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I H S A N U G U R D E L I K A N L I , TO D O R D I M I T R O V, R O E N A A G O L L I
MULTIL ATER AL
DEVELOPMENT
BANK S
Governanc e and Financ e
Multilateral Development Banks
Ihsan Ugur Delikanli • Todor Dimitrov
Roena Agolli
Multilateral
Development Banks
Governance and Finance
Ihsan Ugur Delikanli Todor Dimitrov
Istanbul, Turkey Thessaloniki, Greece
Roena Agolli
Thessaloniki, Greece
ISBN 978-3-319-91523-4 ISBN 978-3-319-91524-1 (eBook)

https://doi.org/10.1007/978-3-319-91524-1
Library of Congress Control Number: 2018942751
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For our families and children as well as all children of the world.
Foreword
During several decades the benefits of multilateralism were taken for granted.
This is no longer the case. In this context, Multilateral Development Banks:
Governance and Finance is a very timely and valuable book that offers a rich
description of Multilateral Development Banks (MDBs), an assessment of
their roles, and a constructive critique with recommendations to enhance
their contribution to the development agenda.
A useful taxonomy of 25 MDBs is proposed and applied for the analysis of
these banks as a whole and by type of MDBs. Having worked for the three
different types of MDBs considered in the book, I can attest that this classifi-
cation makes sense.
This volume is an important contribution to the qualitative and quantita-
tive knowledge about MDBs practices and standards. It addresses misconcep-
tions concerning MDBs, provides a comprehensive review of governance and
funding issues that constrain MDBs’ effectiveness, and suggests means to
overcome those constraints.
It is to be noted that Chap. 3 provides an adequate presentation of the
important issue of additionality, whereas Chap. 5 presents a novel system of
MDB-specific governance principles, which is used in an assessment and in
identifying areas for improvement. It includes the standards developed for
independent evaluation by the MDBs’ Evaluation Cooperation Group
(ECG), considering also other areas relevant for MDBs.
The book concludes with a discussion on the future of MDBs, providing
ideas and suggestions for addressing complex problems, highlighting the
importance of improving governance and strengthening independent
vii
viii Foreword
evaluation, as well as the engagement with stakeholders and the promotion of

synergies across MDBs. Thus it points out ways in which the MDBs can
become more effective and efficient agents of change, playing a key role in
shaping, implementing, and evaluating the development agenda.
Osvaldo Néstor Feinstein

Former manager and advisor at the
World Bank, former senior evaluator and
consultant for IFAD, former senior consultant
with IADB, AfDB, CDB, and several UN and
bilateral development agencies
Preface
Multilateral Development Banks: Governance and Finance is a novel, theory-

inspired, and practice-based guide to the essence and prospects of Multilateral
Development Banks (MDBs). It provides a comprehensive overview regard-
ing virtually all MDBs, involved in lending for international socioeconomic
development. With seven stand-alone chapters, the book represents insights
on a wide range of often misconceived and unattended MDB aspects.
The analysis covers 25 MDBs worldwide to offer unprecedented under-
standing to a broad range of audiences who would be interested in the com-
plexity and the prospects of these institutions. The MDBs are covered as a
family and by groups, rather than presenting each one in detail. The grouping
is based on geographical lending outreach and has three categories of MDBs:
Global, Regional, and Sub-regional.
Unlike similar books and articles, which treat MDBs as banks, the authors
offer a novel perspective by addressing the obscured specifics of multilateral
lending institutions, revealing multiple aspects of their nature and operations,
based on their unique self-regulation and governance. MDBs are addressed in
a forward-looking manner, toward “knowledge banks”, “change agents”, and
even “benchmark setters”, diving into the very essence of the often elusive
additionality (offering of a value that is additional to what is already available
in the market). The variable elements of additionality make an MDB distin-
guished from any other institutions or banks.
The book’s novelty and insight draw on relevant comparisons of the three
regional groups of MDBs, with a focus on their governance and finance, to
outline relative comparative advantages, among other key features. While criti-
cism and reforms were addressed in the past, the book presents the importance
of phased incremental elevations through an evidence-based advancement of
ix
x Preface
values, human capital, and governance. This approach is in contrast with

already known polar ad hoc pressures that led to various stop-and-go reform
campaigns, associated with severe side effects such as “reform fatigue” and staff
disengagement.
The book reflects on the key role of most MDBs in inspiring and advancing
sustainable economic development through the transfer of knowledge and
funding by addressing key global challenges. It provides a constructive elabo-
ration on issues of recent criticism, such as opaque governance, domination
by “donor” countries, controversial requirements and operations, and lack of
inclusiveness. The bold calls for institutional reforms and the recent geopoliti-
cal and social turmoil in the world that have challenged multilateralism for
development (among other post-war values) make the book timely and rele-
vant, with a prospect to remain such for years ahead. Therefore, it is expected
to constructively enhance the ongoing debate, involving a growing network of
stakeholders, directly or indirectly, dealing with MDBs and their agenda (e.g.
OECD and G20).
Originated by a team with experience at a relatively small MDB (the Black
Sea Trade and Development Bank), the book presents a neutral position,
backed by years of diverse experiences at/with numerous MDBs, providing a
hands-on insider perspective. Utilizing their wide networks, as well as insight
from working closely with peer MDBs, the authors offer analysis on a number
of unexplored aspects, drawing from vast ex-post evaluation resources, reflect-
ing the wealth of lessons learned at most MDBs. This makes the book a unique
and hopefully inspiring source of knowledge on a wide range of standards and
practices, for the benefit of practitioners, consultants, government officials,
borrowers, and researchers.
The book is expected to be of particular interest and use to a very wide
range of multilateral as well as bilateral organizations and stakeholders con-
cerned with development. It should also become a key asset to academics and
students with an interest in international finance and development. It may
also be useful to members of the general public interested in the complex
geopolitical context of international development and multilateralism, as they
have never been more important, yet challenged. It is clear that rapid transfor-
mations are taking place toward political and social upheavals, driven by pop-
ulism and nationalism, triggering unprecedented debate about the challenges
of poverty, inequality, peace, and sustainability. This makes the MDBs par-
ticularly relevant and important, at a time when they are pressed to deliver
deeper and wider, faster and better, with even more limited resources.
The opinions and positions expressed in the book belong to the authors
and not to the institutions they are associated with. The authors take
Preface
xi
r esponsibility for all errors and omissions and acknowledge the importance of
contributions by many other people.
The three authors worked jointly on the book upon the idea of Ihsan Ugur
Delikanli. Their primary contribution is as follows:
Ihsan Ugur Delikanli: Chaps. 2, 3, 4, 6, 7.

Todor Dimitrov: Chaps. 1, 2, 3, 5, 6, 7, editing.
Roena Agolli: Chap. 2, index.
Credit for photograph of Todor Dimitrov (back flap): Kalina Dimitrova.
Istanbul, Turkey Ihsan Ugur Delikanli

Contents
1 Introduction 1
2 The Nature of MDBs 9
3 Financial Dynamics 33
4 Current Governance 89
5 Principles of Sound Governance 123
6 Clients’ Perspective 163
7 The Future 177
Glossary 193
Index 203
xiii
List of Figures
Fig. 2.1 Unilateral and multilateral principles 23

Fig. 2.2 Multilateral delegation 24
Fig. 3.1 Subscribed and paid in capital, global MDBs (USD, billion).
Source: Authors’ compilation from MDBs’ annual reports 39
Fig. 3.2 Subscribed and paid in capital, regional MDBs (USD, billion).
Fig. 3.3 Subscribed and paid in capital, sub-regional MDBs (USD, billion).
Fig. 3.4 Equity and paid in capital, global MDBs (USD, billion).
Fig. 3.5 Equity and paid in capital, regional MDBs (USD, billion).
Fig. 3.6 Equity and paid-in capital, sub-regional MDBs (USD, billion).
Fig. 3.7 Total borrowings (USD, billion). Source: Authors’ compilation
from MDBs’ annual reports 44
Fig. 3.8 Gearing ratio (Borrowings + Total equity)/(Loans + Guarantees +
Undisbursed commitments). Source: Authors’ compilation from
MDBs’ annual reports 45
Fig. 3.9 Total assets (USD, billion). Source: Authors’ compilation from
Fig. 3.10 Liquidity asset ratio (Cash and due from banks + Treasury assets)/
Total assets (%). Source: Authors’ compilation from MDBs’
annual reports 47
Fig. 3.11 Liquidity borrowing ratio (Cash and due from banks + Treasury
assets)/Borrowings (%). Source: Authors’ compilation from
xv
xvi List of Figures
Fig. 3.12 Total loans, debt securities and equity investments (USD, billion).
Fig. 3.13 Leverage ratio (%). Source: Authors’ compilation from MDBs’
annual reports 53
Fig. 3.14 Gross income from lending (%). Source: Authors’ compilation
Fig. 3.15 Return on equity (RoE, %). Source: Authors’ compilation from
Fig. 3.16 Administrative costs ratio (Administrative Costs/Gross Income
from Lending and Treasury, %). Source: Authors’ compilation
Fig. 4.1 Governance structure 91
Fig. 6.1 Eligibility and concept review 169
Fig. 6.2 Appraisal and due diligence 170
List of Tables
Table 2.1 Classification of MDBs in terms of regional coverage by lending 10

