It is to be noted that the great strength of the MFIs is their ability to access global capital on the sovereign ratings of their largest shareholders. Even the regional institutions are predominantly owned by developed economies. In effect, they have been intermediating between savings in the developed economies and investment in emerging ones. Without these high-rated economies, the new institutions are constrained in their ability to raise funds by the relatively lower ratings of their shareholders. Of course, this is not their intent in any case. In both institutions, Chinese resources, as reflected in their huge foreign-exchange reserves, will constitute a significant proportion of the capital base. But without the capacity for leverage that the MFIs have, the lending capacity of these new institutions will be relatively small. Then, of course, there is the concern that China will effectively control the lending agenda, ensuring that all the projects financed are consistent with its strategic interests. As lopsided as the governance structure of the MFIs may be, there is some protection against its complete capture by a single dominant interest. This will be much more difficult in institutions owned and financed by a smaller number of countries, with one of them clearly dominant.
Nevertheless, in a larger picture, these banks can be seen as the first steps in creating a financial architecture based exclusively on development objectives and funded exclusively by emerging economies. Governance and operating principles will take time to emerge through what will almost certainly be a contentious process, but that is how things work. India's need for infrastructure finance is so large that no door should be closed. These experiments may or may not work, but the process has to be set in motion.