Patterns of lending and the role of influential shareholders
For the purpose of this paper, a key question is how the size and the pattern of
disbursements by the two institutions reflect the interests of their shareholders. Two
questions spring to mind. Are such institutions just devoted to provide global public
goods such as financial insurance to their members, the stability of the international
financial system or the reduction of poverty? Or are there influential shareholders that are
relatively more successful than others in pressing their national interests and have a
disproportionate impact on the lending policies of these institutions?
Concerning the first question, our analysis so far shows that disbursements, particularly
by the IMF, were strongly affected, at least in the 1990s, by the outburst of currency
crises and, hence, at least implicitly by the desire to limit the national and international
repercussions of national or regional financial instability. Moreover, both institutions
have repeatedly asserted their commitment to poverty reduction, which in itself, and
given the respective means of action, should be a much greater concern of the World
Bank than the IMF.
Assessing the role of influential shareholders’ interests is relatively more complex.
Powerful shareholders may be keen to promote their national interests by channeling IFIs
resources toward those borrowing countries to which they are most closely linked in
political, ideological, historical, commercial, or financial terms. Unfortunately, some of
these factors are not easily amenable to quantitative analysis. Geographical links are by
definition quite stable and their impact hard to identify, particularly in a time series
context. It would be hard to tell for instance whether geographical proximity to the US or
cultural affinities with Europe is predominant in affecting the pattern of disbursements to
Latin America. Similarly, it is difficult to assess whether Sub Sahara Africa receives
relatively more funds, as a percentage of its GDP, because of its historical (colonial)
connections with Europe.
Commercial and financial links instead are easier to measure and their effects can be, at
least in principle, identified. Trade relationships between US and Latin America have
often been mentioned as a major cause of the protracted intervention of IFI’s in the
region (Bulow and Rogoff, 1989). Similarly, the need to preserve the stability of the US
banking system in the aftermath of the 1982 debt crisis was seen as a main motive for
pushing the two IFI’s to increase their lending to the region.
Even so, assessing the impact of trade and economic links on the behavior of influential
shareholders and on the pattern of lending is a complex task. The simplest case would be
if a lending institution were run under the influence of a single shareholder. We call this
the monopoly case. Lending decisions would then be mainly determined by the
commercial and financial interests of the ‘monopolist’. Borrowing regions that have
strong economic links with the monopolist would be favored in the allocation of lending.
Alternatively, there may be a “collusive oligopoly” setting, where the main shareholders
cooperate to advance their joint interests. Differences in the bargaining power between
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