Table 2.2 Why MDBs are different from banks 28
Table 2.3 MDBs—weighting the M, D, and B 30
Table 3.1 MDBs’ credit ratings and risk weights 54
Table 4.1 Quorum and decision-making, Board of Governors 95
Table 4.2 Voting power of G7 and G20 countries at MDBs 97
Table 4.3 Composition of Board of Directors 102
Table 4.4 Requirements for quorum and decision-making at Board of
Directors’ meetings 104
Table 4.5 Selection of president 109
Table 4.6 Examples of MDB’s committees 113
Table 5.1 MDBs’ adherence to the seven governance principles 157
Table 6.1 Phases in the financing cycle 164
Table 7.1 MDBs’ safeguards 187
xvii
1
Introduction
Rationale
Address Misconceptions, Clarify the Essence of MDBs
Despite existing publications and public discourse, the role, governance, and
potential of Multilateral Development Banks (MDBs) remain obscured by
fragmented and often inaccurate information. These institutions remain
poorly understood, implying the need for an open, comprehensive, and bal-
anced overview, going beyond history and data.
This book sheds light on a number of misconceptions regarding MDBs,
widely spread not only among the public, but even among MDBs’ stakehold-
ers such as counterparts, shareholders, managers, and staff. These misconcep-
tions include but are not limited to the following: (1) MDBs are UN agencies;
(2) MDBs are aid/grant/subsidy funds; (3) all MDBs are subsidiaries of the
World Bank; (4) MDBs are just international commercial/investment banks;
and (5) MDBs provide a key share of financing in some countries but there
are no tangible results.
Chapters 3, 4, and 5 (Financial Dynamics, Current Governance, and
Governance Principles) constitute the core of the book, providing insight for
the bumpy road ahead, outlined at the concluding Chap. 7 (The Future).
These chapters provide a comprehensive review of multiple governance and
funding issues that constrain MDBs’ effectiveness, presenting seven novel
governance principles (Chap. 5), followed by an assessment of reality against
those principles.
© The Author(s) 2018 1

I. U. Delikanli et al., Multilateral Development Banks,
https://doi.org/10.1007/978-3-319-91524-1_1
2 I. U. Delikanli et al.
Compare Global, Regional, and Sub-regional MDBs
The book provides an overview of what the MDBs are often mistakenly
assumed to be, in order to reveal and clarify their distinct nature and modus
operandi, recent evolutions, toward future perspectives, covering all essential
aspects, including the most recent challenges to institutional governance and
finance. This is a timely and forward-looking response to the aggressive pres-
sures on multilateralism and development, fuelled by contemporary tides of
populism, nationalism, and protectionism, already affecting many MDBs and
other international institutions.
Methodology
The book has a specific focus on recent waves of criticism and discontent
with governance and results, both legitimate and ill-informed, that triggered
ad hoc reforms, as well as a proliferation of “new”, “green, lean, and clean”
MDBs. The recent motion of creating “alternative” new MDBs is subject of
a balanced assessment of pros and cons, with the ultimate objective of sug-
gesting feasible improvements in both the “old” and the “new” generations
of MDBs.
Approach
The book covers 25—virtually all—MDBs. While a reference to particular

cases is used along with specific individual examples, the important institu-
tional issues are approached in a forward-looking perspective, dealing with
and comparing three groups of MDBs—Global, Regional, and Sub-regional—
revealing their similarities, differences, strengths, and weaknesses. The goal of
grouping and comparing is to perform “MDB family” mapping in order to
suggest possible enhancements that are relevant for each respective group, as
individual MDB approach would be less meaningful or efficient. Another
goal is to make MDBs more aware of comparative advantages and potential
to improve, toward becoming more synergetic and relevant to the pressing
regional and global challenges of the future.
The methodology used in reviewing the 25 MDBs consists of an interdisci-
plinary process, integrating a number of interrelated components, outlined
below. The issues covered by each chapter are addressed by extensive data
reviews, as well as several rounds of peer-to-peer anonymous direct interviews
Introduction 3
with key MDB staff and management, focusing on the departments involved
with institutional learning and memory—the Independent Evaluation depart-
ments. The analysis is also supplemented by interviews with key MDB bor-
rowers, to reflect their perspective. Most interviews were conducted in the
course of several years, within an ongoing MDB comparative research, cover-
ing 260 respondents from 19 MDBs.
The methodology, along with the main messages of each chapter, should
remain informative and relevant in the years to come, as the focus is on
how to improve MDBs’ functioning, looking at the cross-cutting groups
and issues. Hence, it is aimed at providing practice-based inspiration for
further debate regarding the MDB evolution, with a particular attention
on the need and obstacles to enhance old-fashion institutional governance,
in the light of recent efforts of last generation MDBs to challenge the more
traditional “old” development institutions (perceived as inefficient and
donor-dominated).
Overall, the methodology constitutes an interdisciplinary mapping pro-
cess, catalyzing insights from extensive reviews and discussions, involving the
following key elements: (1) MDB categorization based on geographical out-
reach; (2) development and application of MDB-specific governance assess-
ment framework (principles); (3) an assessment of the outreach and impact of
MDBs, based on key ex-post evaluation results; (4) a financial assessment
framework for MDBs, addressing inherent subsidies and privileges as unrec-
ognized risk mitigation instrument; and (5) evaluating the accessibility of
MDBs to borrowers through a borrower-based perspective. Details on the
approach regarding these five elements are presented below.
Unlike existing research that treats MDBs as banks, hereby they are
addressed by revealing the institutional aspects of their operations, going well
beyond the bank concept—toward high-profile self-regulated knowledge
banks, change agents, and franchise-based standard setters. These concepts
involve relevant comparisons of the three regional groups of MDBs, with a
focus on a feasible and sustainable governance-centered, rather than ad hoc,
reform agenda. The goal is to improve all or most MDBs through an evidence-
based advancement of values, management, staff, and governance, rather than
already known polar pressures that resulted in various stop-and-go reform
campaigns, triggering alarming staff disengagement and overall reform fatigue
across most MDBs.
MDB Categorization
All MDBs are grouped by their regional coverage. This facilitates the process
of understanding and improving different institutions, based on common
denominators rather than extensive piecemeal approach. It is instrumental to
demonstrate the similarities and differences among groups, as well as key
issues and shortcomings without criticizing a particular individual institution.
The ultimate goal is to offer feasible improvements that acknowledge MDBs
as complex related institutions, providing additional value beyond mere
finance, unlike conventional banks. This mainly refers to the provision of
knowledge and public goods—hence arguing that MDBs are primarily knowl-
edge banks and role models that should be treated very differently from any
other financial institutions.
The categorization generally reflects the MDBs’ size and ambition and is
defined as follows:
1. Global MDBs lend to several continents, covering those almost entirely;
2. Regional MDBs lend to just one continent, covering it almost entirely;
3. Sub-regional MDBs focus on a specific region that is smaller than a
continent.
Governance Assessment Framework
The very specific governance systems utilized by MDBs deserve central atten-
tion. For this reason, Chap. 4, dedicated to MDBs’ Current Governance,
followed by Chap. 5, which offers principles to elevate governance, are of
specific importance. The latter chapter is based on a methodology involving a
thorough process of reviewing and assessing respective governance systems
against a set of principles, developed by the authors. This is done at group
levels rather than at each MDB, but outlier cases are also addressed as a source
of insight, from both negative (risk) and positive (potential) perspectives.
Given the extensive experience and communication (including dedicated
interviews over the past four years) of the authors in dealing with those gov-
ernance systems within the MDBs, a particular attention is devoted to the less
obvious but very important details and practices of implementing the gover-
nance rules, as they have substantial implications, rarely understood. The
analysis is steered by a review of critical post evaluations at corporate/
institutional levels, in order to derive common issues.
Introduction 5
Chapter 5 (Governance Principles) presents the development and applica-

tion of a unique governance assessment framework, specifically tailored to
MDBs. This involves MDB-customized institutional matrices, addressing the
role of two couples: formal/visible vs. informal/invisible practices at all levels
measured against seven core principles. Hereby an outlier assessment is also
instrumental in revealing and understanding borderline governance practices
that could inspire improvements, with due respect of existing constraints and
feasibility considerations such as the inherent complexity and inertia in mul-
tilateral dialogue.
Financial Assessments
The application of standard instruments of financial analysis (Chap. 3:

Financial Dynamics) is enhanced by applying an assessment framework for
the MDBs’ financial performance, covering the complexity of their unique
and poorly understood capital structure, risk mitigation, and institutional
nature. This highlights the impact of important aspects such as leverage-based
pricing and respective additionality-based premiums, inherent subsidies, and
privileges, as well as linking financial resources with institutional safeguards
and know-how, especially in a time when the latter is in the lead of provid-
ing a competitive edge. In this light, the financial resources, leverage and actual
performance, are assessed in terms of their role and potential for multiplier
effects, as the empirical evidence suggests that even the MDBs’ combined
financing is a tiny fraction of borrowing countries’ GDP (under 1%). In other
words, the concepts of additionality and catalyzing remain in the lead.
Borrower Perspective
The important perspective of the borrowers is covered by Chap. 6, revealing

the various layers of the typical operational and approval cycle, often causing
frustration among applicants. The ultimate goal is to help MDBs become
more inclusive and user-friendly. The analysis is based on a mix of data sources,
such as MDBs’ policies, ex-post evaluation reports/studies, and interviews
with actual and potential clients, as well as key front office staff—covering a
period of 15 years and at least two MDBs in each group of institutions (Global,
Regional, Sub-regional).
Structure of the Book

