Multilateral development banks – Strategic actors in the new economy?

145 2023, olume 26, issue 3, pp. 145–157, DOI: 10.15240/ ul/001/2023-3-009 Finance Mul ila e al de elopmen banks – S a egic ac o sin heneweconomy? Dan Cos in Niţescu1, Valen in Mu gu2, Simona Bea ice Manolache3 1 Bucha es Uni e si y o Economic S udies, Facul y o Finance and Banking, Romania, ORCID: 0000-0002-4538- 8649, [email p o ec ed]; 2 Bucha es Uni e si y o Economic S udies, Facul y o Finance and Banking, Romania, ORCID: 0000-0001-9457- 4707, [email p o ec ed] (co esponding au ho ); 3 “Duna ea de Jos” Uni e si y o Gala i, Facul y o Enginee ing and Managemen in Ag icul u e and Sus ainable De elopmen , Romania, [email p o ec ed]. Abs ac : The pape add esses he ole o mul ila e al de elopmen banks in he new economic pa adigm, buil in he con ex o mul iple c ises wi h global impac . Mul ila e al de elopmen banks, in hei capaci y as p omo e s o go e nmen s’ policies a e “in i ed/expec ed” o play a key ole in he new geopoli ical a chi ec u e, holding a compe i i e ad an age in he p o ision o inance, which is linked o he design and implemen a ion o s uc u al e o ms and p og ams o s eng hening ins i u ions con olled by go e nmen s. The pape aims o ep esen a signal ega ding he s a egic componen and he syne gies ha mul ila e al de elopmen banks can de e mine. I highligh s he ools ha mul ila e al de elopmen banks ha e o selec ing, moni o ing and suppo ing p og ams and p ojec s wi h egional and global impac . The pape desc ibes he s a e o knowledge and e iews he specialised li e a u e in he ield o mul ila e al de elopmen banks, desc ibes in e en ion channels and inancing p oduc s o mul ila e al de elopmen banks, and discusses hei impac on a Eu opean and egional le el. The concluding ema ks add ess he s a egic ole o mul ila e al de elopmen banks, hei con ibu ion o sus ainable de elopmen goals and ou line di ec ions o u u e esea ch. Keywo ds: Globalisa ion, egionalisa ion, mul ila e al de elopmen banks, g een/sus ainable/ ESG inancing, Eu opean Union. JEL Classi ica ion: F63, R11, G21, O52. APA S yle Ci a ion: Niţescu, D. C., Mu gu, V. & Manolache, S. B. (2023). Mul ila e al de elopmen banks – S a egic ac o s in he new economy? E&M Economics and Managemen , 26(3), 145–157. h ps://doi.o g/10.15240/ ul/001/2023-3-009 In oduc ion The mul i ude o c ises ha began in 2008, hei a ie y, speci ici y and e en o e lap ( inancial c isis, so e eign deb c isis in G eece, heal h c isis, p oduc ion and dis ibu ion chain c isis, ene gy c isis, clima e c isis, geopoli ical c isis, c isis o some US banking ins i u ions and Swi - ze land) ha e caused undamen al changes in he go e nance o he inancial indus y, economies and socie y. Wi hin he inancial indus y, amid egula- o y dynamics, new go e nance in ol ed he eme gence o new ins i u ions, as well as new oles and esponsibili ies o exis ing o - ganisa ions. The high deg ee o indeb edness a he global le el, he ageing o he popula- ion, he inc easing ole o echnologies, and he emphasis on sus ainable de elopmen , by g eening he inancial – banking sys ems and suppo ing he ansi ion o he “g een” E+M_3_2023_kniha.indb 145 04.09.2023 16:40:07 146 2023, olume 26, issue 3, pp. 145–157, DOI: 10.15240/ ul/001/2023-3-009 Finance economy, ep esen challenges ha mus be accommoda ed in he new policy design. In he con ex o he pos -global inancial c isis, low in e es a es and he a ailabili y o inancial esou ces allowed hei signi ican alloca ion, h ough banking sys ems and ca- pi al ma ke s. The dis ibu ion and o ien a ion o inancial esou ces o in es men s owa ds ce ain sec o s ha will ain o he esou ces and indus ies ha con ibu e o he eco- nomic g ow h a e key aspec s ha a e pa o any s a egic analysis. The pape add esses he complex issue o mul ila e al de elopmen banks (MDBs), ac- o s ha a e pa o he global inancial ecosys- em and ha ha e signi ican inancial esou ces a hei disposal. Analyses can be made ega d- ing he esponse o mul ila e al banks in he con- ex o he pos -global inancial c isis, wi hin he heal h c isis, as well as, he changes made o he mechanisms, ins umen s, objec i es ha hese ins i u