What Are Development Banks And What Do They Do?

(MENAFN- Swissinfo) Development banks are becoming increasingly important in light of cuts to foreign aid by Western countries such as the United States and Switzerland. But how do these banks work, and what do they achieve for the Global South? This content was published on May 1, 2026 - 12:00 9 minutes Meret Michel

Deutsch de Was sind Entwicklungsbanken und was tun sie? Original Read more: Was sind Entwicklungsbanken und was tun Français fr Les banques de développement: quel rôle et quel impact? Read more: Les banques de développement: quel rôle et quel im Español es Los bancos de desarrollo: ¿qué papel desempeñan y cuál es su impacto? Read more: Los bancos de desarrollo: ¿qué papel desempeñan y cuál es su imp

Development banks are cooperative banks set up by states. Their aim is to promote development in other countries, for instance by supporting infrastructure projects through favourable loans. Given the recent cuts in international development cooperation, they are now playing an ever more important role.

How long have development banks been around?

Development banks have long been a central component of the multilateral system. In 1944, with the Second World War still raging, delegates from 44 countries, meeting at the Bretton Woods Conference, established the International Monetary Fund (IMF) to stabilise the global economy and, alongside it, the first development bank – the International Bank for Reconstruction and Development (IBRD).

The IBRD was intended to promote reconstruction and stability in Europe after the war.

What do development banks do?

Development banks are cooperative banks established by governmentsExternal link. In addition to the capital contributed by the states as shareholders, development banks also mobilise private capital. As their shareholders are wealthy countries, the banks can obtain loans on the capital market on favourable terms. This enables them to support investment projects in countries that would have difficulty borrowing capital on the private market.

Development banks primarily support low- and middle-income countries, such as India and Indonesia. Meanwhile, the poorest countries, such as Ethiopia, can obtain interest-free loans from special funds, as described in a report by the federal technology institute ETH ZurichExternal link.

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