The book consists of seven chapters: 1. Introduction; 2. The Nature of MDBs;
3. Financial Dynamics; 4. Current Governance; 5. Principles of Sound
Governance; 6. Clients’ Perspective; 7. The Future. The chapters are related and
naturally flow in that order. However, they also represent a stand-alone over-
view of the respective subjects. While the first two chapters are more descrip-
tive, the other five are more analytical and forward-looking, balancing
information with insight.
Chapter 2 contextualizes MDBs in terms of their institutional emergence,
role, and evolution, starting with the broader issues of roots, categorization,
and challenges. It groups the 25 MDBs into Global, Regional, and Sub-
regional, to facilitate the scope of analysis. The nature of MDBs as complex
public institutions is outlined, revealing common misconceptions. The review
delves into a number of specific MDB conceptual features that are often
poorly presented and understood—from the wider issues of multilateralism
and development to the more specific political and extraterritorial dimen-
sions, moving toward knowledge bank concepts.
Chapter 3 presents the complexity of MDB finance, revealing major differ-
ences with other institutions that may look similar, as well as across the three
MDB groups. It covers capital formation, deployment and structure, borrow-
ing and catalytic capacity, lending outreach and terms, as well as the impor-
tance of inherent subsidies, safeguards, additionality, credit ratings, and so on.
While this chapter is inevitably more technical, it is written so that the wider
public and policymakers can also grasp the key messages, if not all of the
addressed financial metrics and concepts.
Chapter 4 goes beyond the mere description of typical MDB governance
systems, as this issue is at the core of most MDB challenges and future evolu-
tion. It looks at multiple written and unwritten governance elements, identi-
fying shortcomings and ill-based reforms that were often counterproductive,
with the goal to highlight the way ahead.
Chapter 5 presents a set of novel MDB governance principles, developed
by the authors. They cover virtually all aspects of governance, from the need
to distinguish several Board roles and capacity, to the overshadowed impor-
tance of attracting, motivating, and nurturing the right mix of dedicated
human capital. An assessment of governance against the new principles is also
offered, to inspire possible improvements.
Chapter 6 is a reflection on the implications arising from key issues
addressed so far from a very practical borrower perspective. In addition to an
Introduction 7
overview of the eligibility and application process, it also reveals issues of frus-
tration and opacity that stem from an insufficient understanding of MDBs’
complexity. Ultimately, the chapter aims at helping potential and actual cli-
ents, with a focus on private sector borrowers, to navigate the unchartered
waters of MDB approval and project cycles.
The concluding Chap. 7 presents the actual and potential role of MDBs as
agents of global change, as institutions with sustainable impact, beyond the
mere objects of financing. This deals with their raison d’être and is built upon
the main messages and conclusions of earlier chapters, suggesting how MDBs
can better play this important role as a system of related institutions. Naturally,
MDBs as knowledge institutions are addressed in relation to the independent
evaluation function and the wealth of lessons registered, but not necessarily
learned. The focus is on how MDBs may further excel in providing first-rank
international leadership in high standards of norms and practices, across sec-
tors and countries, beyond ideologies and politics—a worthwhile challenge.
The chapter looks openly into the future of MDBs, in a global context, with
direct reference to technological advancements and the UN Sustainable
Development Goals, among other factors. It is a forward-looking reflection of
all other chapters, suggesting a feasible and comprehensive reform agenda
beyond the traps of the past. Key highlights include the need to elevate gov-
ernance, improve the use of independent evaluation, enhance engagement
with stakeholders, as well as ensure synergies across MDBs at a time of unprec-
edented technological and social shifts with high impact.
2
The Nature of MDBs
Introduction and Categorization

The chapter analyses the nature of Multilateral Development Banks (MDBs),
revealing what makes these institutions specific and different from others. The
important institutional issues are approached in a forward-looking perspec-
tive, dealing with and comparing three groups—Global, Regional, and
Sub-regional—revealing similarities, differences, and some comparative
advantages with the clear notion that regarding their categorization, they all
belong to a complex system of public institutions. The categorization helps to
perform MDB family mapping, allowing enhancements that are relevant for
each respective group, as individual MDB approach would be less meaningful
or efficient. A key goal is to reveal comparative advantages and potential to
improve, toward becoming more synergetic and relevant to the pressing
regional and global challenges of the future.
All MDBs are categorized in respect of their regional coverage. This facili-
tates the process of understanding similarities and differences among them,
based on common denominators rather than extensive individual assessments.
The regional classification generally reflects the MDBs’ size and ambition and
is defined as follows:
1. Global MDBs lend to several continents, covering those almost entirely;
2. Regional MDBs lend to just one continent, covering it almost entirely;
3. Sub-regional MDBs focus on a specific region that is smaller than a
continent.
© The Author(s) 2018 9

I. U. Delikanli et al., Multilateral Development Banks,
https://doi.org/10.1007/978-3-319-91524-1_2
This categorization is relative, as there are overlapping and border cases,

arising from the dynamic nature of MDBs. While most MDBs naturally fall
in those three categories, particularly those who directly target a continent
such as the Asian Development Bank (AsDB) and African Development Bank
(AfDB), there are some outlier institutions that are quite specific, targeting
countries that are not necessarily belonging to one region/continent. The fluid
nature of the classification means that its key role is to facilitate the analysis
rather than push MDBs into watertight boundaries.
The MDBs’ categorization, based on geographical lending outreach, is pre-
sented in Table 2.1.
Table 2.1 Classification of MDBs in terms of regional coverage by lending

Bank/Regional
coverage Established Full name
Global
World Bank
IBRD 1945 International Bank for Reconstruction and
Development
IFC 1956 International Finance Corporation
IDA 1960 International Development Association
IFAD 1977 International Fund for Agricultural Development
Regional
CEDB 1956 Council of Europe Development Bank
EIB 1958 European Investment Bank
IDB 1959 Inter-American Development Bank
AfDB 1964 African Development Bank
AsDB 1966 Asian Development Bank
IsDB 1975 Islamic Development Bank
EBRD 1991 European Bank for Reconstruction and Development
NDB 2014 New Development Bank (formerly referred to as the
BRICS Development Bank)
AIIB 2015 Asian Infrastructure Investment Bank
Sub-regional
CABEI 1960 Central American Bank for Economic Integration
EADB 1967 East African Development Bank
CDB 1969 Caribbean Development Bank
CAF 1970 Development Bank of Latin America (formerly
referred to as the Corporación Andina de Fomento)
IIB 1970 International Investment Bank
BADEA 1973 Arab Bank for Economic Development in Africa
WADB 1973 West African Development Bank
NIB 1976 Nordic Investment Bank
PTA 1985 Eastern and Southern African Trade and Development
Bank or the Preferential Trade Area Bank
BSTDB 1997 Black Sea Trade and Development Bank
ETDB 2005 Economic Cooperation Organization Trade and
Development Bank
EDB 2006 Eurasian Development Bank
Source: Authors’ compilation
The Nature of MDBs 11
It is noteworthy that this classification is not absolute, as there are several

overlapping and border cases, often arising from the dynamic nature of
MDBs. While some MDBs such as the AsDB and AfDB directly fall into the
regional group, some outlier institutions are not so easy to categorize. Good
examples of outlier cases are the European Bank for Development and
Reconstruction (EBRD), the European Investment Bank (EIB), the Islamic
Development Bank (IsDB), and the New Development Bank (NDB):
1. EBRD’s mandate focuses on the former communist countries but since

recently it also covers Turkey, Greece, and even parts of Africa. Due to the
wide scale/coverage that is deemed equivalent to a continent, EBRD falls
in the Regional group.
2. Likewise, the EIB, the infrastructure finance arm of the EU, is focused on
the EU member states but also invests elsewhere—in African, Pacific, and
Caribbean countries. It is also noteworthy that the EIB, like a few other
MDBs, is not exactly a “Development” Bank, except in the recently origi-
nated activities outside the EU. With all these in mind, the EIB also
belongs to the Regional group, as its geographical scope is considered
equivalent to a continental coverage.
3. The IsDB invests in many countries across the world and is therefore not
focused on a specific region, but still comes short in having a global cover-
age in terms of two or more entire continents and therefore falls in the
Regional group as well.
4. The NDB covers just a few countries (BRICS—Brazil, Russia, India,
China, and South Africa) across different continents. However, as those
countries are particularly large and do not fit a specific sub-region, it also
falls in the Regional group.
These examples illustrate the overlapping and relative nature of the categoriza-
tion, implying that it is utilized to facilitate the analysis rather than to assume
absolute boundaries across the three groups.
The Bretton Woods Institutions

