Ajay Banga President of World Bank: Poverty, development, BRICS and India

0:08So, first of all, Satsarayakal, IJay. So, thank you. Very good. It's an honor to have you here, the President of the World Bank. It's a pleasure to be with you, Nikolai. And the thing is that there are so many interesting things to talk about. I mean, the whole global situation, what you're doing in the bank, your background and so on. But let's just get some basics out of the way. What is the World Bank? So, the World Bank is an institution that has five components to it. And it was created back in the late 40s after the Second World War, essentially to help reconstruct Europe and Japan. Somewhere along the line, as that moved pretty well by the 60s, it re-diverted its focus onto eliminating poverty and spreading prosperity in the emerging and developing world.

0:51So the institutions inside the bank, the first one is the International Bank of Reconstruction and Development. That is what was formed back in the late 40s. And then there's IDA, which is the International Development Agency, which the difference between the two is IDA is concessional and lower-priced financing, including a lot of grants and basically zero cost financing for poorer, the poorest countries. So, you know, I have a relatively easy life because I got one boss. Now, who is your boss? So this is a very good question. In my case, it's the members of the executive board. There's 25 of them who represent the countries.

1:27Some countries get individual EDs, others share an ED with a bunch of other countries. It's them in truth who are the governance model for the head of the bank. Now, after you came in, you set some new priorities, more focus on climate, for instance. What are your priorities just now? So what I'm trying to do is to take the bank to remain focused on poverty and eradicating poverty, but on a livable planet. And what I mean by livable planet is to widen the aperture of the bank's way of thinking to include climate change, to include pandemics and their aftermath, to include fragility and refugees and food insecurity.

2:07so that those these intertwined nature are what we are focused on and how did you decide on these priorities so essentially through a process of consulting with civil society and government and that's where you come through this process the the one thing i will tell you nicola back to the point of uh what does the bank do well and it's this knowledge dissemination think of it as think of those being five verticals and you know of of what we do well the first one is focusing on people. Education, health, social benefit programs, that kind of stuff. The second one is prosperity in the world. That is jobs, economic growth, credit for small businesses, financial inclusion, capital markets and helping to develop them in a country, that.

2:54The third is the planet. That's mitigation, adaptation. It's not just energy, but it's also methane and, you know, it's all the practices around biodiversity and the like. The fourth one is infrastructure. That's bridges and tunnels and ports and roads and digital. And the fifth one, which is digital infrastructure, but also the use of digital to help in governance as well as consumers and businesses. And then the sixth is not a vertical, it's across the bottom. And it measures the result of these five on things like gender and equality of gender, on jobs for young people, on carbon emissions avoided.

3:35So think of the bank as doing this. People, prosperity, planet, infrastructure, digital infrastructure, caring about the result on gender, young people, and carbon emissions kind of stuff. That's the bank's role. And we'll come back to some of these. But just in the meantime, who gives you the money? Where do you get the money from? The money comes from donor countries. That's where it starts from. That's what they call the capital of the bank. And then the retained earnings of the bank over the years adds to that capital. And then we leverage that up through bonds, bonds like the ones that Norway and your institution buy.

4:08And these bonds, because we are rated at a AAA credit rating, they can be taken in at a relatively good price. And that enables the mix of financing across the poorer countries and others that we can use for different funding needs. So really, it's the generosity of the taxpayers in the more developed world that starts the process of how the bank raises its money. The US has between 16 and 17 % of the bank. What are the challenges associated with that? Well, in an increasingly kind of split world? Well, the shareholding of the International Bank of Reconstruction and Development, IBRD, is what you're referring to.

4:50And that is the US between 16 and 17. Japan is around 7. China is around 5. And then there's a sliding scale down there of the other countries and their shareholding. And the real challenge comes down to how do you manage these diverse shareholders? There is therefore a voting power that is reflected in that shareholding. But that actually is just a way to settle an issue in terms of voting. But in actual fact, what it means is that all these shareholders have a point of view on where they think the priority should go, what they think we should do, what they think we shouldn't do. Managing that is an important part of what you do.

