Research project
Enhancing MDB Capacity through Local Currency Lending
- Start date: 1 September 2023
- End date: 30 September 2024
- Primary investigator: Professor Annina Kaltenbrunner (Professor of Global Economics, Leeds University Business School) and Dr Bruno Bonizzi (Associate Professor, Hertfordshire Business School)
- Co-investigators: Dr Karina Patrício Ferreira Lima
This project, funded by the MDB Challenge Fund, investigates the potential for increasing local currency financing by MDBs to LMICs, including low and lower-income countries. The research explores the reasons why MDBs opt for or face constraints in lending in local currencies, identifies the associated risks, and examines how these challenges can be addressed through specific lending practices or the development of institutional, regulatory, and legal frameworks.
The methodology involves a combination of extensive interviews with MDB staff from Treasury, Risk, and Legal departments; a survey of MDB representatives, financial sector experts, and recipients of MDB local currency financing; and legal analysis and advanced macro-econometric analysis of secondary data. This comprehensive approach provides a basis for developing concrete policy recommendations to reduce barriers and risks associated with local currency lending.
The goal is to structure local currency lending to LMICs in a way that maximises benefits for recipient economies while minimising risks for MDBs. The findings of this research will be disseminated through a final report, working papers, and policy briefs, leveraging the research team's existing and new relationships with several MDBs.