By the late 1930s and early 1940s, the concept of economic development in
the contemporary sense began to emerge. The economic and social needs of
the post-war world were primarily addressed by the prominent British
economist John Maynard Keynes, inspiring policy makers. Harry Dexter
White, an American economist, was a key figure in envisioning the set of
institutions that had to be created over the visions of John Maynard Keynes.
In 1942, White paved the path toward the fundamentals of a development
policy as he prepared a proposal for a “United Nations Stabilization Fund and
a Bank for Reconstruction and Development of the United and Associated
Nations” which would provide the basis for post-war international monetary
reform (Anderson-Gold 2011).
White considered the Keynes’ principles from a more general perspective
and used them in the US proposal to suggest national and international poli-
cies that would (1) foster economic growth by encouraging international eco-
nomic and monetary cooperation through the stabilization and regulation of
the national systems of exchange rates and (2) encourage economic and social
security in war-torn areas of Europe through rebuilding economic and finan-
cial infrastructure throughout massive supply of capital that will be needed for
reconstruction, relief, and economic recovery (Stiglitz 2003).
The proposal called for the creation of two related institutions with
resources, powers, and structure adequate to meet the major post-war needs.
For international currency matters, the International Monetary Fund (IMF)
was to be established, which would recommend and enforce rules to install a
system of convertibility of currencies and ensure a degree of exchange-rate
stability—indispensable for a multilateral system of payments and trade. For
assisting the economic development and reconstruction of post-war Europe,
the International Bank for Reconstruction and Development (IBRD) was to
be established—broadly recognized as the World Bank, with the purpose of
providing funding and technical assistance for the economic reconstruction of
war-ravaged areas of Europe, mainly by encouraging capital inflows into the
region from surplus countries (Lipscy 2015).
In 1944, the United Nations Monetary and Financial Conference took
place at the Mount Washington Hotel in Bretton Woods, New Hampshire.
The broadly referred to as Bretton Woods Conference agreed to regulate the
international monetary and financial problems after the conclusion of the
World War II, and sealed the negotiation for the establishment of the World
Bank and the IMF. The agreement is a milestone toward more orderly inter-
national relations and multilateralism on a global scale and toward having
agencies predominantly adapted to maintain such relationships. The United
States, of course, was and still is a dominant element.
With the Congress’ approval of the Marshall Plan in 1948, the US pre-
eminence was confirmed (Bordo and Eichengreen 2007). The organizational
patterns of the IMF and the IBRD gave birth to a new track of thought—
development diplomacy, where the American role was critical.
Proliferation: Global, Regional, and Sub-regional

The World Bank and the IFAD
Established in 1944, the World Bank is the world’s largest provider of devel-
opment finance, which lends worldwide to more than a hundred countries in
several continents. Many of the features that were implemented and recog-
nized in the context of the World Bank became a standard for most of the
other MDBs set up later on.
From the outset, the World Bank was an institution which was to be owned
and whose capital would be provided by governments. The commencing
authorized capital ($10 million) comprised 20% paid-in capital or seed
money and 80% callable or guaranteed capital. The callable capital worked as
guarantee fund against which the World Bank could borrow commensurately
large amounts in the international capital markets. Albeit, this was not as a
matter of fact paid by the member countries, it still determined the credit
rating of the Bank (Culpeper 1997).
The capital structure, which evolved under the aegis of the World Bank,
became a cornerstone of the international financial system. It was considered as
a mechanism to secure the obligations to the bondholders in the capital market
to a guarantee by shareholders to pay off the needed amount to the full value
of bonds outstanding. Thus, the bonds issued by the World Bank depended on
the implicit guarantee of the shareholders, rather than on the loan repayments
of the borrowing countries. Given the innovative side of this mechanism, dur-
ing the 1950s, the World Bank managed to successfully raise money on the
international capital markets, even though it was quite modest in size and lent
to few countries that could afford the market interest rate (Harriss 2002).
With the increase in the scale and complexity, the World Bank established
several affiliated institutions. The first addition was the International Financial
Corporation (IFC) in 1956, which was created to supplement the IBRD’s
governmental orientation, by lending to private corporations, usually together
with other investors. The second addition was the International Development
Association (IDA)—created in 1960 to offer concessional or soft lending to
government and private sector firms in low-income countries.
The establishment of IDA as one of the principal component of the World
Bank Group1 shifted the balance of power between shareholders and manage-
ment in the World Bank. The IBRD was funding its lending operations pri-
marily by selling low-interest, high-rated bonds, backed by prudent financial
policies and strong financial support of their members. The accumulated
funds were then on-lent at slightly higher interest rate with relatively long
maturities (15–20 years) to creditworthy countries. However, concessional
loans of IDA had an interest rate of zero or less than 1% and were made on
terms up to 40 years, usually with a 10-year grace period. As the funds for
concessional lending could not be obtained from private markets, member
countries made direct contributions to fund IDA, causing the balance of
power between shareholders and management to shift to donor members.
Along with the World Bank, the International Fund for Agriculture
Development (IFAD) is a global international financial institution and spe-
cialized agency of the United Nations, providing development finance world-
wide. Although IFAD is an outlier as noted in Chap. 1, it is included in the
categorization of MDBs, as it has recently started to borrow from the interna-
tional financial markets, essentially operating as an MDB. The agency was
established in 1974 at the World Food Conference in Rome, in the wake of a
global food shortage, which caused widespread famine, especially in the
African countries. Three years after the Rome conference, IFAD was set up as
an international financial institution. Since then, it has specialized in financ-
ing agricultural development projects aimed at food production in developing
countries (Mosley and Hulme 2006).
The Regional MDBs
The members of regional MDBs are regional developing countries and donor
countries, which can be both regional and non-regional. These institutions
were modeled around the IBRD concept, to lend to one continent, covering
it almost entirely. Two significant factors triggered the creation of these MDBs.
The first one was the aspirations of developing and/or financially distressed
countries for greater regional autonomy and economic stability, by addressing
regional and national needs. The second one was the US geopolitical and geo-
economic strategic interest during the Cold War. The latter factor was crucial
for overcoming the US defiance toward the establishment of the Inter-
American Development Bank (IDB) and the AsDB. The respective response
of the Soviet Bloc countries, who did not participate in IBRD or the follow-
up regional MDBs, was to create in 1963 their own sub-regional MDB (The
Moscow-based International Bank for Economic Cooperation, still operating
today as the International Investment Bank [IIB]).
In Latin America, the proposal for a regional Inter-American Bank pre-
dated the idea for the World Bank. Latin American countries requested the
United States’ help to improve the international cooperation in the region at

the First International American Conference in Washington DC, in 1890.
However, their demands for greater development financing were only
answered in 1959, as a response to the US concerns about the spread of com-
munism in the repercussions of the Cuban revolution (Santiso 2000).
The initiative for the IDB came from politicians who were advocating for
cooperation and integration in regional forums, established by developing
nations to discuss solutions for the marginalized nations in the post-war world
order. The establishment of the IDB was ratified by 18 countries (the United
States and 17 regional members). The United States was the largest share-
holder of the IDB, controlling 42% of the voting power. In the 1970s, Canada
and then non-regional countries, such as Japan and European countries, were
admitted as non-borrowing or donor members. Unlike the World Bank where
the voting share was heavily weighted in favor of developed nations, the IDB
provided in its establishing articles that the voting share of regional developing
countries could not be less than 50% of the total. The IDB was granted a built-
in soft-loan facility, known as the Fund for Special Operations (FSO), and in
1986, the Inter-American Investment Cooperation (IIC) was established as a
private sector affiliate, analogous to the IFC in the World Bank, focusing on
financing of small- and medium-sized enterprises (Ocampo 2007).
In the interim, two regional MDBs emerged in Europe, the Council of
Europe Development Bank (CEDB) in 1958 with an exclusively social man-
date (dealing with problems of refugees and displaced people in Europe after
the World War II) and the EIB, the European Union’s long-term lending
institution established in 1958, to facilitate the European integration and
supplement the IBRD in offering market-based loans for infrastructure, sus-
tainable development, and private sector development. Both MDBs were
borrower-led and did not accommodate non-borrowing or donor sharehold-
ers, as a main difference to IBRD.
In contrast to the IDB, the initiative for the AsDB came from a relatively
developed donor country—Japan, who had a prevalent influence by tradition.
The AsDB came with an explicit mandate to foster economic growth and
cooperation in Asia by investing in potentially viable projects in infrastruc-
ture. By 1974, a concessional loan facility was established—the Asian
Development Fund (AsDF), the general purpose of which was to lend to low-
income countries in the region.
The most distinguishing feature in the organizational dynamics of the
AsDB is its strong Japanese influence. It was the only MDB at that time where
the United States has been co-dominant with another shareholder (upon
inception, the United States and Japan had each 17.1% of the votes; later
declining to 12.7%). In order to preserve the Asian influence, the AsDB’s

