore operate by granting loans that are financed on the capital markets, risking the important assets derived from the capital subscribed by the member countries as a guarantee mechanism.
  • In turn, the Special Funds operate through donations and soft credits, aimed at the poorest countries, and are financed mainly through donations contributed by donor countries – the replacements – normally during three-year periods, as a part of the benefits obtained by the development banks.

Lastly, all MFI have incorporated the function of support for private sector development as an important element in the economic development strategy of emerging countries. These institutions support the private sector, unlike development banks and special funds (which lend directly to governments or projects with public guarantees), and their main guarantee is their own profitability.  The most common types of instruments are credits, guarantees and participation in capital. The involvement of private investors and financial institutions in developed countries also plays an important role in financing private investment projects.

(1) José Antonio Alonso et al; “Estrategia para la cooperación española”, page 125 ss.