Why MDBs must double down on their added value as the world’s challenges grow more complex

 

Author: Dr Natalia Kryg, Principal Economist, EBRD Independent Evaluation Department

Contact: krygn@ebrd.com

 

What is the real value that Multilateral Development Banks (MDBs) bring to development finance?

For years, the answer has centred on a single word: additionality. At its core, this concept captures the unique role MDBs play in going where the market won’t—or can’t. Whether through long-term finance, greater risk-taking, or upstream policy engagement, additionality has long been the litmus test for MDB relevance.

But today, in a world grappling with deepening climate risks, growing fragility, and shrinking public finance, additionality has taken on renewed urgency. As governments strain to meet development goals and private capital grows more cautious, MDBs are being called upon to do more with less—and to prove that they truly add value.

That’s the spirit behind a new synthesis of evaluation insights across the MDB system, drawing on 86 reports from institutions like the EBRD, ADB, IFC, AfDB and EIB. The findings show that additionality is not a fixed benchmark—it’s a moving target that evolves with market context, maturity and institutional innovation.

Here are five lessons that highlight the changing face of additionality, and why it matters now more than ever.

1. Additionality is strongest at the start—but doesn’t last forever

MDBs often have their greatest impact early on, especially in fragile states or nascent sectors. But as private markets deepen, their unique contribution tends to fade. That’s not a failure—it’s a sign of MDBs success and a signal that MDBs must pivot: phasing out, handing over, or innovating.

Evaluations across institutions confirm that staying relevant means tracking how market gaps change over time and designing exit strategies that support long-term sustainability.

 

2. Local currency finance is a quiet but powerful game changer

When inflation spikes or currencies slide—as we’ve seen in many emerging markets recently—local currency (LCY) finance becomes a critical buffer. MDBs are often the only players able (or willing) to offer LCY loans in shallow capital markets.

From Uzbekistan to the southern Mediterranean, MDBs have helped clients avoid currency mismatches and access finance that would otherwise be out of reach. In volatile times, this form of financial additionality is more than helpful—it’s essential.

 

3. Non-financial additionality often matters more than money

MDBs don’t just bring funds—they bring trust. Their presence helps de-risk fragile markets, support policy reform, and signal confidence to hesitant investors. In fact, many evaluations suggest that these “soft” contributions are often the most enduring.

Examples abound—from regulatory improvements in Ukraine’s agribusiness sector to financial sector reforms in Jordan. These outcomes speak to the MDBs’ unique role as development partners, not just financiers.

 

4. Repeat deals aren’t inherently bad—but they require a sharp lens

Follow-on investments often raise red flags in additionality assessments. But repeat transactions can still be valid—if they stretch the envelope, introduce innovation, or support reforms that wouldn’t happen otherwise.

Evaluators increasingly call for better documentation and clearer articulation of “why now” when dealing with repeat clients. In a tight fiscal environment, clarity and accountability matter more than ever.

 

5. Evaluating additionality means evolving how we measure success

Perhaps the biggest takeaway is that additionality can’t be treated as a checklist. It’s dynamic, multi-dimensional, and deeply context-dependent. Evaluation needs to keep pace.

That means embedding forward-looking monitoring, tailoring metrics to market realities, and embracing both financial and non-financial forms of value. As MDBs face greater pressure to mobilise private capital for climate and development, evaluation must help sharpen strategic decisions—not just justify past ones.

 

Final thought

In today’s crisis-prone world—where development gaps are widening and resources are stretched—ensuring that public institutions are truly additional is no longer optional. It’s the only way to justify their role.

And for evaluators, that means asking not just what was done, but why it mattered—and whether anyone else could (or would) have done the same.

References

EBRD-IEvD (2025). Connecting the Dots: Additionality as a Catalyst for Change: Insights from Evaluation. Available here: Additionality as a Catalyst for Change: Insights from Evaluation