charter requires at least a 60% voting majority for regional members, includ-
ing non-borrowing nations—Australia, Japan, and New Zealand. As such, the
AsDB has always been classified as a donor-dominated institution (Kilby
2006).
The AfDB was funded entirely by borrowing members. Its initiative came
from Africa, and for the first 18 years, membership at AfDB was restricted
only to African countries. The founders believed that the admission of non-
regional donor members would endanger the ownership and governance, and
also threaten the newly gained independence of the African countries. Such a
view is still valid for some of the newer MDBs with a particular reference to
sub-regional ones, addressed further.
The absence of a developed member in the region divested the AfDB of
funds. South Africa was the only exception, but its membership was pro-
scribed until 1995 on account of its apartheid policies. Soon after its founda-
tion, it became a conundrum to raise the financing resources in the
international capital markets based on the African callable capital subscrip-
tion. Eventually, the AfDB fettered itself to lending only out of its paid-in
capital. Originally its authorized capital was $250 million, nearly one half of
which was expected to be paid-in capital—but only $52.6 million was actu-
ally paid in, which shrunk the lending potential and credibility even further.
In the early 1970s, having come to the conclusion, that it was better to
gambit some measure of autonomy with the purpose of building a more influ-
ential institution, the AfDB started discussions to open membership to non-
regional countries. In 1973, a concessional financing facility, known as the
AfDF, was created to direct concessional resources from donor countries to
the region. The AfDF was inaugurated with $82.6 million in grants from 13
non-regional members (mainly Japan and Canada). Despite intense polemics
among the African members, the voting power in the AfDF was split 50–50
between regional and non-regional members.
By 1992, 25 non-regional countries, including the United States, had
received the assent to membership in the AfDB and controlled 35.5% of the
voting share, while regional members accounted for a majority of 64.5%.
Developing member countries held a voting majority, but in fact, the devel-
oped country minority shareholders controlled access to resources and capital
increases and replenishments.
In the early 1970s, substantial progress was made in the field of regional
financial cooperation even in the Arab region with the establishment of the
IsDB in 1974. The capital was subscribed in a new account currency, the
Islamic Dinar (ID), and at its inception, the 22 member countries contrib-
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water heaved up about four feet and burst. Gathering up my clothes, bare-
footed, I scampered off as fast as possible; fortunately without cutting myself
on the flinty scale-like laminæ, which on the edges are as hard and sharp as
knives. It was only a little disturbance which subsided in a few minutes, but
shallow streams of boiling water flowed down over the very part of the basin
where I had been standing. Afterwards returning with Professor Chadbourne,
we completed our toilet, giving a keen edge to our razors by dipping them into
the hot water of the great Geyser, at the same time making use of a little pool
at the side as a mirror. The matter-of-fact oddness of the situation recalled
sundry adventures of Don Quixote, when in quest of another basin—that of
the barber, which he mistook for the enchanted golden helmet of Mambrino.
The Geyser also did efficient duty as pot and tea-kettle for breakfast.
About ten o’clock A.M. we witnessed an eruption of Strokr. All of a sudden, we
heard as it were the whiz of a rocket, and saw a jet of water spouting up in a
single column, to the height of fifty or sixty feet, straight as the trunk of a
palm tree, but spreading out at the top, bending gracefully down all round, and
falling in clouds of spray. It lasted for about ten minutes, subsided, and began
again. Some of us, looking down, narrowly escaped being scalded by its
sudden vehement and unexpected spurts. The ascending water shewed
beautifully clear and transparent against the sky; and gleaming rainbows came
and went—now bright as the tint of flowers, now dim and evanescent—
lending opaline lustres to the falling showers of diamond spray.
After all was over, Zöga collected several heaps of turf at the side, and then at
once plumped them all in, to provoke an eruption. We expected the dose
would take effect in twenty minutes or half-an-hour; but a whole hour having
elapsed without any sign, we began to fear it would exhibit no resentment at
being made to eat dirt. Five minutes more, however, and up it came, rushing
with tremendous force, in several jets, and attaining a height of from a
hundred to a hundred and fifty feet. The water falling back, nearly in a
perpendicular line, was met by up-rushing steam, and thus formed a glassy
dome, from which jets of water sprang up. This disturbance lasted twenty-one
minutes; was followed by a lull; then it commenced again, subsided and ended
by one or two explosions and spurts, after which the water sunk down into the
pipe, rumbling, seething, boiling hard, and plop-plopping as before. The water
this time was black and dirty with the particles of sand and turf which had
been administered to it; so that, although higher, it lacked the fairy-like beauty
of the last eruption. I had thrown in a white cambric pocket handkerchief with
some turf tied in it; but, instead of its being washed and thrown up, suppose it
must have been cooked, and reduced to “shreds and patches” or pulp, as I saw
no more of it.
Several cows were wandering near the Geysers quite unconcerned. Many
sheep and lambs browse in the valley beneath, occasionally approaching the
springs. Accidents, however, seldom occur; although we were told of an
unlucky ox having once stumbled into Blesi, where it was boiled alive. Sea-
swallows were flying overhead; and at our feet, among the stony grit, grew
isolated patches of wild-thyme, sea-pinks, dandelions, butter-cups, sorrel and
parnassia—all of them old friends, and quite home-like. The thermometer
stood at 60° in the shade. At noon, being Sabbath, we sat down in the lee of
the tent, which was fluttering in the breeze, and Mr. Haycock read the service
for the day—Professor Chadbourne and I taking the lessons; gave an English
Testament, and some of the Religious Tract Society’s illustrated publications to
Zöga, who could both read and translate them to his brother guides.
After dinner walked down to the river. On either side of its course lies a strip
of meadow, where the herbage is rich, green, tender and luxuriant like a velvet
carpet; the valley around, though also green, is in many places wet and spongy;
covered with heather and moss-hags.
The overflow of the Geysers comes down, steaming, to the river, through the
brown shingle which is variegated here and there with little strips and patches
of verdure. After great eruptions there is some body of water; at other times it
merely trickles, spread over a wide bed.
Wandering about, I visited every one of the springs alone. In the south corner
of the Geyser ground, steaming pits occur every little bit: the crust there is
very thin, so that one requires to tread with caution. Some of them are merely
holes in this thin crust, showing steaming pools of hot water, flush with the
surface and extending under it; others are holes in rocks, deep, dark and
craggy, with the water far down boiling furiously and seething in white foam;
such is Strokr. Some are as if one looked down the kitchen chimney of a castle
in the olden time when good cheer was preparing: you hear boiling going on
but see nothing, for all is dark. Others throw up jets of steam. At many places
you hear internal cauldrons boiling violently, at others you can also see puffs of
steam escaping at intervals from small clay holes. The Little Geyser enlivens
the scene by throwing up many jets of steaming water, at different angles,
playing like a fountain several times in the course of an hour or so; nor does
the great Geyser allow itself to be long forgotten: loud noises, rising bells of
water, and other premonitory symptoms frequently calling us up to its side in
expectation of grand eruptions; for, more perfect in its formation and larger
than any of the other springs, it is justly regarded as the chief attraction of the
place.
Sir George Mackenzie attempted to explain the mechanism of the Geyser
eruptions, by supposing that the tube was fed from hot water confined in a
neighbouring subterranean cavern. This water was forced into and up the tube
by the pressure of steam, accumulated between the surface of the water and
the roof of the hypothetical cavern, when it had attained power sufficient to
overcome the resistance of the column of water contained in the tube.
For several reasons, this explanation is unsatisfactory; and the more likely
theory is the chemical one, propounded by Bunsen who spent eleven days
here. In few words it is as follows. The water in the lower part of the tube gets
heated far above the boiling point by the surrounding strata; water, thus super-
heated for a length of time, is known to undergo certain changes which
materially modify its composition; particles of air are expelled, the component
molecules consequently adhere more closely together, so that it requires a
much higher temperature to make it boil. When, however, under these
conditions, it does boil, the production of steam is so great and instantaneous
as sufficiently to account for all the phenomena of a Geyser eruption.
This theory is supported by various facts. The temperature, both in the Geyser
tube and in Strokr, gradually rises towards the bottom, and increases before
eruptions. It has actually been found as high as 261° Fahrenheit, which is 39°
above the boiling point. In ordinary circumstances it would be found equal
throughout, or, if a difference were appreciable, the hottest water, being the
lightest, would rise to the top. Stones have been suspended at the bottom and
remained undisturbed by eruptions, showing that the super-heating process
went on above them in the tube itself; and lastly, M. Donny, of Ghent, has
produced precisely the same effects in miniature; using for the experiment a
brass tube stopped with a cork, and heating it all round with charcoal fires;
one, if we remember rightly, at the bottom of the pipe, and another half-way
up.
This theory would also explain the terrific and destructive water eruptions of
Kötlugjá, provided the water actually does come from the crater, as is said, and
not rather from the great deposits of surface snow and ice melted by the
internal heat of the mountain. One of these eruptions in 1755—the year of the
earthquake at Lisbon—destroyed 50 farms in the low country, with many men
and cattle. Of the two Geyser-theories, Bunsen’s is the more likely to prove the
correct one.
After exploring the plain and gazing on the farm of Haukadal, which is
situated on a height about three quarters of a mile to the north of the Geyser
and celebrated as the birth-place of Ari Frodi the earliest historian of the north
and the first compiler of the Landnámabok, accompanied by Mr. Murray, I
ascended the hill behind so as to get a complete bird’s-eye view of the Geyser
ground, and the whole valley of Haukadal or Hawk-dale. The view of this
singular region from thence, is peculiar, and I shall try to convey an idea of it,
even at the risk of repetition.
Below, a green marshy plain runs nearly north and south; the river, winding
through it, shows here and there little serpentine reaches of water like bits of
mirror; the horizon, on the south and south-east, is bounded by a low sloping
range of purple hills, and several low detached heights shaped like the Nineveh
mounds. On the north and north-east rise several distant mountains. One of
them is a Jökul, with perpetual snow and ice on its summit, and ribbed with
white streaks down its sides. On the west is the hill-range on which we now
stand. It is considerably higher, rougher, and wilder in character than the
heights on the other side of the valley. Near the foot of the hills, at our feet,
are bluff banks covered with reddish irony mould, not unlike old red
sandstone; these deposits however we afterwards found to be fine clay,
containing iron oxidized by exposure to the air, and very slippery to walk
upon. From these red banks there stretches a gentle slope, mostly covered
with a brown and white silicious stuff like slag, such as is seen on many garden
walks. On this little slope are the Geysers; and all the springs occur within the
small space of about fifty acres.
The great Geyser is the most northern, and lies on our extreme left. From
where we stand, it resembles an artificial mill pond with an embankment rising
all round it and slanting—to compare great things with small—like the sides of
a limpet-shell from which the top or cone has been struck off. Clouds of white
vapour hovered over it, as it lay gleaming like a silver shield. Near it, is our
tent, and a heap of boxes, saddles, and other gear lying piled on the ground.
A little higher up and nearer us, on the right, lies the tranquil and beautiful
spring of Blesi. More to the right, but lower down, that dark hole like a well is
Strokr. Yet further, in the same direction, the little Geyser is in full play,
