The Shanghai-headquartered New Development Bank, which was established in 2015 by the Brics (Brazil, Russia, India, China and SA) countries as an alternative multilateral financing institution, successfully tapped global bond markets for the first time in 2020 to support the large increase in its loan book.
The bank’s total loan book rose 63% to $24.4bn at the end of 2020 as it responded to the pandemic by disbursing loans to its member countries to support the fight against Covid-19.
The bank was established in 2015, with the five founding members holding an equal shareholding (20%), and there is no veto power. It began fully fledged operations in 2016 with an initial subscribed capital of $10bn to be paid in by its founding members.
The bank has already received $8bn, with the balance expected to be received by the end of 2022.
The bank has a further $40bn in callable capital, which can be drawn on when required.
The 2020 annual report shows that the large majority of its lending ($20.1bn) comprises “sovereign loans” to its member countries, which ramped up during the pandemic.
The bank approved Covid-related loans totalling $6bn under its Covid-19 emergency programme.
This included a $1bn loan to SA that was approved in June last year to tackle the urgent health needs required to overcome the pandemic.
Similar-sized loans were extended to the other members for similar purposes.
The bank approved 19 projects to the value of over $10bn during 2020. Besides Covid relief, the bank lent money for the construction and maintenance of transport infrastructure, followed closely by clean energy investments and urban development.
After obtaining AA+ credit ratings from Fitch Investors Service and S&P Global, the second-highest subcategory of rating, the bank was able to access funding at rates cheaper than what is possible by individual member countries.
It issued its first US dollar-denominated bond in June 2020, and had issued $3.5bn by the end of the year.
The bank has scope to lend to other non-member countries in due course, in time providing an alternative source of financing to the traditional Bretton Woods institutions that include the World Bank and IMF.
“We will spare no effort to contribute to a world where emerging markets and developing countries are home not only to most of the global development challenges but also to sound solutions, based on worldwide co-operation,” said bank president Marcos Troyjo in a statement accompanying the bank’s 2020 annual report.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.