Ajay Banga faces great expectations as he takes helm of World Bank | Devex

[Gunnar Larson]

Bank.org is so excited to see Ajay Banga at the World Bank.

Congratulations!

Gunnar

--

Inside DevelopmentWorld Bank
Ajay Banga faces great expectations as he takes helm of World Bank
By Shabtai Gold // 02 June 2023

Wrold Bank President Ajay Banga. Photo by: Benedikt von Loebell / WEF / CC
BY-NC-SA
Ajay Banga’s star power has been on display ever since it became clear that
he would take over the World Bank.


Government and financial leaders rushed to meet the former Mastercard chief
executive and praise his credentials as he embarked on a worldwide campaign
tour this year. They heralded his meteoric rise through the global
corporate ranks and passion for fusing the private and public sectors to
solve the financial quandaries that trap people in poverty.

On Friday, Banga takes over the largest global anti-poverty lender — which
across its five wings last year did $114 billion in loans, investments,
grants, and guarantees — as it’s in the midst of a potentially radical
transformation.

Debates rage about the trajectory of its ongoing reform process and whether
the Washington-based institution will be capable of both fighting rising
inequality and meeting clients’ increasingly urgent needs for money to
deliver low-carbon economies and safeguard against worsening floods and
droughts.

The biggest pressure will be avoiding tough tradeoffs on these two mandates
— poverty and climate change — given the bank’s limited financial resources.

Banga’s many fans argue the former finance executive can balance multiple
constituencies with competing priorities — a must in an institution whose
board is divided between wealthy and lower-income nations with a range of
views on issues such as climate.

They say Banga’s career trajectory is proof he can make the 78-year-old
bank more modern, agile, and efficient over the coming five years and
smooth over differences between rich shareholders pushing for more green
spending and lower-income nations trying to ensure their citizens’ next
meal.

“When Ajay is committed to something, he is unshakable,” said Shamina
Singh, the founder of the Center for Inclusive Growth, Mastercard’s social
impact hub, which was set up while Banga ran the company.

‘A pivot to urgency’ at the bank
Born in Pune, India, to a military family, Banga began his career at
Nestlé in his home country, shifting jobs and eventually working his way
over to financial services. He hit his corporate capstone as the chief
executive of Mastercard, where he grew the firm’s size 10 times during his
just over a decade in charge, turning it into the 21st largest company in
the world.

This explosion in Mastercard’s growth demonstrates why the former CEO is
well suited to take over the bank, according to Bhaskar Chakravorti, a
professor at The Fletcher School of Law and Diplomacy at Tufts University
who has known the 63-year-old Banga for decades.

“In many ways, he is taking on an institution with an enormous footprint
and enormous potential for impact but not quite achieving it,” Chakravorti
said of the bank. “He’s done this before, stepped into organizations in the
past, most recently Mastercard, where he was taking over an organization
that was operating beneath its potential.”

Not only did Mastercard boom, but it made significant forays into financial
inclusion of low-income people around the world through partnerships with
governments and other firms.

That — along with his work on the board of the Red Cross and other
nonprofits — has supersized Banga’s credentials for the job at the
development bank, with more than $230 billion in loans just at its main
wing, with tens of billions going to climate-linked projects.

And Banga will be capable of modernizing the lender for an era of
overlapping quagmires — including debt traps, a higher cost of capital, and
stretched government budgets — because of his laser-like focus on results,
said Singh at the Center for Inclusive Growth.

 “Over an Ajay Banga tenure, we’ll see a shift to agility, a pivot to
urgency.”

— Shamina Singh, founder, Center for Inclusive Growth
But, Singh added, this will mean building on the existing skills at the
bank, rather than some root-and-branch restructuring.


The U.S. Treasury Department, which handled Banga’s media appearances
during his campaign, declined to make him available to Devex for an
interview for this story.

Listen first
Those who know him well predict Banga won’t do a shock-and-awe shakeup on
his first day or months at the lender, with its more than 25,000 full-time
employees and consultants spread across the world.

Rather, he is likely to repeat the approach he took during his
campaign over the last few months as he sought the job — conduct an
internal “listening tour,” understand the different groups and their needs,
and then find ways to bring it all together into a strategy.

“He’ll get to know the talent inside the organization and get to know the
innovation — and then figure out how he takes it to a greater scale,” said
Michael Schlein, the head of financial inclusion organization Accion and
who worked with Banga in the financial services sector.

Banga himself is well aware of such expectations and has cautioned that he
will not be coming through the bank’s doors on his first day with a “magic
wand.” It’s a phrase he’s used before, saying in 2020 that shaping an
organization is about putting one’s shoulder to the wheel.

“Culture doesn’t just come because you wave a magic wand. It comes through
hard work,” he said as he was preparing the step down from Mastercard. But,
as a leader this also means “you basically make people feel that your hand
is on their back and not in their face,” he added.

Chakravorti, his old friend, said this is what makes Banga a good manager.

“He’s very approachable,” he said. “He’s down to Earth and he’s very clear
about where he wants to take any organization.”