sending up numerous jets of water like a fountain; while volumes of steam are
rising from it, and rolling away to the south. To the right of the little Geyser,
and on the slope which runs down eastward below it, are numerous little
round pools, close together, which reflect the sky, and look as if they were blue
eyes gazing from earth to heaven. Little jets and puffs of white vapour rise
from among them. Several farms are in sight; cattle are grazing on the plain;
tern and snipe are flying athwart the sky; wind-clouds are gathering in the
north; but the hazy veil in the south-east, which conceals Hekla and other
mountains in that direction, has not been lifted. Instead of being sated with
the scene before us, wonder increases every time we survey it, or dwell on the
striking features of its marvellous phenomena.
It was now between ten and eleven o’clock P.M. We descended leisurely to the
brink of the Geyser, were joined by several of our party, and there sang several
fine old psalm-tunes, such as “York” and the “Old Hundred,” in full harmony.
These, associated as they ever are in our minds with the language of Scripture,
lost none of their impressive grandeur, thus heard by waters that are not
always still, in the land of destroying mountains, burnt mountains, earthquakes,
and storms. Where we have Geysers—gushers or pourers forth—as in the
valley of Siddim; indeed, there is a valley with the very same name, rendered in
Icelandic instead of Hebrew, viz. Geysadal, a little to the north-west of Krabla.
Places with parched ground, waste and desolate; a wilderness wherein there is
no man. A land where red-hot pumice or ashes, fire and brimstone, shot up
into the air by volcanoes, have oft-times been rained from heaven; and, on
every side the once molten lava flood—which is graphically described by Job
as overtaking and arresting mortals, carrying their substance away and
devouring their riches by fire—may be observed crossing the ancient track.
Where, excepting for a few months in the year, hoar-frost is scattered like
ashes, and the treasures of the snow or of the hail are not hid; and the face of
the deep itself is often frozen. Again, He causeth His wind to blow and the
waters flow.
Where spring comes with the small rain on the tender herb; valleys are watered
by springs; grass grows for the cattle, and the pastures are clothed with flocks.
Where we encounter nomades pitching their tents, and many old eastern
customs that remind us of the dwellers in Mesopotamia. Where we behold the
eagle mounting on high and spreading abroad her wings, and hear the young
ravens which cry. The swan too, and other migratory birds may be seen
stretching their wings towards the south. Around its shores leviathans play in
the deep; and there too go the ships.
Here in an especial manner we are reminded, at every step, of the wondrous
works of Him who looketh on the earth and it trembleth; He toucheth the hills
and they smoke: the mountains quake at Him and the hills melt, and the earth
is burnt at His presence. His fury is poured out like fire, and the rocks are
thrown down by Him. The earth shook and trembled, the foundations of the
hills moved and were shaken. Truly wonderful are His works, who maketh His
angels spirits, His ministers a flaming fire!
Such were some of our thoughts as we stood, at midnight, singing these grand
old psalm tunes, by the side of the Geyser; reminded, in a peculiar manner,
that the whole surface of the globe is after all but a thin crust, cooled down
and caked over the great molten central mass of liquid fire which constitutes
our planet; and how easily, were latent forces called forth, or even were those
powers which are already developed only roused into more energetic action,
the whole might explode[10] like a shell filled with molten iron—the myriad
scattered fragments then “spinning down the ringing grooves of change” as a
shower of asteroids—nor could the orphaned moon survive the dire
catastrophe!
THE GREAT GEYSER.
Although midnight is spoken of, it was quite light, and I sketched for nearly an
hour and a half, beginning at a quarter-past 12 o’clock. Before Professor
Chadbourne left for the night-quarters which Zöga had secured for him at the
neighbouring farm, we two stood together on the brink of the Great Geyser,
filled our glasses with its hot water—pure, and, as soon as it cooled down
below the scalding point, drank to absent friends on both sides of the Atlantic;
this toast having special reference to our own distant homes. Then four
separate Geyser-bumpers were devoted respectively to Longfellow, William
and Mary Howitt, Dr. Laurence Edmondston of Shetland, and Gísli
Brynjúlfsson the Icelandic poet.
Properly speaking there was no night at all; only a slight dim towards two
o’clock in the morning, which I took as a hint to get quietly under the canvas
of our tent. The wind rose, increasing to a gale; our tent-lining came down and
the sides flapped up, fluttering in the wind with a noise like platoon firing. For
me, sleep was impossible; but as I was very tired and things could not well be
much worse, I patiently lay still till five o’clock in the morning, when we all
rose, and Zöga struck the tent. The wind blowing from the north-coast, on
which many icebergs were at present stranded, was piercingly cold, and
reminded us of the Duke’s allusion, in the forest of Arden, to
“The icy fang
And churlish chiding of the winter’s wind;
Which when it bites and blows upon my body
Even till I shrink with cold, I smite and say,
This is no flattery.”
As breakfast would not be ready for a couple of hours, I took some brandy
and hot water at the Geyser, literally to stop my teeth from chattering, and
descended into the gully behind to examine the banks of coloured clay. These
lie, just under the Geyser, on the north-west side. Steam may be observed
escaping from many little clay holes, and the sound of boiling may be heard
inside at places where there are no holes. This hot clay is deposited in
horizontal layers, red, purple, violet, white, light blue, and pale green. These
colours occur by themselves, and are also occasionally found mixed together,
mottled and variegated like a cake of fancy soap or a sheet of marble paper.
Judging by the taste, the clay seems impregnated with sulphuric acid; and, to
the touch, it is of a very fine consistency, having no grit whatever. I secured
specimens of the finest colours, cutting them like butter with a table knife, and
filled several empty preserved-meat cans to take home for analysis. The
colours are most beautiful, but, apparently caused by oxydized iron, would, I
fear, be useless as pigments. If this fine clay could be put to any use in the
potteries, thousands of tons might be obtained here and also at Krisuvik.
What leads me to suppose that the colouring matter of the alumina chiefly
consists of iron, is the fact that, excepting where the layers were evidently
freshly laid bare to view by water or by some other mechanical means, the
banks, however beautifully variegated beneath, invariably exhibited no colour
but red on the surface; or, in other words, the iron was uniformly oxydized by
exposure to the air.[11]
Further down the gully, we came upon large rough slabs of whitish stone,
beautifully variegated with tints of violet, red, and yellow, dashed with blue.
These were in compact laminae, and each colour about the fourth of an inch
in thickness. In several instances however the colours, as in the clays, were
mixed. I broke up several masses, and secured a number of the most
characteristic and beautiful specimens. We also obtained chalcedony and agate,
at times approaching to opal; these and cornelian being only varieties of silex,
colour making the chief difference.
Before filling some bottles with Geyser water, as the wind was fresh, I set one
of them afloat to be carried across the basin before it. When the half of its
venturous voyage was accomplished and it had reached the tube in the centre,
a little eruption came on, by which the bottle was thrown up, and floated over
the outer edge of the basin. I succeeded in getting hold of it uninjured,
arrested in a little pool amid the boiling water which was flowing down the
sides, and afterwards filled it, marking it specially for Dr. R. Angus Smith;
—“one whose name,” in a different sense however from that in which Keats
used the expression, “is writ in water,” and let me add, in air too; for, in
connection with sanatory matters and the supply or purification of these two
health-giving elements to towns, no man in Europe has analyzed more water;
nor was there any known index of local atmospheric insalubrity but the
mortality bills, till he made his great discovery—the Air-test. On all such
subjects there is no higher scientific authority.
Wandering, once more to bid farewell to the other springs, we could not but
remark that the whole slope is a thin crust, with innumerable caldrons below;
these each preserve their individuality, although the central heat be common to
all, for the various eruptions seem to be quite independent of each other. Blesi
was quite tranquil during the eruption of its neighbour the great Geyser; and
the other springs take as little notice of the Little Geyser’s activity as it does of
Strokr. Wonder ever increases, although the ground has been gone over so
often as to be already quite familiar to us.
Breakfast waits and is soon despatched with keen relish. Packing done, horses
ready, and a guide left to find three that have strayed, we start on our return
journey to Thingvalla and Reykjavik at a quarter to eight A.M. Truly, as
Shakspere hath it,
“Nature oftentimes breaks forth
In strange eruptions!”
The wind was still from the north and bitterly chill. On rounding the shoulder
of the hill, we picked up the Professor, at the farm house. The room he slept
in had been all carefully washed out on purpose to receive him, the earthen
floor as well, so that it was very damp. He was assisted to undress by the
hostess, till he called a halt, and insisted on retaining some portion of his
under-clothing. Then, after he lay down, a basin of milk was brought and
placed at his bed-side. Had he looked under the pillow, he would probably
have discovered a bottle of brandy deposited there for his own especial use;
but, as the worthy Professor would have left it precisely as he found it, no
“sense of loss” dawned upon him when the probability was hinted at.
Rector Jonson subsequently explained to me the rationale of the hostess, or
her daughter, attending to guests. Among the Icelanders, wet feet and
thorough drenchings are incident to locomotion. It is the universally
acknowledged duty of the female department to render the way-worn traveller
such assistance as he may require, taking away his wet stockings and mud-
soaked garments at night, and returning them to him, dry and comfortable, in
the morning. This simple old custom, which is also to be met with in various
parts of Norway and Sweden, will give the key to many funny exaggerations
on the subject, where the art of putting things has been employed chiefly in
the direction of the ludicrous.
We see on the way many lovely wild flowers, which confirm our previous
observation that they are larger in the petals, but smaller in the leaves and
stems than the same kinds at home; the aroma is also less. This is caused by
their receiving more light and less heat, in the short Icelandic summer, than in
more southern climes.
Graceful white sea-swallows are darting about; curlews are very tame, flying
within a few yards of us or sitting unconcerned on stones till we ride past
them, noting their beautifully speckled breasts, long bent bills, and plaintive
tremulous whistle.
SKAPTÁR JÖKUL.
The atmosphere was now much clearer, and many distant snow-covered
mountains were visible on our left. Zöga pointed out one of a peculiar shape,
which he informed us was Skaptár Jökul, the most destructive volcano in the
island. Of this, however, again.
A bird, with a red breast, perched on a block of lava near us; this, the
Professor told me, was the American robin. It seemed as large as our
blackbird.
MOUNT HEKLA.
Retracing our steps, we crossed the Bruará, ascended the heights, and at length
got into the green level plain, halting at the same spot where we had rested in
coming along. Here we obtained a magnificent view of Hekla, and made a
number of sketches. The prospect varies but little, as we ride along skirting the
hills and at length ascend them on the other side of the plain. From this point,
Hekla still appears dome-shaped; the three peaks being scarcely perceptible
from the distance—about thirty miles—at which we stand, and only indicated
by very slight dints in its rounded outline. The mountain, covered with snow
and mottled here and there with black patches, rises beyond a low range of
purple hills and towers high above them, in shape and colour not unlike Mont
Blanc as seen from the banks of the Arve below Geneva, if we could only
imagine the monarch of mountains deprived of his surrounding Aiguilles, and
left standing alone over the vale of Chamouni.
The bird’s-eye view of the great flat green plain, with rivers meandering
through it, which stretches from the low range of purple hills over which
Hekla rises to the foot of the heights on which we now ride, is both striking
and picturesque.
About twenty volcanoes have been in action in Iceland for the last 1000 years.
Of these the eruptions of Hekla have been the most frequent, although by no
means so destructive as many of the others. Only attaining a height of about
