Leader for change

Ajay Banga was recently named the new head of the World Bank. Can he carry out the reforms needed to steer the global institution into the future of climate financing and pandemic preparedness, or is his appointment a poisoned chalice?


Even at a time of unprecedented globalisation, uniting 187 countries behind a single vision is a tough ask. Yet that is exactly what the World Bank, under its new president Ajay Banga, is attempting to do. Recent years have shown that developing countries around the world face an increase in barriers to development, with the climate crisis, recovery from the Covid-19 pandemic, and an ongoing war in Europe all having far-reaching impacts.

Questions have swirled about the purpose and significance of the World Bank, which operates with the aim of eradicating poverty. However, as Banga wrote in an opinion piece for Project Syndicate soon after his appointment, “While questioning its relevance, the world is looking to the 78-year-old institution to deliver solutions at scale. To do that, the bank must adopt a new vision and mission that is worthy of our shared aspirations. In my view, the vision for the World Bank is simple: to create a world free of poverty on a liveable planet.”

While many would agree with Banga in principle, the price tag for delivering this expanded mission statement will be hefty. International development experts have said transitioning to clean energy would require financing in the trillions of dollars, not only requiring a larger World Bank but also a significant chunk of funding from the private sector.

Having been in his role heading up the World Bank for less than a year, it is still difficult to determine whether Banga can carry out the reforms needed. Many are positive, however, about his prospects. “Ajay Banga has made a terrific start as World Bank President, energising an institution which has drifted in recent years,” Vasuki Shastry, a journalist who has held senior roles at the International Monetary Fund, Standard Chartered Bank and elsewhere, told World Finance.

Yet he pointed to the urgency with which Banga will need to address the question marks surrounding the bank. “Building on the goodwill his appointment has generated, Banga needs to quickly address fundamental questions about the bank’s business model. Is it the world’s climate or the world’s development bank?” Banga believes it can be both, but to make that a reality he must convince others.

A global view
World Bank reform is at the top of the international agenda, Clemence Landers, senior policy fellow at the Centre for Global Development, told World Finance. “But the spotlight on the bank may prove to be somewhat of a poisoned chalice for Ajay Banga. Indeed, there are great – in some quarters, astronomical – expectations for what World Bank reform can deliver,” she said. At a time of such upheaval and high expectation, not everyone would be confident enough to dive in, but a look back on Banga’s career trajectory shows the development of a leader who would become a perfect fit for the World Bank.

Banga, who was born in Pune, in the Indian state of Maharashtra, in 1959, is now recognised as one of the world’s top business executives, and he began his education at Hyderabad Public School and the St Edward’s School in Shimla. He then gained a bachelor’s degree in economics from St Stephen’s college in New Delhi and an MBA from Indian Institute of Management-Ahmedabad (IIM-A), which is one of the country’s top business schools. Although in a speech for the 50th annual convocation of the IIM-A he admitted that he “had no clue” what he was going to do with his life, he had an instinct that would prove to shape his entire career: join a firm with global reach.

“That was my grand plan: get with somebody good. Get with somebody global. Do something that interested me,” he said in his speech. Banga’s drive to join a large organisation led him to Nestlé, where he began his career as a management trainee in 1981. He steadily worked his way up over 13 years before moving over to PepsiCo, where he helped to steer the launch of fast food franchises Pizza Hut and KFC in India. In 1996, Banga made a shift to the financial services industry, joining Citigroup and quickly rising through the ranks to become the business head of CitiFinancial. In 2008, he was named head of the Asia-Pacific region. By this point in his career, he had lived and worked in the US for several years, and he obtained US citizenship in 2007.

Following his long career at Citigroup, Banga was poached by Mastercard in 2009, joining as president and chief operating officer. In less than a year, he was handed the reins as CEO, and he served there for a decade. In his role at Mastercard, Banga oversaw significant growth, including a tripling of revenue and a 16-times growth in its market capitalisation. Over his tenure, he transformed the business from a payments network focused on serving banks to a technology and data services company that connected people, governments and businesses of all kinds. Throughout his time at Mastercard, Banga’s public profile grew, and he was presented with a number of lofty positions, including heading the US-India Business Council in 2012 and being appointed by former president Barack Obama as a member of the Advisory Committee for Trade Policy and Negotiations in 2015. In 2021, two years before his appointment at the World Bank, he left Mastercard for global growth equity firm General Atlantic, where he was vice chairman, advising on strategic matters for the firm’s portfolio of more than 165 companies around the world.

Banga believes that to be a successful leader, one must develop a global focus, telling students at IIM-A, “The key is to go beyond looking at the world through the lens of your company or your organisation or even your country.” Taking up the top position at the World Bank, an organisation that provides billions to developing nations every year, seems a natural next step for Banga, and the Bank’s mission to eliminate poverty ties in well with his personal philosophy of doing well and doing good. As he said in his convocation speech, “Both the private and the public sector have a role to play in the following: bring[ing] more people into the financial mainstream – at a time when half the world’s adults don’t have a bank account, guard against a future where we have the Internet of Everything, but not the Inclusion of Everyone, give women [the] same opportunities as men.”