Private capital
Banga became a U.S. citizen about 15 years ago — meaning President Joe
Biden was selecting an American when it nominated him in March for the job,
keeping with a somewhat controversial tradition.

In the months since Banga has become more judicious with his public
appearances. His limited public comments, however, have made two things
abundantly clear: He does not think public money will be sufficient for
development needs, and he thinks the climate crisis will require much of
his attention.

“We know we need to get the private sector to be a constructive player in
our mission,” Banga said in a speech in April, just before the World Bank
Spring Meetings kicked off.

The problem, Banga has admitted, is that the private sector does not love
taking unknown risks. He sees part of his new job as helping investors
navigate uncertainty so that they are willing to put in money for projects
they previously shunned.

Janet Yellen, the U.S. treasury secretary, focused on this in her message
congratulating Banga on securing the role: “His track record of forging
partnerships between the public sector, private sector, and non-profits
uniquely equips him to help mobilize private capital.”

However, the so-called billions-to-trillions agenda has been on the table
for years and is broadly seen as a failure — aid dollars have not led to
the hoped-for hordes of private investment dollars.

More reading:

► Interview: World Bank's Malpass says 'urgent' debt relief is needed

► Experts react: The good, bad, and meh in the World Bank's reform plan

► Malpass to staff: World Bank exploring climate finance, more lending

In addition, dozens of governments that raised money on capital markets and
from new lenders like China are now facing a severe debt crisis. For Banga,
this will mean a slew of headaches in the months to come as heavily
indebted nations will not be able to readily attract the private capital
they need for development.

More capital
Experts such as Annalisa Prizzon, a researcher at the Overseas Development
Institute think-tank, have long argued that the World Bank should form more
partnerships and generally play better with other organizations, including
regional development banks, so that it can be more effective with its
resources.


The bank “must use its capital better,” Prizzon said. However, even if it
creates efficiencies and increases its risk profile to get more money out
the door to client states — and makes the whole process smoother and faster
for the borrowers — the bank will still need a capital injection so it can
lend more, she said.

New capital would have to come from shareholders, including the United
States, the largest one, though also other countries, including China —
which is still a borrower from the bank, a point of contention on Capitol
Hill that could become a bone for lawmakers to pick with Banga.

Homi Kharas, a former banker now at the Brookings Institution, concurs with
Prizzon but argues that Banga will stand a better chance of getting
Congressional approval if he brings “demonstrated proof” of an improved
operation.

This will mean a strong focus on the reform agenda at the bank, which is
already underway. Banga’s predecessor, David Malpass, began the process
toward the end of 2022, under pressure from shareholders. Management is
working through the next stages ahead of the World Bank’s Annual Meetings
in October in Morocco, sources tell Devex.

So far, they’ve found $50 billion in additional lending over the next 10
years, but Banga will be tasked with finding ways to increase this
figure and speed up the delivery.

More bipartisan, but more climate
Despite being nominated by a Democratic president and serving as an adviser
to the Obama administration, Banga is not perceived as especially partisan.
His nomination was welcomed by some Republicans and ran into almost no
opposition in Washington.

Should he have to ask Congress for money, his ability to work across the
political aisle will come in handy. Still, his worldview aligns with the
current White House, including on climate.

“My logic is that the climate aspect is not separated from development,”
Banga has said on different occasions. This echoes similar rhetoric from
the U.S. Treasury Department.

This language excites climate activists, who want to see the bank leading a
greener future.

But these hopeful expressions often run into the realities of the world.
For example, low-income countries, which historically have emitted the
least carbon, by and large, want the bank to focus on fighting poverty.

“Rather than pushing climate solutions that are conceived in and respond to
historically high-emitting rich countries’ green priorities,” Zainab Usman,
the head of the Africa Program at the Carnegie Endowment wrote in March.
“[The] World Bank’s climate finance should reflect borrower countries’
growth, poverty reduction, and industrialization priorities.”

Even climate devotees such as Claire Healy at the E3G think-tank have
warned that reforms at the World Bank “cannot be seen as the new Washington
Consensus imposed from the global north.”

Banga is being brought in precisely because he understands emerging
countries such as India, which are fighting extreme poverty while also
facing climate concerns, such as heat waves.

He brings a clear sense of ambition, which critics of the Malpass tenure
say has been lacking over the last years. But turning that gumption into
action is where the rubber will meet the road.

About the author

Shabtai Gold
Shabtai Gold is a Senior Reporter based in Washington. He covers
multilateral development banks, with a focus on the World Bank, along with
trends in development finance. Prior to Devex, he worked for the German
Press Agency, dpa, for more than a decade, with stints in Africa, Europe,
and the Middle East, before relocating to Washington to cover politics and
business."

https://www.devex.com/news/ajay-banga-faces-great-expectations-as-he-takes-helm-of-world-bank-105621#:~:text=Inside%20Development,politics%20and%20business
.
-------------- next part --------------
A non-text attachment was scrubbed...
Name: not available
Type: text/html
Size: 12943 bytes
Desc: not available
URL: <https://lists.cpunks.org/pipermail/cypherpunks/attachments/20230602/28d7a8ca/attachment.txt>