INFORMING THE APPROACH OF MULTILATERAL DEVELOPMENT BANKS TO USE OF COUNTRY SYSTEMS

The document examines the shift by multilateral development banks (MDBs) toward using a borrower country's own domestic public financial management (PFM) and environmental and social frameworks (ESF) rather than imposing external rules. While UCS promotes national sovereignty and reduces duplication of costs, its adoption is hindered by MDB concerns over financial and reputational risks, as well as capacity gaps in borrowing countries. Case studies reveal divergent attitudes: South Africa views UCS as a right, Kenya prefers a hybrid approach, and Morocco is pragmatic, accepting MDB systems where domestic gaps exist.

• The 'use of country systems' (UCS) approach aims to respect national sovereignty and increase project sustainability by utilizing domestic legislation and institutions instead of external MDB conditionalities.
• MDBs face significant financial risks when employing UCS, particularly 'process risks' within four PFM pillars: budget, procurement, audit, and reporting, where mismanagement can damage the bank's credit rating.
• The implementation of UCS is hampered by the rigidity of MDB 'equivalence and acceptability' tests, which often force borrowing countries to mimic MDB standards rather than adapting to local contexts.
• Procurement is a highly contested area of UCS because MDB rules often prohibit domestic preferences, conflicting with developing countries' goals to use procurement for industrialization and job creation.
• Case studies show distinct national attitudes toward UCS: South Africa views it as non-negotiable; Morocco is pragmatic, using MDB systems for specific weak functions; and Kenya accepts a 'hybrid' system.
• Parallel safeguard systems create excessive costs; for example, a World Bank equivalence assessment for one country can cost approximately $104,000, and domestic environmental impact assessments in Morocco are significantly cheaper than those required by the World Bank.
• The Morocco Sustainable Energy Financing Facility (MorSEFF) demonstrates a successful risk-mitigation model by channeling funds through local private financial institutions, achieving up to 90% UCS with less than 3% financial mismanagement.
• Reputational risks for MDBs are often driven by pressure from international NGOs and shareholders, such as the US Congress, which may prioritize Northern environmental concerns over the acute needs of borrowing countries.
• Capacity constraints are a major barrier; MDBs often lack sufficient ESF-related personnel, and capacity-building efforts are frequently undermined by 'brain drain' as trained officials leave for higher-paying private sector jobs.

APA

Prinsloo, C., Markowitz, C., Jamea, E. M., & Owino, K. (2017). INFORMING THE APPROACH OF MULTILATERAL DEVELOPMENT BANKS TO USE OF COUNTRY SYSTEMS. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2017/09/GA_Th1_DP_Prinsloo-et-al_20170920.pdf

Chicago

Prinsloo, Cyril, Chelsea Markowitz, El Mostafa Jamea, and Kwame Owino. INFORMING THE APPROACH OF MULTILATERAL DEVELOPMENT BANKS TO USE OF COUNTRY SYSTEMS. South African Institute of International Affairs, 2017. https://saiia.org.za/wp-content/uploads/2017/09/GA_Th1_DP_Prinsloo-et-al_20170920.pdf.

Wikipedia

{{cite report |last1=Prinsloo |first1=Cyril |last2=Markowitz |first2=Chelsea |last3=Jamea |first3=El Mostafa |last4=Owino |first4=Kwame |title=INFORMING THE APPROACH OF MULTILATERAL DEVELOPMENT BANKS TO USE OF COUNTRY SYSTEMS |publisher=South African Institute of International Affairs |date=September 2017 |url=https://saiia.org.za/wp-content/uploads/2017/09/GA_Th1_DP_Prinsloo-et-al_20170920.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{prinsloo2017informing, author = {Prinsloo, Cyril and Markowitz, Chelsea and Jamea, El Mostafa and Owino, Kwame}, title = {{INFORMING THE APPROACH OF MULTILATERAL DEVELOPMENT BANKS TO USE OF COUNTRY SYSTEMS}}, institution = {South African Institute of International Affairs}, year = {2017}, month = sep, url = {https://saiia.org.za/wp-content/uploads/2017/09/GA_Th1_DP_Prinsloo-et-al_20170920.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }