The World Bank Financial Intermediary Funds as a Multilateral Mechanism to Channel Assistance to Politically Unstable Regions: The Case of the Middle East and North Africa Transition Fund

Abstract

In recent years there has been a steady growth of “multi-bilateral aid,” or voluntary earmarked contributions transferred by international donors through multilateral organizations. The World Bank Group’s financial intermediary funds (FIFs) and trust funds have gained an especially wide recognition and have been particularly instrumental in channelling aid to fragile states — a priority group of partners for achieving the United Nations’ sustainable development goals. But researchers have paid much less attention to FIFs than to trust funds.This article identifies characteristic features of World Bank IFIs as a multilateral mechanism to channel aid to politically unstable regions, focusing on the Middle East and North Africa Transition Fund (MENA TF) established in 2012 to support Arab countries undergoing political transitions as a result of the Arab Awakening. The introductory section examines the particularities, benefits and risks of establishing FIFs as multilateral mechanisms to transfer development assistance. These parameters are illustrated in subsequent sections which discuss the MENA TF’s establishment procedures, governance structure, and mobilization and allocation of funds.The article concludes that for each of the parties involved, hypothetically, World Bank FIFs are a quite convenient mechanism for supporting fragile states. However, the example of the MENA TF conclusively shows that everything depends on the concrete political context of their establishment and operation. In terms of some key parameters (establishment procedure, governance structure) the MENA TF mechanism is very similar to other funds of the same type, but its operation is strongly affected by challenges uncommon to the majority of FIFs, which are focused on more politically neutral sectors. These challenges stem from several factors, including the predominance of political decisions within the Deauville Partnership, a unique list of contributors, and a severity of discord among them given the drastic deterioration of the political climate in the Arab world and beyond in 2014. This not only disrupted plans to engage more donors and mobilize the planned amount of funds, but it also stipulated a visible politicization of aid allocation. Political risks which materialized in the MENA TF operations might occur in other FIFs focused on fragile states and situations. The establishment of additional multilateral mechanisms, thus, requires learning from experience and prioritizing risk assessment and mitigation.