New Development Bank: the Emerging Markets' very own development bank

New Development Bank: the Emerging Markets' very own development bank
New Development Bank was set up by and works exclusively for Emerging Markets. / bne IntelliNews
By Ben Aris in Almaty May 17, 2023

There is a new kid on the developing banking block that is entirely owned by the leading Emerging Market (EM) countries and totally focused on investing in those markets.

In an increasingly fractured world, the Shanghai-headquartered New Development Bank (NDB, formerly known as the BRICS Development Bank) was originally established in 2014 at a meeting in Brazil’s Fortaleza, by Brazil, Russia, India and China.

The war in Ukraine has catalysed a rapid change in the make-up of global trade patterns and investment flows and has to some extent forced countries to choose sides as Western and Russian diplomats are travelling the world to drum up support for their respective sides. One of the unintended consequences of sanctions on Russia has led to EMs more actively banding together to better represent their interests in the face of these toxic geopolitical tensions.

The NDB can be seen as a product of these growing rivalries and an attempt to push back against Western domination of international financial institutions (IFIs).

Institutions such as the World Bank, its private sector offspring the International Financial Corporation (IFC), and the International Monetary Fund (IMF), are all based in the Global North and are seen as dominated by the G7 countries.

The NDB's Vice President Anil Kishora told bne IntelliNews in an exclusive interview that the bank was simply born from the leading EMs' desire to have a development bank that caters directly to their needs and is under their own control.

“The Emerging Markets have emerged and now the development process continues,” Kishora told bne IntelliNews on the sidelines of a development banking conference held in the Kazakh commercial centre of Astana.  “GDPs are rising and the people aspire to an improvement in the quality of life. It doesn't matter if they are in the Global South or Global North.” 

The NDB is apolitical and has a very specific mandate: to invest into infrastructure that is mutually beneficial for its member countries and to promote sustainable development.

“The NDB is not a political organisation. The common thread that unites our membership is the aspiration to pursue sustainable development. We are not a regional bank, but a global bank. Our articles of agreement focus on infrastructure and sustainable development but do not have things like poverty reduction, which is part of the World Bank’s mandate,” Kishora adds. 

Membership growing

The NDB was created by the BRIC countries, but Kishora says it is not a BRIC entity per se, which was why the name was changed to simply New Development Bank.  The membership has already been expanded and more countries are expected to join. The NDB has included Bangladesh, Egypt, and the United Arab Emirates (UAE) as paid up members since 2021, with Uruguay’s membership pending.

“You don't need to be a BRICS country to be a member and it doesn't matter if you are big in terms of population like China or smaller. The UAE has a relatively small economy, but it is an energy powerhouse and has a well-developed capital market. It can help members find investment opportunities for less developed members. The more disparate the members the better,” says Kishora. “It gives better synergies in their cooperation.” 

The membership looks eclectic and Kishora says there is no particular strategy to expand the bank’s membership, although it will continue to invite new members to join. But it is definitely focused on Emerging Markets and developing countries, and is specifically not another Western-run development agency.

“We don't think of ourselves as BRICS only, hence the name New Development Bank. We work with any developing, underdeveloped and emerging or frontier market country as our members desire,” says Kishora. 

The NDB is not in a rush to add new members as currently it is well capitalised and has plenty to do. The bank was set up with $50bn in seed capital and reviews its capital needs every five years.

Currently the bank has $10bn of contributed capital from its members and has raised another $30bn from eurobond issues, almost all on the London Stock Exchange (LSE).

With some $20bn of capital still available for disbursement, the bank is adequately funded and able to raise more from the international capital markets.

It also works closely with other development banks where the countries of operation overlap, such as with the Asian Development Bank and the African Finance Corporation. The NDB regularly cooperates with its peers, co-investing in projects, and Kishora says this year a fifth of its projects will be done in partnership with other multilateral development banks.

In addition to the big institutions there are a dozen more regionally focused banks such as the European Investment Bank or the European Bank for Reconstruction and Development (EBRD) with which the NDB also overlaps.

All these banks meet informally once a year to coordinate their plans; in 2023 the NDB was the chairman of the latest informal meeting on the sidelines of the World Bank Spring Meeting in Washington.

As bne IntelliNews has reported, there is an emerging BRICS bloc where the leading EMs are increasingly clubbing together to build new institutions that are entirely independent of the West and there is an intention to add new members to create a BRICS+. While the NDB could be seen as part of this, Kishora argues that the NDB's role is a beneficial addition to the Western institutions rather than a rival.

“The non-Western countries set up their own development bank. They felt that they should have voting rights over their own international financial institution. The EMs account for some 42% of the global population, but the voting rights in the major international institutions do not reflect that,” says Kishora. 

“It’s not being anti- or pro-Western. It’s just setting up your own shop which the EMs are responsible for. But once you open a shop on the same street as the others then you are part of a community and this leads naturally to cooperation,” Kishora added. 


EMs still struggle to attract investment and the very long-term nature of infrastructure investments makes attracting money from the private sector particularly difficult. Government’s can attract debt to pay for these projects too, but that can also be problematic.