5:29Is there a possibility that these ownership stakes will be adjusted to reflect the world in a better way? They have been adjusted in prior capital raising. The last capital raising was 2018. And I think the US came down a little and so did Europe and some of the other countries went up. Is there a possibility that they should be adjusted further? Absolutely. Will it happen in the near future? No idea. It depends when the next capital increase comes through. And then really these shareholders have to agree on an appropriate shareholding pattern. It's really not for management to be in that. It's their shareholding.

6:04I appreciate there are some limitations for how old-spoken you can be about global geopolitics. But if you look at China and the buildup of the BRICS, just how do you think this is going to develop going forward? And this counterweight to the World Bank, what are the issues associated with that? From the point of view of the World Bank, my belief is that the challenges in the world around, you know, that idea of eradicating poverty on a livable planet are way too big for us to get caught up in competitive issues on development. I don't believe that's the issue. I think we need more shoulders of the wheel.

6:43What I wouldn't want is fragmented shoulders because scale does matter in development and change. But I would want more shoulders of the wheel. The question is, can we work better together to help aim at some of these things? So for example, the Inter-American Development Bank, which operates primarily in Latin America. We've just done a deal with them by which we will focus together on the Amazon, on issues with climate in the Caribbean and its impact on the Caribbean nations, and how to use digital technology in the first case to help childhood learning and reduce the impact of what the pandemic caused.

7:19Now, that's one example. I should be doing something similar with the African Development Bank. I should be doing something similar with AIIB and so on. and that's what I'm trying to set up. I don't believe that this is an issue of us versus them or them versus somebody else. It's about how can we do this better together. And one of the challenges to solving the debt crisis in the highly indebted countries, when the debt is kind of so spread out, right? They borrow from China, they borrow from other countries, from you and so on. Just what other... It's very problematic because you have to get, first of all, a clear comprehension of what is the debt, when are the payments due, and how much are due.

8:00As you can understand, a lot of the countries either have covenants that are not similar, or in some cases, have actually asked the country that received the loan to not disclose the terms. So the first real issue is transparency, just getting the data right. Now, Zambia recently announced the debt restructuring, it did take everyone to put data transparently on the table. Bilateral creditors, including China and others, multilateral creditors and commercial creditors. And when you put that all together and you looked at what was required and then you restructured that and people have to take a haircut, including the commercial creditors.

8:43Now, you have an Indian background, even though you're a US citizen. Just what do you think it does to the buy-in you get on the global scene these days? I am surprised by how much of a difference it does make. I think it's not just the fact that I am an Indian by birth, but I did grow up in India. I was educated there and I spent the first 15, 16 years of my life working there. And then from there, I got involved with other emerging markets. I ran Central Europe, Middle East Africa for Citibank, and then ran Global Consumer for Citibank, and then ran Asia for Citi in 07, 08, 09. So as it turns out, even before I became the CEO of MasterCard and had a global job, this thing of living in the emerging markets and understanding them, I've learned in the last few months of travel that both countries as well as the individuals in those countries do have a respect for my knowledge on the ground.

9:41I do actually think I bring knowledge and expertise or what it's like. But, you know, I'm not the only guy who's an expert in the World Bank. The World Bank has 40 ,000, you know, between our full-time and our contractors and consultants. There are 40 ,000 people doing this, 55 % of whom live outside of the US, in-country, working on the ground with country partnership frameworks and strategies and projects and development. Those guys are the experts. So my understanding is important. My empathy is important. My clarity of vision is important. My leadership is important. But even more important are the people who back me up.

10:20Before we get back to your leadership, you were recently in India at the G20 meeting. From your point of view, what came out of that? Well, from the World Bank's point of view, very clearly, there's a lot of focus on MDB reform. and the message that came across clearly was that the G20 is solidly behind the idea of this poverty on a livable planet, but also about trying to ensure that a better bank working the right way should get the support of the G20 to also be a bigger bank. And I think the reality is the kind of money that's going to be required in these intertwined crises to really make a difference, There's not enough money in government or MDBs alone.