One and all
Inclusivity has been a key message throughout Banga’s career, and with his appointment at the World Bank, he not only brings a drive to improve financial inclusivity around the world, but also a viewpoint shaped by different experiences than the vast majority of the institution’s previous leaders. In addition to Banga’s strong credentials, he holds an American passport, which is an informal prerequisite for the president of the World Bank. But equally importantly, his upbringing took place outside the US.

Since the founding of the international financial institution in 1944, the US, as the largest shareholder, has nominated and chosen its leader. On the other side of the Atlantic Ocean, the head of the International Monetary Fund (IMF) has always been chosen by western European nations. Previous heads of the World Bank include bankers and economists who were all, notably, American, while leaders of the IMF have historically always been European. These conventions have been called into question in recent years, with Mark Sobel, chair of the US Official Monetary and Financial Institutions Forum, saying in 2019 that it was time for a non-American to lead the World Bank.

Leadership attributes are tremendously facilitated if you surround yourself with people who don’t look like you, don’t walk like you, don’t talk like you, and don’t have the same experiences as you

“The changing global economic landscape makes the convention outdated,” he wrote. A non-American president would entrench the World Bank as a global institution, he argued. “In the past, the international financial institutions were closely associated with hegemonic US priorities. Yet this is far less the case today. Choosing a president who is neither American nor European would enhance the global standing of the fund and bank. That would helpfully counter the drift toward regionalism, when opaque Chinese official lending is challenging the scale of, and standards for, multilateral finance – undermining debt sustainability in many countries.”

With the nomination of Banga, US president Joe Biden stuck to the letter of the informal agreement while also seemingly attempting to address the voices clamouring for a break from convention. In fact, as well as praising his three decades building and managing successful, global companies, Biden noted that Banga’s background made him uniquely qualified for the job. “Raised in India, Ajay has a unique perspective on the opportunities and challenges facing developing countries and how the World Bank can deliver on its ambitious agenda to reduce poverty and expand prosperity,” Biden said.

Banga himself has spoken of the benefits of fostering inclusivity. “Leadership attributes are tremendously facilitated if you surround yourself with people who don’t look like you, don’t walk like you, don’t talk like you, and don’t have the same experiences as you,” Banga said to students at IIM-A. He went on to explain that a lack of diversity results in homogenous thinking. “Diversity is essential because a group of similar people tends to think in similar ways, reach similar conclusions, and have similar blind spots. To guard against that, you need to harness the collective uniqueness of those around you to widen your field of vision – to see things differently, to fail harder, to innovate, and to question everything,” he said. “Widening that field of vision means widening your worldview.”

A new playbook
Banga’s inclusive perspective is more than just talk. Soon after his appointment in June 2023, he announced he would be embarking on a months-long global tour as part of his aim to write a new playbook for the World Bank. By visiting multiple countries in every region where the bank operates, he was tasked with getting to know the areas in which the bank operates on a deeper level, rethinking the bank’s strategic partnerships and identifying opportunities to boost private sector investment.

Development, the bank has acknowledged, has become more difficult in the face of several intertwined challenges: poverty, climate, pandemics, conflict and fragility. These forces have “eroded a decade of progress in a matter of months,” the institution said in a press release. During his global tour, Banga said countries around the world are experiencing these challenges differently. “The World Bank Group must reach out to all of them and we need a new playbook to do it.”

Banga has asked staff to help him write the bank’s new playbook by thinking creatively, taking informed risks and forging new partnerships. Risks are nothing new for Banga; he has built his career taking what he calls “thoughtful risks.” Being willing to make a decision when you don’t have all the information, he said at IIM-A’s convocation, is what it means to take a thoughtful risk. “The thoughtful part depends also on your humility and realising that you don’t have all the answers – that you can learn something from everybody,” he said. Yet in many cases for Banga, the topics and issues that are at the top of his agenda as president of the World Bank are familiar, having been key priorities for him throughout his career. Homi Kharas, a senior fellow with the Centre for Sustainable Development at Brookings, the non-profit research group, pointed out in the group’s podcast, The Current, that Banga in 2014 launched Mastercard’s Centre for Inclusive Growth, which advances equitable and sustainable economic growth and financial inclusion around the world, “well before many of these things became fashionable in development circles. So the chances are that these are things he truly believes in,” Kharas said.

The climate question
A key focus of Banga’s efforts is to update the World Bank’s mission statement to focus on eliminating poverty ‘on a liveable planet.’ Banga explained on his tour, “What I mean by liveable is climate, but also pandemics, and also fragility and food insecurity. How do you eliminate poverty if you can’t breathe, you don’t have clean water, you’re scared of Covid and you’re a refugee, and you can’t eat? I don’t understand how these are either-or. To me, they’re together.”