ions ha e om hei s akeholde s. Howe e , one undamen al ques ion is o in e - es o he o ien a ion o new policies, o go e n- men s, academia, au ho i ies, and egula o s: RQ: How and wha mus he e be adjus ed/ comple ed, so ha he mul ila e al de elopmen banks de e mine syne gies and con ibu e si- g ni i can ly o ensu ing sus ainable economic g ow h in he new economy? I is a ques ion ha equi es esea ch, analysis, he answe being complex and he impac being e en mo e complex o measu e. This pape in es iga es he issue o mul ila - e al de elopmen banks, hei ole and mecha - nisms, and c ea es he amewo k o answe ing his ques ion. The issue o MDBs canno be add essed wi hou highligh ing some landma ks o he con- ex . The new dis ibu ion and p oduc ion chains, o ep esen added alue chains, mus be an- cho ed in he new geopoli ical and economic eali ies. Concep s such as “nea sho ing” (wi h an emphasis on geog aphical p oximi y and ac- cess by di e en means o anspo ), “ iendsho - ing,” e lec ing a geopoli ical pe spec i e, and a secu i y pe spec i e, a e included in he s a- egic assessmen o he eloca ion, ese le- men , and de elopmen o new alue chains. Global in as uc u es ( inancial, economic, elecommunica ion, anspo ) a e composed o egional in as uc u es, which mus in e- g a e mul ila e al collabo a ion mechanisms. Rele an li e a u e, as well as s udies based on empi ical analyses, emphasise he ounda- ions o he new economy, in which egions play an inc easingly p ominen ole. In he new geopoli ical con ex , he egional policy can also be app oached om he pe - spec i e o he au ho i ies’ use o a ailable esou ces, and economic and inancial policy ins umen s wi h he aim o s imula ing in es - men s, c ea ing new jobs and imp o ing li ing condi ions in a ce ain egion. Such economic policy ins umen s co e a wide a ea, anging om hose o a gene al na u e, such as he le- gal amewo k in ended o suppo de elopmen , o he economic egula ions ela ed o speci ic measu es, such as, s a e aid g an ed o compa- nies, wi h he aim o educing he gaps be ween he Membe S a es o he Eu opean Union. Simila ly, g an s and subsidies may be app o- p ia ely a ached o p ojec s o p og ams inan ced by MDBs, o he ex en ha his is an e ec i e way o co ec ing ex e nali ies o public good cha ac e is ics associa ed wi h ongoing p oj- ec s. MDBs o e go e nmen s and au ho i ies a compe i i e ad an age in p o iding inancing, co ela ed wi h he design and implemen a ion o s uc u al e o ms and ins i u ion-building p og ams adop ed by go e nmen s. The esea ch highligh s, in he i s pa , landma ks o he ele an li e a u e on he issue o MDBs. The MDBs’ in e en ion channels and inancing p oduc s a e p esen ed in he second pa and he discussions ega ding hei impac a he egional le el a e e lec ed in he hi d pa o he pape . The ou h pa summa ises he au ho s’ concluding ema ks ega ding he s a egic ole o MDBs, hei con ibu ion o sus ainable de elopmen goals and ou lines di ec ions o u u e esea ch. 1. S a eo knowledgeand e iew o specialised li e a u e Amid g owing conce n abou clima e isk, c i i- cism o he MDBs o lack o anspa ency and ailu e o p io i ise social, en i onmen al and go e nance issues has begun o su ace in e- cen yea s (Dinu & Bunea, 2022; Wang, 2019). Thus, e o s ha e been made o add ess hese issues h ough a g ea e ocus on en i onmen- al p o ec ion issues, wi h MDBs wo king o im- p o e hei clima e isk managemen sys ems. In such a con ex , he Eu opean In es men Bank has commi ed o g adually educe in es - men s in ossil uels, going as a as elimina ing hese in es men s, and he Eu opean Bank o E+M_3_2023_kniha.indb 146 04.09.2023 16:40:07 147 2023, olume 26, issue 3, pp. 145–157, DOI: 10.15240/ ul/001/2023-3-009 Finance Recons uc ion and De elopmen has gi en up coal inancing since 2018. Howe e , none o he majo de elopmen banks is ully aligned wi h he Pa is Ag eemen , wi h some o hese banks con inuing o inance coal p ojec s. The e is a la ge olume o li e a u e on he quali y o MDBs as policy ehicles o s imula- ing economic g ow h, pa icula ly in de eloping economies. MDBs’ o e consis ing o g an s and loans in p io i y sec o s, p o ision o echnical