Yet infrastructure projects into things such as roads and airports are economic multipliers and can have hugely positive benefits for a country.

“Part of that is to develop the transport corridors between East and West, between the developed markets and the new ones,” says Kishora. “And that starts with a first-class air link that makes a country tourist-friendly and helps growth.” 

These investment goals are something that all development banks share, regardless of the specifics of their mandate. Th NDB doesn’t see itself as a rival to the West but as a member of the “family of international development banks”. But NDB also has a unique contribution to offer.

“The West is suffering from an ageing population, slowing growth and low rates of return on investments. The question for many has become: how to ensure an income in old age? The Global South has a young population, fast growth, lots of labour and good markets. This set up suggests that basic principles need to change: that capital should flow from the Global North to the Global South to help those markets grow and to provide returns for the Global North. It's a win-win situation,” says Kishora. 

Many of the EMs have already emerged. There is still lots of work to do, but for example, China is now the world’s leader in 37 of 44 high impact technologies that will shape the world’s future, according to a recent study. The collective GDP of the emerging world has already overtaken that of the developed world in PPP terms, and is not that far behind in nominal terms either. While much of the Western world is facing a demographic decline, most of the countries in the EMs are young and growing fast.

“But [the investment flow from West to East] is not really happening. There has been a trillion invested into cryptocurrencies and NFTs, but not into emerging markets infrastructure. So it’s about basic fundamentals of investment. The NDB is a harbinger of this necessary change,” says Kishora. 

That is part of the reason the NDB was set up as the inflow of investment to the emerging world has underperformed in the last decades and the investment needs remain enormous.

The NDB cooperates with the other development banks, often co-investing on projects as well as tapping the Western capital markets for funds. Its most recent issue was the NDB’s first-ever green bond, which  raised $1.25bn and has a three-year maturity, placed on April 20. The issue was made as part of the $50 billion medium-term eurobond programme, which was registered by the bank in December 2019 as part of a programme of green investment projects.


One of the bank’s awkward issues is Russia’s membership: as a founding member it holds a 19.4% stake in the bank. So far the NDB has not been sanctioned and Kishkora says that work in Russia has halted, but that risks remains, as highlighted by the recent sanctions on Budapest-based International Investment Bank (IIB), a Soviet-era development bank, in which Russia owned a large stake.

And Russia has been much more outspoken in its objections to the dominance of the West in the development banking business than the NDB, making it a political issue.

The IMF “has become a tool to achieve US goals, including military ones”, Russian Foreign Minister Sergey Lavrov said on April 24 at the opening session of Russia’s six months as chair of the UN Security Council.

Kishora played down the Russian criticism, which he says is the Russian government position, not the view of his bank.

“The NDB is well aware of the geopolitical context. Russia was a founding member but NDB is an independent institution that caters to its members' needs. Russia has played a constructive role so there has been no impact on the NDB,” says Kishora.  “Russia is up to date with paying up on all its loans. It doesn't hold a very large share… we fund the projects of our member countries. The NDB complies with sanctions. So where is the problem?”

The dollar's exorbitant priviliege

During a recent trip to China on April 13, Brazilian President Luiz Inacio Lula da Silva said the NDB should consider an alternative to the dollar in payments between the BRICS countries (Brazil, Russia, India, China and South Africa).

"It’s difficult and inconvenient for many," Lula conceded, adding that there should be no rush in this matter.

Lula was addressing his former protégé and ex-Brazilian president Dilma Rousseff, who was elected the head of the NDB the day before. Lula called on her to "turn the BRICS Bank into the main investment bank for developing countries".

There is growing momentum among the countries of the Global South to de-dollarise and settle their mutual trade deals in local currency. The US decision to weaponise the dollar in its fight with Russia has unsettled central bankers around the world, and especially in the EMs, which don't have the close ties to the US that the rest of the G7 enjoy. They see their own reserves and trade as at risk.

Dollars still dominate global trade, used in 85% of all transactions, and will do for the foreseeable future. But its share in reserves is already falling slowly and at a regional level countries such as Russia and China have already largely eradicated dollars in trade deals and replaced it with yuan.

After the Bretton Woods agreement that established the basis of fiat currencies, guaranteeing countries would exchange dollars, and ending the gold standard, the International Monetary Fund (IMF) was created partly to underwrite the use of the dollar in mutual trade. In theory the NDB could play the same role and at its founding a liquidity mechanism called the Contingent Reserve Arrangement to support members struggling with payments was created, but Kishora says that de-dollaraisation is not part of the bank’s mandate.

“Our currency of trade is mainly the dollar, but we work in any currency that our members want to use, such as the yuan or Swiss franc. However, dollars makes up about 75% of our transactions,” says Kishora. “There is nothing in our charter about currency or support of alternatives to the dollar and in that we are different from the IMF. We are a multilateral development bank, not a global financial institution. There is a big difference.”

One of the NDB’s goals is to develop local capital markets and promote local currency securities such as bond issues, but that is more of a development issue than a strategic goal as the development of local capital markets creates more resources for local companies seeking investment capital to tap.