'Trillions of dollars' needed to fight global poverty, says World Bank nominee Ajay Banga

US President Joe Biden nominated Indian-American business veteran Ajay Banga to lead the World Bank (Image: Reuters)

The multilateral lender should facilitate private-sector involvement in fighting poverty by shouldering the kinds of risks that conventional investors struggle to understand, said Ajay Banga, according to a report by NIKKEI Asia.

Banga was recently nominated by US President Joe Biden to lead the World Bank after the World Bank's current leader David Malpass announced plans to step down early.

Ajay Banga, the former CEO of Mastercard, told reporters in Tokyo that the war in Ukraine, the COVID-19 pandemic, and other reasons have all slowed down or perhaps halted progress in reducing poverty globally.

In order to address these issues, "trillions of dollars a year" will be required," he said. These investments must be "larger than what multilateral banks have, larger than what even the most generous governments, including the Japanese government, have. We have to involve the private sector."

According to the report, Banga recommended that the World Bank try to develop a "facilitating environment" for private investors. Anything from supplying data or project management expertise to accepting risks that defy analysis by investors like asset managers or pension funds would be considered this form of assistance.

"The private sector can deal with the risk of putting up a project and running it. It cannot deal with political risk or with excessive volatility, or with things that they don't understand," he said.

Banga believes that powerful institutions like multilateral banks need to take some of the unknown risks so that the private sector can efficiently navigate known risks and, in the process, reduce the cost of capital for borrowers.

"The scale of investments required for fighting inequality and climate change, and boosting productivity and growth, is in the many trillions of dollars each year. The bank should build on the recommendations of the G20 Capital Adequacy Framework to stretch every dollar it has. But working alone, it will fall short of what’s required. All multilateral development banks must work in tandem to maximise impact," Banga wrote, in his column in Financial Times, adding that more is required.

According to what he wrote, collaborations between civil society, the government, and private enterprise must be expanded. Banga said the World Bank may provide technical assistance, financial backing, and policy support to act as a catalyst in igniting the private sector's response to the issues.

Banga, an Indian-born employee of Citigroup, held senior positions there beginning in 1996, including that of head of the Asia-Pacific division. He joined Mastercard in 2009 and was named CEO the following year. He held that position for a little more than ten years. Revenues for the company more than tripled while he was in charge.