suppo , policy ad ice and p oduc knowledge shapes MDBs’ lending olumes, s a egies and ope a ions. One o MDBs’ s eng hs lies in com- bining he unc ions o inancing a below-ma ke a es, echnical assis ance and poli ical ad- ice, esea ch and con ening powe (Gu ia & Volcke , 2001). In mos cases, he inancial e ms and condi ions o MDBs loans a e mo e a ou able han hose on which many go e n- men s could bo ow om in e na ional o domes- ic capi al ma ke s (P izzon e al., 2022). To be eligible o unding om he MDB, an ope a ion mus mee he eligibili y c i e ia and policies o he espec i e MDB (Engen & P izzon, 2018). Mos MDB ope a ions a e concen a ed in he economic in as uc u e (Fau e e al., 2015). Acco ding o BenYishay and Tuns all (2011), he de elopmen o in as uc u e encou ages economic g ow h, p i a e en e p ise and em- ploymen . The p o ision o elec ici y, e icien anspo sys ems, a clean wa e supply, access o sani a ion and mode n elecommunica ions imp o e he heal h and well-being o he poo and enable hem o be e engage in he economy. O he au ho s ha e concluded ha in as uc u e se ices make a subs an ial con ibu ion o GDP, gene ally exceeding he cos o p o iding (Es ah- ani & Rami ez, 2003). To p omo e de elopmen , MDBs mus ac as ca alys s o hose go e nmen policies ha p omo e sus ainable g ow h, empha- sising inno a ion and p i a e sec o in es men in p ocesses ha , o e ime, gene a e p oduc i- i y gains ha aise he li ing s anda ds (Che san e al., 2020; S e n, 2001). MDBs can also p o ide longe - e m, highe - isk in es men s needed o suppo s uc u al change in economies whe e comme cial banks o capi al ma ke s would a oid inancing, while mobilising public and p i- a e esou ces (B occolini e al., 2021). Due o hei global o egional a ilia ion and expe ise in a eas such as clima e change, mi iga ion and global heal h, MDBs a e aken in o consi- de a ion o unding o global public goods (Kha as, 2010). The use o subsidised in e es could be jus i ied o suppo he c ea ion o new en e - p ises, wi h he condi ion ha he subsidies a e g an ed anspa en ly and used o he in- ended pu poses (Sco , 2007). I de elopmen banks channel subsidised loans o companies wi h a g ea e abili y o epay hei loans, hen he p i a e banks may become eluc an o e- spond o smalle , highe - isk companies ha a e ela i ely mo e a ec ed by c edi ma ke ailu es (Colombo e al., 2012; Dinu & Bunea, 2020). G an s and subsidies, which a e gene a- lly condi ional, may be a ached o p ojec s o p og ams inanced by he MDBs. Condi- ional lending is a ool h ough which e o ming go e n men s can publicly commi o adop ing policies and measu es, hus sending a signal o he p i a e sec o ha he e o m p og am is c edible. In addi ion, condi ional loans can also help inance he cos s o e o ms and hei ad- jus men s, helping o s eng hen poli ical sup- po o e o ms (S e n, 2001). The mix o g an s and loans is usually de e mined by he coun- y’s le el o deb isk a he han by he clien coun y (IMF, 2018); hus, he alloca ion will be in he o m o g an s o coun ies a high isk o deb c isis o al eady in deb dis ess; hal subsidies and hal c edi s o coun ies wi h a mode a e isk o deb c isis and loans o coun ies wi h a low isk o di icul ies. 2. In e en ion channels and inancingp oduc s o he mul ila e al de elopmen banks Be o e highligh ing he speci ici y o he me- chanisms and ins umen s a ailable o he mul i la e al de elopmen banks (MDBs), i is app o p ia e o co ela e a pa icula ly ele an indica o , he deg ee o indeb edness wi h he olume o loans g an ed, in acco dance wi h he e e ences o he specialised li e a u e. We will use a se o ques ions o e lec he s a egic componen o his co ela ion. RQs: Can s a es/go e nmen s s ill go in o deb ? Is he accumula ion o new deb s sus ain- able o go e nmen s, he non- inancial p i a e sec o , non- inancial co po a ions, o he popu- la ion? Who will pay he deb s? Will hese deb s be es uc u ed? How can he inancial esou ces o go e nmen s, mul ila e al banks, and ins i u ional in es o s be edi ec ed o b ing long- e m alue? Fig. 1 e lec s he e olu ion o indeb ed- ness in he pe iod 2000–2022, o a selec ion E+M_3_2023_kniha.indb 147 04.09.2023 