11:01We need more, for sure, but there's not enough in these. You have to get the private sector involved in a way that makes sense for the private sector. Because their capital and their ingenuity, whether they're operators or they're long-term investors, is going to be part of the solution. Now, you're in Oslo, not only to do this podcast, also to achieve some other things. What do you hope that Norway can contribute? So I'm really here for two things. One is to meet Norway and the country. And Norway has been both a thought leader, but also a financial contributor. And a thought leader in terms of gender and climate and domestic resource mobilization, topics that the Norwegian government and its people hold pretty dear, but also in its financial generosity.

11:43And, you know, everything from its contribution to the bank's general capital to its willingness to step up for the new instruments like hybrid capital that we're discussing are very much a part. They're also big contributors to IDA. And I'm here to meet the development minister, the central bank governor, and the prime minister tomorrow. The second part of what I'm here to do is to attend the Nordic-Baltic governor's meeting, which is the finance and development ministers of the Nordic and Baltic countries. and the World Bank president kind of tries to meet them once a year and really come up to speed on what they're interested in, what we are trying to do, because they are a very strong constituency of support for the bank.

12:27Changing tack a bit, we recently had Sam Altman on the podcast. Now, he thought that artificial intelligence would help global inequality. What is your take on this? I think AI and technology of this type is definitely part of evolution. You've got to embrace it. And if you think of all the good users of data, there's enormous, you know, from health to climate to development to learning. But like everything else, technologies unchecked can have consequences that don't always work very well. And I think thinking our way through how to create guide rails that allow innovation to grow in the field, but also ensure that the technology does the right things and is focused on the good that it's meant to do is going to be quite important.

13:19Absolutely. So that has to do with the regulation. But what about the uptake in poor countries? His argument was that today in the Western world, we have access to the best specialists. through AI, also in poorer countries, they will access to the best specialists. So, yeah, I think that technology of this type is a democratizer of that kind of thing. I mean, look at Google. When Google came, prior to Google, you had to have an Encyclopedia Britannica to figure out where Galapagos was. How many people could afford an Encyclopedia Britannica? But now it's free. You just go onto Google, type it in.

13:59Not only do you know where it is, you get 50 ,000 items to learn about them. So I believe that technology of this type democratizes knowledge and enables knowledge and the benefit of that knowledge to spread far and wide. So I'm all for it. But have poorer countries, do they have the infrastructure to really benefit in the short term? No, so not in the short term. But would the knowledge that comes from AI be useful to them? For sure. Will they then need to build or partake of some of that infrastructure to enable that knowledge to be converted to tangible benefits for their citizenry? Probably, yes.

14:34But, you know, Nikolai, you can't hold back these things. And I think you should embrace them as part of spreading knowledge. Now, you have a background from MasterCard, and we'll talk a bit about that. But the payment technologies and digital ID and so on, how is this going to impact the world? Oh, these are critical. I mean, look, less cash in the economy leads to more transparency in an economy. I used to joke about this, but it's not really a joke, that cash is the friend of the rich person, not the poor person. Because the poor person in a cash economy doesn't get counted. If they don't have an ID, if they're in a cash economy, they don't get counted.

15:19They don't get access to credit. They don't get insurance. They don't get the things you and I take for granted. And so, to me, an identity, which is digital, not just for financial inclusion, but for your dignity as a citizen of a state, the identity is required. Once you get that, to be able to use that identity to have access to financial services, education, services the state offers for health care, all that is important to me. Doing it in a way that protects the privacy of a citizen and is cyber safe as well in today's world of cybersecurity is kind of important. So this has to be done the right way.

15:59But I think a digital ID is foundational. Now, you did an unbelievable job at MasterCard. I think the share prize went up 20 times whilst you were there. 18 times. Well, from$20 to$360. Unbelievable. Now, what are the things you take from your life at MasterCard and bring into the World Bank? Well, there's lots, Nicola, that's in common. I mean, the idea of involving people and communicating with clarity, simplicity of vision, repetitive communication to make sure you take people with you, putting your arm around them to inspire them. The whole idea of people and culture, very, very interesting.