5000 feet, it owes its celebrity to the frequency of its eruptions; to its rising
from a plain, being visible from a frequented part of the island, and quite
accessible; and also to the fact of its being well seen, from the sea, by vessels
sailing to Greenland and North America. Four and twenty eruptions, of lava,
sand or pumice, are recorded; the last having occurred in 1846. The intervals
between these eruptions vary from six to seventy-six years, the average period
being thirty-five; but some of them have lasted as long as six years at a time.
We give an account of one of these eruptions, selecting that of 1766, which
was remarkable for its violence. “Four years before it took place, when Olafsen
and Povelsen were there, some of the people were flattering themselves with
the belief, that as there had been no outbreak from the principal crater for
upwards of seventy years, its energies were completely exhausted. Others on
the contrary, thought that there was on this account only more reason to
expect that it would soon again commence. The preceding winter was
remarkably mild, so that the lakes and rivers in the vicinity seldom froze, and
were much diminished, probably from the internal heat. On the 4th April
1766, there were some slight shocks of an earthquake; and early next morning
a pillar of sand, mingled with fire and red hot stones, burst with a loud
thundering noise from its summit. Masses of pumice, six feet in circumference,
were thrown to the distance of ten or fifteen miles, together with heavy
magnetic stones, one of which, eight pounds weight, fell fourteen miles off,
and sank into the ground though still hardened by the frost. The sand was
carried towards the north-west, covering the land, one hundred and fifty miles
round, four inches deep; impeding the fishing boats along the coast, and
darkening the air, so that at Thingore, 140 miles distant, it was impossible to
know whether a sheet of paper was white or black. At Holum, 155 miles to the
north, some persons thought they saw the stars shining through the sand-
cloud. About mid-day, the wind veering round to the south-east, conveyed the
dust into the central desert, and prevented it from totally destroying the
pastures. On the 9th April the lava first appeared, spreading about five miles
towards the south-west, and on the 23d May, a column of water was seen
shooting up in the midst of the sand. The last violent eruption was on the 5th
July, the mountains in the interval often ceasing to eject any matter; and the
large stones thrown into the air were compared to a swarm of bees clustering
round the mountain-top; the noise was heard like loud thunder forty miles
distant, and the accompanying earthquakes were more severe at Krisuvik,
eighty miles westward, than at half the distance on the opposite side. The
eruptions are said to be in general more violent during a north or west wind
than when it blows from the south or east, and on this occasion more matter
was thrown out in mild than in stormy weather. Where the ashes were not too
thick, it was observed that they increased the fertility of the grass fields, and
some of them were carried even to the Orkney islands, the inhabitants of
which were at first terrified by what they considered showers of “black
snow.”[12]
This mountain, with its pits of burning sulphur and mud, and openings from
whence issue smoke and flames, is associated with the old superstitions of the
Icelanders as the entrance to the dark abode of Hela, and those gloomy
regions of woe where the souls of the wicked are tormented with fire. Nor are
these ideas to be wondered at in connection with the terrible phenomena of
such an Inferno.
As Hekla lay gleaming peacefully in the sunshine, with a heavier mantle of
snow, we are told, than usual, I bade adieu to it by attempting yet another
sketch from the pony’s back, pulling the rein for five minutes, and then
galloping on after my companions.
Having rounded the shoulder of the hill, we now lost sight of Hekla and the
greater part of the plain. In a region where some brushwood and a few flowers
grew among dark coloured rocks, we came upon a fine example of ropy
looking lava, curiously wrinkled in cooling, and all corrugated in wavy lines.
Soon afterwards we saw a sloping mass of rock, some sixty feet square,
inclined at an angle of 25°, polished smooth by the ice-drift, and deeply
abraded in grooves, all running southwards. The marks were not to be
mistaken, and were more distinct than those we had observed in coming.
Here I gathered specimens of geraniums and other flowers, placing them
between the leaves of my pocket Wordsworth. Coming to a glade of dwarf
willows, we observed bees feeding on the flowers of the flossy species, and
were forthwith, even in this northern region, reminded of Mount Hybla,
recalling Virgil’s line,
“Hyblæis apibus florem depastâ salicti.”
LAKE OF THINGVALLA.
The Professor, Mr. Murray, and I, riding together, now reached and descended
the Hrafnagjá or Raven’s Chasm, which has already been described. It was
steeper than a stair, full of breaks and irregular turns. At some places, the
ponies drew up their hind legs and slid down. It seems more perilous to
descend than to climb such places, but the ponies are very sure-footed. On a
bosky slope, I pulled the bridle and made a sketch of the lake of Thingvalla,
the waters of which were intensely blue.
Crossing the plain of Thingvalla, we reached our rendezvous—the Pastor’s
house—about nine o’clock at night, after a splendid day’s ride; some of us,
much to our own surprise, being not only in excellent spirits, but fresh and in
good physical condition; rough-riding feats and prolonged fatigues
notwithstanding. We dined on trout, soup, &c.; and at 20 minutes to 11 P.M. I
wandered out, alone, to the Althing to sketch and gather flowers.
The three lost ponies, that strayed from the Geysers, have just come in. I see
them now scampering before the guide and passing the waterfall of the Oxerá,
which thunders over the black rock-wall, about half a mile from the descent
into the Almannagjá. The fall looks like a square sheet of burnished silver
from the sacred Lögberg or Hill of Laws, on which I now sit writing,
entrenched and moated round with deep volcanic chasms about two-thirds
filled with clear water.
Skialdbreid—or Broadshield—Jökul, to the north-west, is mottled towards its
base with black patches, but its summit and flanks are lit up with pure roseate
light. Armannsfell, one of a range nearer and more to the north, is of a dark
rich venetian red colour touched with bronze and exhibits a living glow, an
effect I have never elsewhere seen equalled or even approached. Whereever
the light falls, all is transfigured and glorious beyond description; yet there is
no approach to hardness, either of line or tint, but an atmosphere of subduing
softness, transparency, and purity, magically invests everything with an etherial
spiritual beauty: such effects are peculiar to Iceland.
Having made a sketch of the lake, I retired to rest, the last of our party. We
slept, without undressing, in our old quarters—on the floor of the pastor’s
parlour.
Tuesday morning.—Rose between five and six o’clock, and went out to gather
ferns—aspidium or crystoperis—on the Althing. The scene around was singularly
wild, and yet strikingly picturesque in its desolate strangeness; while the tender
green of the valley itself afforded a refreshing rest to the eye. On returning I
made a sketch of the priest’s house;[13] examined the site of the little church
which was being re-erected; strolled down by the river side, and performed my
ablutions in it—laying my clothes in the priest’s fishing coble, which was lying
hauled up on the bank.
I then paused at the simple churchyard close by, and tried to conjure up life
and heart histories for those who had entered this “Saula-hleith”—or soul-
gate, as the churchyard is beautifully named—while hymns were being chanted
over them, and who were now resting peacefully beneath the green sod.
Conversation with the pastor was again attempted to be carried on in Latin.
His morning salutation was “bonus dies,” or other remarks about the weather,
as with ourselves. After squaring accounts, on leaving, we gave him—as a
nimbus for the rix-dollars—a mediaeval “pax-vobiscum,” in exchange for his
many expressions of good-will towards us, and his rounded classical “vale!”
The glebe hay was being tedded, but the ground here as elsewhere is covered
with little hummocks. Were it only levelled and drained, the soil, one would
think, should raise turnips in quantity, and, certainly, larger hay crops would be
obtained. During the short summer there is not time for the grain to ripen; but
food suitable for cattle might readily be grown in the valleys; for it is chiefly by
the rearing of stock, that Iceland, when she can muster the requisite enterprise
and activity, will, in all probability, advance to commercial prosperity.
After sketching the gorge of the Almannagjá—see illustration, p. 81—we
ascended it, crossed the lava plateau, and rapidly retraced our steps to the
capital, only pausing now and again to take a sketch.
ICELANDIC FARM.
Over the last part of our journey, from the river which we forded just below
the farm house on the hill, to Reykjavik, we rode like the wind—men and
horses alike eager to get to the end of their journey. Our entry into the town
was a regular scrimmage. It was a quarter to three P.M. when we got in, having
done the distance from Thingvalla in six hours. By this time we had ceased to
wonder at any feats performed by the ponies. Seldom, if ever, disconcerted,
they go at anything in a most patient philosophical manner, and get over
difficulties which elsewhere one would think insurmountable, and sheer
madness to attempt. Thanks to mackintosh overboots—made specially for the
purpose—at the end of the journey, I was the only one of our party whose feet
were dry.
REYKJAVIK.
Mr. Bushby invited us to dine with him at the hotel, and Dr. Mackinlay kindly
gave us his room to dress in.
How oddly things sometimes turn up! We saw lying on the floor a box of
“Brown and Polson’s Patent Corn Flour,” which at once suggested two very
different, although not incongruous, trains of ideas; one, the contrast between
the hurry and bustle of railway stations in Britain, where the corn flour is
everywhere so extensively advertised, and the primitive locomotion of Iceland,
in which not a single steam engine has been erected; and the other, associating
the beautiful locality where the flour is made—near Paisley, at the foot of “the
Braes of Gleniffer” celebrated in song by Tannahill, one of Scotland’s sweetest
minstrels—with some of the loveliest scenes we had lately witnessed. For here,
are we not in the land of Eddas and Sagas! and is not the Poet found singing
wherever there are human hearts!
A gentleman told me, that having obtained permission, he had, that afternoon,
caught seventy trout in the salmon river—three of them from his pony’s back;
he had only to throw the fish over his head on the grass behind him, as fast as
he could whip them up. He had seen a fisherman get 130 at one haul of the
net. I saw the manager of the fishery, an active intelligent Scotchman, whom,
from his appearance, one would take to be the mate of a vessel. He told me he
had been three years in Iceland, and had some of his family here with him.
Mr. Bushby procured us several specimens of double refracting Iceland spar,
obtained from the other side of the island. It polarizes light, and is valuable in
various ways, both to science and the arts.
Mr. Murray and Mr. Cleghorn set out after dinner to visit the sulphur mines of
Krisuvik; I, on the principle of letting well alone, preferred remaining at
Reykjavik to undergoing the fresh fatigue of such a ride immediately after the
Geyser journey. Three of us spent the evening, by invitation, at the Governor’s
—the Count Von Trampe. I had a long conversation with him in German,
during which he mentioned that all the old Saga and Edda MSS. had been
removed to Copenhagen; and, in answer to sundry enquiries, told me that the
“lang spiel” is the only Icelandic musical instrument now in use. It is
something like a guitar or banjo, has four strings, and is played with a little
bow. The airs now played are chiefly Danish dance music, and other foreign
melodies.
The Icelanders, like the natives of Madagascar, have adopted the music of our
“God save the Queen” as their national air. The words to which it is sung were
composed in the beginning of the present century, by the late Biarni
Thorarensen, Governor of the northern province of the island, when he was a
student at the university of Copenhagen. The song is called “Islands Minni,”
or the “Remembrance of Iceland;” and finely illustrates the intense love of
country displayed by Icelanders, who, wherever they may travel or sojourn,
always sooner or later return home though but to die; for to them, as their
own proverb has it, “Iceland is the best land on which the sun shines.” We
here give the words of this national song, which, calling up in foreign lands
memories of sweet home, is no less to the Icelander, than is the Ranz de Vaches
to the Swiss when far away from the one chalet he loves best in the world,
perched, it may be, on the lofty mountain side, or lying peacefully in some
green sunny valley.
MUSIC IN AN ICELANDIC HOME.
ISLANDS MINNI.
I.
Eldgamla Isafold,
Astkæra fósturmold,
Fjallkonan fríd!
Mögum thín muntu kær,
Medan lönd girdir sær
Og gumar girnast mær;
Gljár sól á hlíd.
II.
Hafnar úr gufu hér