16:40:07 148 2023, olume 26, issue 3, pp. 145–157, DOI: 10.15240/ ul/001/2023-3-009 Finance o coun ies. The “Agg ega e” ca ego y is included, which eg oups 45 ad anced and eme ging economies. Acco ding o he Bank o In e na ional Se lemen s, he e was a signi ican inc ease in he deg ee o indeb edness be ween 2008 Fig. 1: C edi olumes, 2000–2022, as % o GDP Sou ce: Bank o In e na ional Se lemen s [as ci ed in La osiè e and Cahen (2023)] Gene al go e nmen P i a enon- inancialsec o  (a + b) Non- inancialco po a ions(a) Households (b) 2000 2008 Q3–2022 2000 2008 Q3–2022 2000 2008 Q3–2022 2000 2008 Q3–2022 Uni ed S a es 48.6 66.1 112.6 135.4 168.8 153.9 64.3 72.5 78.8 71.1 n. a. n. a. Uni ed Kingdom 37.7 50.8 100.8 135.3 184.8 154.0 70.7 90.0 69.5 64.6 n. a. n. a. Japan 114.6 145.1 228.3 187.5 163.8 184.7 117.7 103.5 116.8 69.8 n. a. n. a. China 22.9 27.1 76.2 109.3 111.9 219.7 n. a. 93.9 158.2 n. a. n. a. 55.6 Eu o a ea 69.2 69.8 93.1 126 157.2 167.4 76.8 96.5 109.1 49.2 55.6 85.9 F ance 58.8 68.8 113.4 137.7 164.2 230.6 104.3 116.2 164.1 34.2 85.9 113.0 Ge many 59.3 65.8 66.6 140.6 129.9 129.2 69.4 70.1 73.4 71.2 113.0 130.5 I aly 108.9 106.2 147.2 79.3 116.5 112.2 56.6 77.5 69.6 22.6 130.5 154.4 Spain 57.8 39.7 115.4 117.9 214.2 151.7 72.5 131.6 97.4 45.4 154.4 n. a. Ne he lands 52.2 54.7 49.0 219.7 234.7 241.3 130.1 123.2 144.1 89.6 n. a. 76.8 Aus ia 66.1 68.7 82.8 127.8 142.5 148.3 83.0 90.5 98.2 45.3 76.8 96.9 Po ugal 54.2 75.6 120.1 142.8 206.3 158.1 83.9 117.4 95.4 58.8 96.9 n. a. Belgium 109.6 93.2 106.2 146.2 192.1 199.9 105.4 142.2 139.3 40.8 n. a. 53.9 Agg ega e n. a. 55.6 85.9 113.0 130.5 154.4 n. a. 76.8 96.9 n. a. 53.9 57.5 Fig. 2: Change in global deb be ween 2008 and 2022 (%) No e:*Global. Sou ce: Bank o In e na ional Se lemen s [as ci ed in La osiè e and Cahen (2023)] E+M_3_2023_kniha.indb 148 04.09.2023 16:40:08 149 2023, olume 26, issue 3, pp. 145–157, DOI: 10.15240/ ul/001/2023-3-009 Finance and 2022, as shown in Fig. 2. The inancial c ises we e based on excessi e indeb ed- ness, which c ea ed ulne abili ies ega ding he abili y o epay, he o ien a ion o inancial esou ces, he inancial suppo g an ed o sa - ings/new p ojec s. Be ween 2008 and 2022, he o e all public deb , as pe cen age o GDP, inc eased by 30.3 pp s, om 55.6% in 2008 o 85.9% o GDP in 2022. The inc ease in in- deb edness in all ca ego ies (public and p i a e) was signi ican e en be o e he heal h c isis. In his global con ex o indeb edness, com- bined wi h ha o mul iple o e lapping c ises, he design o p ojec s o de e mine syne gies a he le el o some egions, he co-in e es o p i a e esou ces, alongside he alloca ion o inancial esou ces h ough public p og ams, he long- e m o ien a ion including he sus- ainabili y componen , ep esen benchma ks o he new inancial a chi ec u e. MDBs can mobilise in es o s wi h addi ional esou ces h ough banking syndica es and o he inan- cial mechanisms. The ele an li e a u e and empi ical s udies e lec a ans o ma ion o glo- balisa ion wi h a egional ocus and oo p in , which impac s he p oduc ion chains, dis ibu- ion and inancing mechanisms. While globali- sa ion ( he p ocess o in e na ional in eg a ion) p omo es he in eg a ion o wo ld economies, egionalisa ion ( he p ocess o o ming egions) ends o oppose in eg a ion and b ing di ision. Regionalisa ion and egionalism ( he endency o c ea e egional ins i u ions and a angemen s) ind hei exp ession in he economic and secu i y ields, including he con e gen mo i- a ions owa ds bo h o ms o in eg a ion (eco- nomic and poli ical/secu i y) (Kacowicz, 1998; La yea, 2013). Th ough he p ocess o “p oximi y globali- sa ion,” go e nmen s and companies wan hei supplie s o p oduc s and aw ma e ials as close as possible o hei ac o ies in he same coun- y o egion. And in his new economic conjunc- u e, he inancing needs o go e nmen s a e mainly co e ed by he MDB h ough inancing p oduc s and p og ams adop ed by he bene i- cia y coun ies o imposed by he bene icia ies. Funding om he MDB is also suppo ed by he esea ch, policy ad ice and echnical as- sis ance o accompany p ojec and p og am implemen a ion. The sha eholde s o MDBs wi h global and