Strengthening the Foundations? Alternative Institutions for Finance and Development

ABSTRACT The 21st century has ushered in the emergence of alternative institutions for liquidity provision and development finance, many of which are Southern‐led. The special issue that follows this Introduction assesses the extent to which existing theoretical perspectives and tools are sufficient for evaluating the implications of these alternatives for the global financial architecture. Our analysis finds that while an increasingly varied landscape of diverse institutions designed to foster financial stability and development comes with inherent risks, these new forms of finance bring real benefits to an architecture that has long been deemed insufficient. Larger and more capable Southern‐led institutions not only mean additional sources of financing for emerging market and developing countries, but also could increase their voice in an international financial architecture long dominated by the most advanced economies. That said, the variation in the landscape could create inequities and fault lines between new and existing institutions, which will be difficult to overcome through the coordination of a fragmented and diverse system. Finally, despite the increases in capital for liquidity provision and development made available by these new institutions, significantly more financing and coordination will be needed to achieve financial stability and economic development on a global scale.