16:44Measuring things. So if you have simple visions of what you want to get done, having measurements that are clear and transparent to your people, very important. And celebrating success, very important. There's no difference between the private and the public sector on these aspects. What's different is who are you dealing with. In the private sector, your investors, your board, were a certain type of constituency. Civil society in the recent past has become more important to the private sector. And companies like MasterCard had embraced financial inclusion and inclusive growth earlier. So we were into civil society in various ways.

17:24But in my new life in the public sector, civil society is an important part of transparency using taxpayer money. What would you say were the main values at MasterCard? for a leader the values were three the first one was the willingness to have a sense of urgency meaning listen to people take their opinion but have a sense of urgency about taking a decision the second big value was thoughtful risk taking so you know you're never going to have perfect information but you collect the information you can and you have to be willing to take a risk because without risk, there is no reward and no arbitrage, which means that comes a third value.

18:09You will make mistakes when you take risk. You will not always win. If you make a mistake and you don't always win, it's okay because the idea is that empowerment and accountability go with your ability to take a thoughtful risk. Yeah, but the speed risk-taking and mistakes are not values that work well in a bureaucracy. Well, but they do. if you encourage people to think about them as part of who they want to be. They may not be at the same level. You may not have the same independence or the ability to take a decision as quickly because you have to involve more people in the public sector, just given the nature of the transparency.

18:48But the fact that you should be faster than you are today, the fact that you should be taking more thoughtful risks than you may be taking today, the fact that you should hold measurement of accountability and empowerment with you, I think those are pretty good values. How do you get speed into the World Bank? Many different ways. I mean, you look at how long it takes for a project to go from conception to approval to implementation. I consider that to be, in some cases, interminably long. Now, some of the reason that it's so long is the complexity. That's different. And, you know, there's one thing I'm telling everybody in the bank.

19:24Development delayed is development denied. And I think comprehending the social value of getting things done and getting them done quickly is quite important. You come to my office, you'll find I've got three little pieces of paper. One says, done is better than perfect. One says, fail smart and fail often. And one says, take the risk. And I believe in these. and I believe in them in the manner that empowers people to do something with them. At Mastercard, you were very good at sharing the benefits of the value creation and you had a lot of people participating in… Our stock ownership plans. Yes.

20:09Do you mind, without giving specific numbers, just how, what was the magnitude of that? How did the magnitude of that develop? So, Nigel, in my first year or so that I was there, the bank had, The Mastercard had just done its IPO a year, year and a half earlier, and had come out from being owned by banks to being publicly owned. And the level of penetration of stock ownership plans was in the tens of people. By the time I left, it was in the tens of thousands of people. Wow. And because the stock did well as we started this discussion, those who got stock early, of course, benefited even more.

20:45Those who got stock later in the cycle still benefited. I mean, listen, if you didn't get a 16x, but you got a 5x, I'll take it every day of the week. If you got a 2x, I would take it every day of the week. How many millionaires were created? Quite a few, thousands. So that's a good thing. Thousands of millionaires. It's a good thing. Do you think we as a long-term shareholder should advocate more strongly for those type of systems? I do. I believe that not only for the purpose of employees feeling that they have skin in the game and they own a part of what this institution is doing, but also, I think, for them to feel the pain and the pleasure of the company's performance.

21:25What you have to do, however, is to make sure that in the process, you don't incent them to do short-term things to goose prices. That's not a good thing. So ensuring, like in everything else, like our discussion on AI regulation, balance and guide rails are really important. But allowing people to feel that they're a part of growth and success, to me, is quite important in the private sector.

21:53Changing tacks a bit here, I believe you, well, tell us, I mean, you went from like not much to a lot, back down again and back up again a lot. Well, that's true of a lot of people. But I moved overseas relatively later. I studied and worked in India for many years and came out in the year 1996 when I was about 36, 37 years old with Citibank to come to London and then worked with Citibank for the next 13, 14 years before the next 12 years at MasterCard. And when I first came out with Citibank, even though I was a middle and senior middle level executive, I didn't really bring much. You couldn't bring any money out of India.

