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CGD Notes

Fixing International Financial Institutions: How Africa Can Lead the Way

9/22/06
Dennis de Tray and Todd Moss
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On September 7, CGD released a report proposing ways the African Development Bank (AfDB) can focus and modernize to ensure its relevance in a rapidly changing world. The recommendation that created the strongest buzz was to streamline the governance of the Bank, specifically to transform its board of resident executive directors into a non-resident, non-executive body. In this CGD Note, CGD vice president Dennis de Tray and senior fellow Todd Moss argue that the boards of other international financial institutions should be similarly reformed.

Rather than weaken the governance structure of IFIs as some fear, de Tray and Moss argue that non-executive, non-resident boards would force the governing bodies to focus on their core responsibilities: setting strategy, establishing benchmarks for management, and monitoring of execution. A non-executive model would also increase accountability by reducing the overlap of responsibilities within the institutions, and it would reduce costs of all kinds.

The multilateral system's mission of spreading global prosperity is too important--and these institutions too pivotal to that mission--to leave them languishing in an outdated and ineffective governance structure. Freeing management and staff to focus on the countries they are supposed to serve rather than keeping a resident board happy would sharpen accountability and improve effectiveness with no loss of oversight.

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