egional exposu e ha e inc easingly analysed he pu pose, e ec i eness and de- mand o he o e o hese ins i u ions in o de o espond as e ec i ely as possible o he e- ali ies o he new economy. MDBs use a wide ange o inancing ins u- men s: loans, lines o c edi , g an s, echnical as- sis ance and equi y inancing. Loans a e he mos common inancing ins umen used by MDBs, ollowed by echnical assis ance, gua an ees and equi y inancing (Fau e e al., 2015). In 2020, MDBs epo ed a o al o 16,100 million USD in clima e adap a ion inance commi men s, o which 13,327 million USD, o 83%, is com- mi ed o low- and middle-income economies. Ins umen ype Fo low-income and middle-income economies Fo high-income economies To al Equi y 240 189 428 G an 2,017 1 2,018 Gua an ee 249 39 288 In es men loan 8,212 2,142 10,354 Line o c edi 59 14 72 Policy-based inancing 2,328 363 2,690 Resul s-based inancing 27 27 54 O he ins umen s 196 – 196 To al 13,327 2,773 16,100 Sou ce: MIGA.o g (2020; p. 19) Tab. 1: MDBs adap a ion inance by ype o ins umen , 2020 (USD million) E+M_3_2023_kniha.indb 149 04.09.2023 16:40:08 150 2023, olume 26, issue 3, pp. 145–157, DOI: 10.15240/ ul/001/2023-3-009 Finance The epo ed da a co espond o he inc emen- al cos s o he componen s, sub-componen s o elemen s o he suppo ed p ojec s, being conside ed inpu s o an adap a ion p ocess and a e in ended o educe ulne abili y o cli- ma e change. Tab. 1 de ails MDBs’ adap a ion inancing by ype o ins umen (yea 2020). Tab. 1 shows ha he MDBs epo ed ha 64% o he o al inancing o clima e change adap a- ion was commi ed h ough in es men loans. F om he pe spec i e o he economic sec- o s inanced by he MDBs, i is aligned wi h he goal o economic and social de elopmen o he a ge ed geog aphical a eas, wi h he i- nancing di ec ed o he economic in as uc u e ha p edomina es. Tab. 2 p esen s he inancing o he MDBs adap a ion by economic sec o s, in which 26% o channelled inancing is iden i ied mainly o he ene gy sec o , anspo and o he buil en i onmen s and in as uc u e, ollowed by 23% o ans e sal ope a ions. Regionally-o ien ed MDBs con ibu e o he suppo o coun ies, p ojec s, and economic sec o s in he espec i e geog aphical a ea. In i s capaci y as MDB, he A ican De elopmen Bank (AFDB) s imula es sus ain- able, inclusi e economic de elopmen and social p og ess in he 54 A ican egional mem- be coun ies, he eby con ibu ing o po e y educ ion. Funding mechanisms ocus on com- me cially iable companies and p ojec s in key sec o s o de elopmen as ollow. Ag icul u e and ag o-indus ies. AFDB add esses he po en ial o ag icul u e as an im- pe a i e o A ica by in es ing in la ge ag i- business i ms. The impac o he inancing con ibu es o a ou ing he eme gence o lo- cally owned ag icul u al p ocessing indus ies and s a egic pa ne ships o he inancing o s akeholde s in he alue chain. Financial ins i u ions. AFDB suppo s and de elops inancial in e media ies, combining i- nancial assis ance and expe ise o achie e Sec o g oup Fo low-income and middle-income economies Fo high-income economies To al Coas al and i e ine in as uc u e 432 – 432 C op and ood p oduc ion 960 3 963 C oss-cu ing sec o s 3,529 205 3,734 Ene gy, anspo , and o he buil en i onmen and in as uc u e 3,430 818 4,248 Financial se ices 923 1 925 Indus y, manu ac u ing and ade 145 – 145 In o ma ion and communica ions echnology 218 6 225 Ins i u ional capaci y suppo o echnical assis ance 1,186 813 1,999 O he ag icul u al and ecological esou ces 587 139 727 Wa e and was ewa e sys ems 1,916 787 2,703 To al 13,327 2,773 16,100 Sou ce: MIGA.o g (2020; p. 21) Tab. 2: MDB adap a ion inance by sec o , 2020 (USD million) E+M_3_2023_kniha.indb 150 04.09.2023 16:40:08 151 2023, olume 26, issue 3, pp. 145–157, DOI: 10.15240/ ul/001/2023-3-009 Finance he expansion and deepening o A ican inan- cial sys ems, easie access o inancial se ices and acili a ing ade g ow h o local SMEs. Indus y and se ices. AFDB’s indus i- alisa ion objec i es a e o suppo he global ade in eg a ion and egional alue chains, in- c ease co- inancing and mobilise p i a e sec o in es men , os e he eme gence o egional playe s, c ea e sus ainable jobs and inc