22:33Comp in India was relatively small. So I really had to build myself up with Citibank's performance. And I got paid in stock. And as the years went by, I did get paid a certain percentage of my income in stock. And it accumulated really nicely because the share did well and the bank was doing really well. And that allowed me to reach a substantial amount of wealth for me at that time. So much so that, you know, on a beach somewhere or teaching or doing something else. And then came the financial crisis. And what looked like a beach turned out to be a mirage because the value of that stock holding went from the tens of millions to the single digit.

23:13So what did you think? Well, I said, you know what? This is, life's dealt me this. Fortunately, I had no loans and no debt. So that is very helpful and a matter of stability and a very supportive family. And then I ended up in Mastercard and, you know, Mastercard did well. And now I look back and I'm very fortunate. When I tell everybody that life is 50 % luck, the other 50 % is what you do with the luck and how you handle it. But you got to have the luck. And I got the luck. Your father was in the army. How does that impact you? Well, my dad served all his life, his working life until he retired and then went on into medical research and hospitals.

23:54He, you know, you move often. My father moved every two or three years. So one of the things you learn very quickly is to make new friends, to try and find a way to become a part of a group in a school, to try and adjust and sort of become flexible in who you are. That, I believe, I did pick up. I just think it's second nature when you move that often. It's interesting because the CEO of ExxonMobil said the same thing. They also moved for army reasons. Darren Wood. Yeah. Yeah, yeah, yeah. And he thought he had added to his agility. It does because of the flexibility you learn. The second thing that it did was I watched my dad.

24:39And two or three things do come through. One is the idea of discipline in your life. Having a plan, trying to do things with it, caring about the plan, thinking things through, very important. but also leadership. You know, in the army, you're really leading people into danger. You're encouraging them to go towards danger. And that is not an easy form of leadership. And knowing how to take people with you is what I used to watch him doing. And his way of doing it, which I think I've tried to internalize, was one, curiosity in everybody. He had the same curiosity for the visiting general that he had for the guard at our gate.

25:20kind of interested in people. And the second was his willingness to relate to them and learn from each of them, which made him better. He kind of, this was second nature to him. And, but he was disciplined. He knew how to give an order and he knew how to take an order. And I think that's an interesting combination to pick up as you grow up. You kind of drink it in subliminally. You watch him, it comes into you. It's not something that he sits down in a podcast and tells you about. or you do drink it up. But do you think these interests in people can be taught or learnt? I think by watching and by caring about it, you absolutely begin to enjoy it.

26:02So I don't know whether it's teaching or learning as much as enjoying the process and enjoying what you learn from people. I love it. I get my energy from people. Yeah, I know. I can see that. And I share your view on this. People are the most important thing. I am a believer that if you empower people and if you choose them well and you give them the runway to succeed and you make them feel that your hand is on their back and not in their face, they will pay you back many times over in spades. What do you think is the best way to empower people? To have clear guide rules and vision on which you agree so that everybody is rowing in that direction.

26:43But then, and also guide rules on how to engage and where the risk taking should be. And then let them take decisions. And, you know, they will make mistakes. The trick is, can you tell them, if you make a mistake, let me know and I will help you. Hiding a mistake is kind of not a good thing. And so finding the right balance in all these communications with your folks, pretty important. Who else has influenced your leadership style? Oh, many others. I had my first real boss's boss's boss at Nestle, a guy called Barry Ryan, who was the managing director of Nestle in India when I was a young management trainee.

27:21Completely hands-on man, main levels above me. But, you know, he taught me a couple of things. One of the things he taught me was never take no for an answer. he said you know just because someone tells you that this was tried 10 years ago and it didn't work doesn't mean it won't work today or doesn't mean it wasn't badly executed so use your brains and see if something has changed between then and now are the assumptions still valid if not it might well be worth trying don't just take no for an answer and move on to the next item have a little bit of perseverance came from him another one that came from him was investing in people.

27:57He used to invest in trusting you, empowering you, caring for you, curiosity, ask you a question, you know, push the envelope to grow. And he was ambitious always. He always had an ambitious plan. And I think that combination came from Barry. I still think the world of Barry Ryan, still alive and living in Ireland and just an amazing man. Now, you worked at both Pepsi and Nestle in India. And well, I guess when you serve the Indian market, you need to think big volumes, low price. Has this influenced your thinking in any way? That's a great point. So not only is a big volumes, low price, it's low unit price, which is important.