Heim allir girnumst vér
Thig thekka ad sjá;
Glepur oss glaumurinn,
Ginnir oss sollurinn,
Hlær ad oss heimskinginn
Hafnar slód á.
III.
Leidist oss fjall-laust frón,

Fær oss opt heilsutjón
Thokulopt léd;
Svipljótt land synist mér
Sífelt ad vera hér,
Sem neflaus ásynd er
Augnalaus med.
IV.
Ödruvís er ad sjá
A thjer hvítfaldinn há
Heid-himin vid;
Eda thær krystalls ár,
A hverjar sólin gljár,
Og heidar himin-blár,
Há-jökla rid.
V.
Eldgamla Isafold,
Astkæra fósturmold,
Fjallkonan fríd!
Agætust audnan thér
Upp lypt, bidjum vér,
Medan ad uppi er
Oll heimsins tíd![14]
From the literal prose-rendering into English which follows, the reader will be
able to gather how beautiful such thoughts must be, when clothed in the
flowing rhythmic music of the original stanzas.
THE REMEMBRANCE OF ICELAND.
I.
Old land of ice,

Dearly beloved native land,
Fair maid of the mountains!
Dear thou shalt be to thy sons
As long as land is surrounded by sea;
As men love women;
Or sun-gleam falls on the hill-side.
II.
Here, from the midst of Copenhagen’s smoke,

We all yearning after home
Long, dear one, again to behold thee.
The noisy din irks us;
Revelry tempts us in vain;
And the fool jeers contemptuously at us
In the streets of Copenhagen.
III.
We are tired of a mountainless land;

We are constantly losing our health
In this smoky thick atmosphere;
I find this country everywhere
To be destitute of fine features,
A land like a face without nose,
And even without eyes.
IV.
How different it is to see

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Multilateral Development Banks:

Governance and Finance 1st ed. 2018

ISBN 978-3-319-91523-4 ISBN 978-3-319-91524-1 (eBook)

Library of Congress Control Number: 2018942751

© The Editor(s) (if applicable) and The Author(s) 2018

Cover image: © RooM the Agency / Alamy Stock Photo

Printed on acid-free paper

evaluation, as well as the engagement with stakeholders and the promotion of

Osvaldo Néstor Feinstein

Multilateral Development Banks: Governance and Finance is a novel, theory-

values, human capital, and governance. This approach is in contrast with

Ihsan Ugur Delikanli: Chaps. 2, 3, 4, 6, 7.

Credit for photograph of Todor Dimitrov (back flap): Kalina Dimitrova.

Istanbul, Turkey Ihsan Ugur Delikanli

2 The Nature of MDBs 9

5 Principles of Sound Governance 123

Fig. 2.1 Unilateral and multilateral principles 23

Table 2.1 Classification of MDBs in terms of regional coverage by lending 10

© The Author(s) 2018 1

Compare Global, Regional, and Sub-regional MDBs

The book covers 25—virtually all—MDBs. While a reference to particular

Governance Assessment Framework

Chapter 5 (Governance Principles) presents the development and applica-

The application of standard instruments of financial analysis (Chap. 3:

The important perspective of the borrowers is covered by Chap. 6, revealing

Structure of the Book

Introduction and Categorization

© The Author(s) 2018 9

This categorization is relative, as there are overlapping and border cases,

Table 2.1 Classification of MDBs in terms of regional coverage by lending

It is noteworthy that this classification is not absolute, as there are several

1. EBRD’s mandate focuses on the former communist countries but since

The Bretton Woods Institutions

Proliferation: Global, Regional, and Sub-regional

The Regional MDBs

United States’ help to improve the international cooperation in the region at

declining to 12.7%). In order to preserve the Asian influence, the AsDB’s

THE GREAT GEYSER.

Hafnar úr gufu hér

Leidist oss fjall-laust frón,

Old land of ice,

Here, from the midst of Copenhagen’s smoke,

We are tired of a mountainless land;

How different it is to see

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Istanbul, Turkey Ihsan Ugur Delikanli

2 The Nature of MDBs 9

5 Principles of Sound Governance 123

Fig. 2.1 Unilateral and multilateral principles 23

Table 2.1 Classification of MDBs in terms of regional coverage by lending 10

Compare Global, Regional, and Sub-regional MDBs

Governance Assessment Framework

Structure of the Book

Introduction and Categorization

The Bretton Woods Institutions

Proliferation: Global, Regional, and Sub-regional

The Regional MDBs