ease p oduc i i y. Educa ion and heal h. The bank in es s in heal h sys ems ha p o ide access o qual- i y se ices o all and in heal h indus ies ha s imula e economic g ow h, echnological inno- a ion and job c ea ion. In as uc u e (ene gy, in o ma ion and communica ion echnology, anspo , wa- e and sani a ion). AFDB suppo s he ene gy sec o , om g id-connec ed p ojec s o u ili- ies, o decen alised ene gy solu ions, such as domes ic sola sys ems and mini-g ids. A special emphasis is placed on la ge p ojec s, on u ban and semi-u ban wa e supply and sewage in as uc u e. Also, MDBs o e con- cessional inancing [concessional o p e e en ial loan is c edi o e ed on e ms ha a e conside - ably mo e a ou able han hose ob ained unde ma ke condi ions. The In e na ional Mone a y Fund (IMF) calcula es he le el o concessional- i y as he di e ence be ween he nominal alue o he loan and he amoun o he discoun ed alue o he paymen s ha he deb o will make in he u u e in o de o pay he deb , exp essed as a pe cen age o he nominal alue], i.e., i- nancing om public ins i u ions (e.g., om he Eu opean Union o he Eu opean In es - men Bank – EIB p og am) and om p i a e ins i u ions (e.g., om philan h opic o ganisa- ions – NGOs). Blended inancing is p o ided by he MDB h ough ehicles ha combine comme cial and concessional inancing. An ex- ample o a mixed inancing acili y is he Na u al Capi al Financing Facili y (NCFF), a inancial ins umen es ablished by he EIB and he Eu- opean Commission, which suppo s p ojec s wi hin he Eu opean Union on biodi e si y and clima e adap a ion h ough cus omised loans and in es men s, suppo ed by speci ic gua an- ee s uc u es wi hin he EU. The NCFF com- bines he wo componen s: he inancing acili y wi h alues be ween 2 and 15 million eu os and he echnical assis ance acili y ha can o e each p ojec a g an o up o a maximum o 1 mil- lion eu os o he p epa a ion, implemen a ion and moni o ing o p ojec esul s. S a ing wi h 2023, he NCFF p og am has been eplaced by he In es EU p og am, which suppo s sus ain- able in es men , inno a ion and job c ea ion in Eu ope; i aims o igge addi ional in es - men o mo e han 372 billion eu os be ween 2021 and 2027. In hei inancing o e , he MDBs and in pa - icula , he EIB, in i s capaci y as in es men bank o he Eu opean Union, combines adi ional inancing p oduc s. EIB o e s a mix o inancing p oduc s, wi h a ce ain deg ee o sophis ica- ion, in ol ing p omo ional de elopmen banks (e.g., K edi ans al ü Wiede au bau – K W, which is Ge many’s leading de elopmen bank), in es men unds, bank syndica ions, as well as mezzanine, senio and/o equi y i- nancing. Tab. 3 ou lines he p oduc s o e ed by MDBs and hei espec i e ea u es, acco ding o he na u e o he unding sou ce (comme - cial, in e media y and di ec unding). The selec ion o speci ic ins umen s o he op imal exploi a ion o inancial esou ces and know-how held by he MDB, in he dynamic con ex o mul iple c ises, a e aspec s ha e- qui e analysis and esea ch. The MDB con- ibu es o educing he isk o ansac ions, so ha o he sou ces o capi al (mos ly p i a e) can be a ac ed o he inancial suppo o some p ojec s. F om he pe spec i e o comme cial banks, in es o s/sha eholde s emphasise alue maximisa ion, wi h hei unding coming om p i- a e o public ma ke s, based on highe expec- a ions o p o i abili y. MDBs ha e de elopmen manda es ha allow hem o ha e some lex- ibili y in p icing he inancing hey o e , sou ces and cos s o inancing. MDBs a e inanced by membe coun ies, which hold sha es, as well as h ough capi al ma ke s, h ough bond issues. Since he MDBs bene i om he so - e eign suppo o he membe coun ies, hey also implici ly bene i om he c edi a ing o he espec i e coun ies, which esul s in low inancing cos s. The MDB mus e alua e wha is he bes way o capi alise on i s own esou c- es, con ibu e o he mobilisa ion o al e na i e sou ces o inancing, by educing he isks o p ojec s, by imp o ing he s uc u e o loans, h ough subo dina ed anches o capi al, gua - an ees (Uzsoki, 2017). In he analysis ca ied ou , he inancing p oduc s o he MDB Eu opean In es men Bank (EIB) a e ep esen a i e o he Eu opean egion. 