28:41Because a lot of people will not buy a 500 gram pack of Nescafe, but they will buy a 100 gram refill sachet of Nescafe five times to get to the same coffee consumption, end up paying more in total per gram, but actually in affordable quantities that they can put the money into. So it's not just volumes, it's volumes at the right unit price that matter. And any of these influencing the way you think at the World Bank? All through. I mean, I always, I believe it's not just India. It is, you have to think through what makes that country, that situation tick, and then see whether what you're delivering can be tailored.

29:26So I used to call this in my old life in MasterCard, I used to call it global, as in global thinking, local execution. And I think the World Bank is very similar. Those five vertical practices I was telling you about, you know, people, prosperity, planet, and infrastructure, and digital, those are global practices. But delivering them locally every day on the ground is what our country teams do through country partnership frameworks and the like. And I think that's very important. One size fits all is not a good way to think. And yet, replicability and scalability of what does work adapted to the local market is kind of important.

30:04That's the only way you get speed in what you do. Ajay, you mentioned tick. What makes you tick? the feeling that I want to do well, the feeling that I want to do good, the feeling that my, you know, I can look at the mirror at the end of the day and say, I made a difference. I really, it matters to me. I, it matters to me that the people I work with should care that my heart is in the right place, should care that I'm using my energy and my brain to be helpful. all these kinds of, these softer side of what constitutes your personal feeling of success are very important to me. You mentioned taking risks.

30:45How do you personally think about risk-taking? Oh, I've taken risks in my life and career all the way. You know, if you think about leaving Nestle to join Pepsi, Nestle was a Swiss company, certain kind of fairly informed and careful culture, believing in investing in a country for 30 years kind of thing. Pepsi is far more American, far more of an aggressive company. Did that, left that and joined Citibank. How many people do you know who would leave consumer products and go to a bank? And I did. And I enjoyed it thoroughly. And then just when I had an opportunity to be one of the candidates to become a future CEO of the bank, I left to join MasterCard, which at that time was 4 ,000 people and 20 billion a market cap.

31:30and I was leading a company, which is many times the size of that, both in terms of people and market cap and brand name. But it worked out fine. And then I, you know, after 12 years at Mastercard, I retired and I had told the board that I would give them 10 years and then comes the World Bank. And I threw up all that to jump off the deep end into a public sector kind of institution with its own fairly interesting challenges to work on. I mean, if you don't call that risk-taking And during this period, you know, I've moved 10, 12 times. My elder daughter was in nine schools before she finished high school.

32:07My younger one in eight across continents. And so, you know, I'm lucky. Risk-taking is not just your own design. It's also your family who has to take those risks with you. And I've got a very supportive family. And that makes a huge difference. What is your most important way of learning? listening. I listen to everybody. I talk to everybody I can. I'm just, I'm curious. And I intake as much as I can from listening. I read. So what do you read? Briefing documents for a trip. If I were to get, you know, I get hundreds of pages by the time I'm going on a long trip and I read every page in every line and it matters.

32:51Now, internalizing it all is not easy when you're an outsider. But I do read. I read outside of this. I love reading when I get a chance. I read everything from, you know, biographies to books about history to novels, you know, just completely crappy novels to release my mind. I do all that. I listen to music of all types from Lady Gaga to queen to jazz to classical. I exercise, I travel, I love food, I collect wine. Good. Now we have tens of thousands of young people listening to this podcast. What would be your advice to them? I think for young people, their future, their energy, their optimism is what excites me.

33:46For that to be channeled well and used well, they should use their time. They have one precious life and they should enjoy that life and learn as much as they can and do as much with their life as they possibly can. Take as many risks, thoughtful risks, as you possibly can in your life and career. Don't allow yourself to get bored. It's only one life. Just don't allow yourself to do things you don't want to do. Yeah. Well, for sure, it seems like you are certainly not bored in your current job. And Ajay, it's been a true pleasure to have you on. Good luck with your super important work. It's never been more important what you do.

34:23So all the best of luck. Thank you. I'm going to need those good wishes. Thanks very much. Thank you.