The determinants of multilateral development banks' participation in infrastructure projects

Abstract

Multilateral development banks (MDBs) have important functions in infrastructure projects. Besides their traditional lending role, they provide additional guarantees to private investors about the creditworthiness of the project. An empirical analysis is performed for the determinants of MDBs’ participation in infrastructure projects in developing countries using data from 1990 to 2007 obtained from the World Bank’s Private Participation in Infrastructure database and through limited dependent variable models. The results suggest that the participation of MDBs is higher for less populous and poorer countries, in line with past empirical findings, and where legal and financial systems are underdeveloped. However, neither political risk nor even respect for human rights seems to play an important role in explaining multilateral participation.