Banga’s view on climate change makes a stark change from David Malpass, the previous head of the World Bank who was appointed by former president Donald Trump. Malpass had been criticised for his approach to climate change, with Al Gore, a previous US vice president, calling him a climate denier after he wouldn’t say whether he thought fossil fuels were driving climate change. Malpass announced his retirement about a year before his term was due to end to “pursue new challenges” – but this conveniently coincided with US Treasury secretary Janet Yellen’s push to reform multilateral development banks like the World Bank. Following his nomination of Banga, Biden credited his “critical experience mobilising public-private resources to tackle the most urgent challenges of our time, including climate change.” Banga had been an advisor to General Atlantic’s climate-focused fund, BeyondNetZero, when it was created in 2021.

Kharas agreed that Banga’s plan to tackle climate change is a common-sense one. “We have to think about development, economic development, with an understanding that this is now economic development in the context of climate change. And if you don’t integrate your activities on climate, in particular on adaptation and resilience with your activities on development, you’ll get neither the one nor the other. You’ll fail on both. So it’s very much of an integrated agenda.”

Indeed, with many of the nations that are most vulnerable to the impacts of climate breakdown already living in extreme poverty, increasingly common disasters like hurricanes, earthquakes and floods will impact on their infrastructure and ecosystems, likely pushing them further into debt. Expanding the scope of the bank’s mandate will require additional funding – the World Bank simply can’t do it all on its own. What will the bank do to boost its resources, and how will Banga persuade stakeholders of the need for a far larger World Bank?

Forging partnerships
In 2022, Yellen announced efforts to reform the bank, after an independent report for the Group of 20 economies (G20) found that development banks could free up hundreds of billions of dollars by adjusting their balance sheets and taking on more risk. The bank’s steering committee has endorsed an ambitious set of reforms including balance sheet changes that will boost the bank’s lending by $50bn over 10 years while crucially maintaining its AAA credit rating.

It is no surprise then that Banga and Yellen have agreed that the bank must work to harness more private capital. A recently formed ‘private sector investment lab’ for the World Bank held its inaugural meeting in September at the UN general assembly. Forging these partnerships is critical to Banga’s success. “One of Banga’s signature achievements may well be in bringing the private sector to play a more prominent role in development and climate finance,” Shastry told World Finance. The first-of-its-kind committee of CEOs are brainstorming solutions, and many industry commentators are optimistic about the partnerships that can be developed.

However, while many would like to see the World Bank “make a quantum leap forward in terms of the volumes of finances it provides poor and middle-income countries,” Landers told World Finance, there are “a lot of somewhat unrealistic expectations out there around how much the bank can grow its balance sheet through financial innovations, and shareholders’ willingness to put in big amounts of fresh new capital.” What’s more, in addition to finding partners for funding, Banga must also work closely with individual countries to understand the impact of integrating climate and development work, including managing the transition in countries whose economies rely heavily on fossil fuels like coal. “Many developing countries are dependent on fossil fuels for their public finances,” Kharas said. “In fact, if you look at the continent of Africa, a lot of the tax revenue in Africa comes from energy sources, whether it’s oil or gas or coal or other kinds of natural resources, they need to manage a transition, which is not going to be easy. And that’s where I think having a partner like the World Bank can be very helpful.”

Challenges ahead
While Banga is laser-focused on boosting the bank’s function to deal with climate change, “he will face considerable headwinds as the US-China strategic competition will conflict with his expansive agenda,” Shastry said. Another reason western nations are backing a larger role for the World Bank is to give developing countries more funding options to reduce their dependence on China. “It is essential that we offer a credible alternative to the People’s Republic of China’s coercive and unsustainable lending and infrastructure projects for developing countries around the world,” the White House said in August.

Banga’s career trajectory shows the development of a leader who would become a perfect fit for the World Bank

Yellen echoed this sentiment in a speech to a US House of Representatives committee, where she said World Bank loans “serve as an important counterweight to non-transparent, unsustainable lending from others, like China.” Despite this, Banga has said he “doesn’t view China as a rival” in providing funds to developing countries. “You need everybody at the wheel,” he said in an interview for Bloomberg.

Banga’s optimism for the task at hand is evident, but Landers warns that transforming the World Bank will not be a simple task by any means – and if “the stars don’t align” his work will be nearly impossible to accomplish. “He faces two equally daunting challenges,” Landers said. “First, the bank is a notoriously hard tanker of an organisation to steer in a radically new direction. Second, he will need to forge a consensus vision amongst a group of countries who are increasingly far apart in the context of today’s fragmented geopolitics. The first task requires a seasoned manager. The second task, a shrewd diplomat. It’s an uphill but not impossible feat to pull off.”