90% o he bank’s inancing is di ec ed E+M_3_2023_kniha.indb 151 04.09.2023 16:40:08 152 2023, olume 26, issue 3, pp. 145–157, DOI: 10.15240/ ul/001/2023-3-009 Finance owa ds p omo ing sus ainable g ow h and job c ea ion in Membe S a es, based on loans, gua - an ees, inancing o in es men s h ough equi y capi al and consul ing se ices, as ollows. Loans. The EIB lends o he public and p i a e sec o s, suppo ing small companies h ough local banks, including loans o inno a- i e s a -ups. Mid-cap companies (MidCaps) can ecei e di ec suppo o R&D in es men . An EIB- inanced p ojec goes h ough se en majo s ages: p oposal, e alua ion, app o al, signa u e, paymen s, moni o ing and epaymen ; he bank, also p o ides in o ma ion on he p o- cu emen o wo ks, goods and se ices equi ed o he p ojec s being inanced. The EIB inances p ojec s in mos sec o s and co e s up o 50% o he o al cos o a p ojec . Loans s a , as ap- p op ia e, om 25 million eu os, al hough in some cases, he EIB can lend smalle amoun s. Ano he way o p o ide loans is h ough he inancing ceil- ings made a ailable o local comme cial banks by he MDB. Fo example, on he Romanian banking ma ke , a he end o 2022, he Aus ian bank Rai eisen Bank (Romanian b anch) concluded Comme cial unding In e media ed unding Di ec  inancing Equi y unds Indi ec deb Hyb ids Equi y Deb Financing om: – Public de elopmen banks (e.g., om KFW o EIB); – P i a e inancial ins i u ions (e.g., om local banks o equi y unds) Po olio s uc u e whe eby a und manage aises capi al om in es o s and/ o inancial ins i u ions (such as he EIB) ha a e subsequen ly in es ed in p ojec s On lending o end bo owe by a local bank o o he in e media y inance ha was o iginally p o ided (long e m) by a di e en inancial ins i u ion such as EIB Financing ha combines deb and equi y ea u es Capi al injec ion om in es o s in e u n o owne ship sha e (based on a due diligence p ocess and assessmen o g ow h po en ial) Loans om a bank and o he inancial ins i u ion (simila o a mo gage o a ca loan) Fund manage esponsible o pipeline de elopmen and due diligence Lending decision and inancial isk emain wi h he in e media y ins i u ions Mezzanine inancing*, as an example, gi es lende abili y o con e o equi y a la e s age (p e-de ined c i e ia, ypically a de aul ) No g adual epaymen , in es o s will ecei e capi al losses/gains a sale (possible egula di idend o ma u e companies) Repaymen s consis o 1 a iable o ixed a e and 2 p incipals (amo ising g adually o bulle paymen a end) S a egy and e u n expec a ions de e mined wi h in es o s ahead o capi al commi men Con ac ual ela ionship only be ween end bo owe and in e media y (albei ge s in o med abou on-lending s uc u e) Risk o pe o mance si s un il sale (can lose money and a e anking bellow deb p o ide ; i is a „pa ien o m o capi al). In e es ma gin decided by he bank, depend on p ojec ’s isk p o ile, eno (leng h o loan) and po en ial secu i y (colla e al, e.g. p ope y o equipmen ); he “nega i e pledge” clauses in MDB loans es ic colla e al bu do no make i impossible o ind No e: *Mezzanine inancing is a hyb id o deb inancing and equi y inancing ha gi es he lende he igh o con e he deb in o an equi y s ake in he company in he e en o de aul , gene ally a e being paid by he en u e capi al i ms and o he senio c edi o s. In e ms o isk, i exis s be ween senio deb and equi y. Mezzanine deb inc eases he alue o subo dina ed deb and allows g ea e lexibili y in dealing wi h bondholde s. Sou ce: www.eib.o g Tab. 3: Funding sou ces and hei espec i e ea u es E+M_3_2023_kniha.indb 152 04.09.2023 16:40:08 153 2023, olume 26, issue 3, pp. 145–157, DOI: 10.15240/ ul/001/2023-3-009 Finance a syn he ic secu i isa ion ansac ion (syn he ic secu i isa ions a e an impo an ool o e icien capi al managemen and help o inc ease he inancing capaci y h ough isk ans e , especially in he ma ke con ex , cha ac e ised by an inc eased unce ain y and high- isk p e- miums; he s uc u e o he secu i isa ion allows he bank o elease mos o he olume o own unds and eligible deb s alloca ed o he secu- i ised po olio and hus s eng hen i s abili y o inance economic ac i i y) wi h he EIB G oup in he amoun o 523 million lei (106 million eu- os), wi h a compa a i ely low in e es wi h o he simila inancings, h ough which i will suppo he inc ease o access o inancing o small and medium-sized companies, as well as hose wi h medium capi alisa ion in Romania. The pu pose o he ansac ion was o con ibu e o inc eas- ing access o inancing and s eng hening he esilience o small and medium-sized com- panies (SMEs), as well as, hose wi h medium capi alisa ion (MidCaps) in Romania. The syn- he ic secu i isa ion ansac ion was s uc u ed on a po olio o non- e ail loans, wo h 1.52 bil- lion lei (308 million eu os). The secu i ised po olio emains on he bank’s balance shee and is di ided in o h ee syn he ic isk anches: (i) a senio anche, (ii) a mezzanine anche and (iii) a junio anche. In he ansac ion, he c edi isk o he mezzanine anche is ully ans e ed o he Eu opean In es men Fund (EIF), while he c edi isk o he senio and junio anches is assumed by he bank. The ansac ion p o ides o a h ee-yea eco e y pe iod, du ing which amo ised exposu es in he secu i ised po olio can be eplaced wi h new eligible exposu es. The majo i y sha eholde o he Eu opean In- es men Fund (EIF) is he EIB. Toge he , hese wo o ganisa ions cons i u e he EIB G oup. Wi hin he In es men Plan o Eu ope p oposed by he Eu opean Commission, he EIB G oup is pa o a mo e gene al s a egy aimed a co e - ing he conside able in es men de ici , hus elie ing in es o s o some o he isks inhe en in he p ojec s. Ano he p ojec ha bene i ed om s uc- u ed inancing om a MDB is he cons uc ion o he A inkou and Azi o powe plan s in he Re- public o Cô e d’I oi e. The inancing was g an ed in June 2019 by he AFDB, h ough wo senio loans, amoun ing o 150 million eu os, o s eng hen he powe g id in Cô e d’I oi e. The i s loan o 100 million eu os was g an ed o he cons uc ion o he A inkou powe plan , a gas combined cycle he mal plan wi h an elec ici y gene a ion capaci y o 390 mega- wa s (MW). The p ojec was de eloped in wo phases by deli e ing a 255 MW combined cycle gas u bine and a 135 MW s eam u bine plan . The o he senio loan o 50 million eu os was g an ed o he expansion o elec ici y gen- e a ion capaci y a he Azi o combined cycle gas he mal powe plan , inc easing he o al addi ional gene a ion capaci y by 253 MW. The p ojec will p o ide a o dable elec ici y o he neighbou ing coun ies. Equi y inancing. The EIB p o ides inanc- ing mainly by in es ing o co-in es ing wi h in- as uc u e- ocused in es men unds. In some cases, he bank also o e s di ec quasi-equi y inancing o suppo inno a i e companies seeking inancing o g ow h. Fo example, s a ing wi h 2020, he EU’s Inno Fin A i icial In elligence/Blockchain Technology pilo p o- g am in es s in en u e capi al unds whose s a egies a ge AI/BT ac i i ies, as well as, co- in es ing alongside equi y unds, in companies ope a ing in hese sec o s. Gua an ees. The EIB o e s gua an ees ha co e he isks o p ojec s, depending on hei size. The Ci adele p ojec , app o ed a he EIB le el in No embe 2022, suppo s, h ough a gua an ee s uc u e wo hing 190.8 million eu- os, a po olio o loans o SMEs and Mid-Caps. This suppo s he ex ension o lending o he Es- onian company Ci adele in he sec o o SMEs and medium-sized en e p ises, including wi h a ocus on p ojec s wi h clima e ac ion con en . Counselling se ices. In o de o ealise he in es men p ojec s, he EIB o e s consul - ing se ices ha co e all s ages o he p ojec cycle. The se ices a e a ailable o public and p i a e p ojec p omo e s, suppo ing p ojec de elopmen and public au ho i ies, hus imp o - ing access o inance. The bank conduc s ma - ke and sec o s udies o unde s and he needs o di e en indus ies and egions, helps clien s o design hei s a egy and hone hei skills by sha ing hei know-how and expe ience. The MDBs also ha e he ole o acili a - ing he imp o emen o managemen and consolida ion o he abso p ion o Eu opean s uc u al and in es men unds, o he eali- sa ion o he agenda o s uc u al e o ms and in es men s in he public sec o . An example o his is he Slo enia EU unds 2012–2020 P og am o 500 million eu os, signed in No- embe 2015 by he EIB wi h he Republic E+M_3_2023_kniha.indb 153 04.09.2023 16:40:08