As the world’s attention turns towards building back from the Covid crisis, the question of how to scale up financing from the multilateral development banks (MDBs) is on the minds of many. To do the job, MDBs need greater financial firepower. But obtaining new capital from shareholders is politically fraught, while MDB efforts to mobilise private finance face numerous obstacles.

One innovation already in practice at several smaller MDBs, but not yet considered by the World Bank and major regionals, would be to create a new, non-voting share class for institutional investors. Because MDBs leverage their capital, one dollar of new capital translates into four or five dollars in development lending. A number of political and financial obstacles would need to be addressed, but such a reform could work in technical terms, and would give a substantial boost to MDB lending capacity.

This paper explores several of the key issues involved to make a preliminary assessment of the viability of creating a new MDB share class for investors. Given what’s at stake in rebuilding the world economy post-Covid, it’s an option worth putting on the table.