The New Development Bank is seeking a complementary and innovative approach from other international financial institutions.
Known as the BRICS bank, the major complementary role lies in the focus and resources, which will match the needs of emerging countries.
During the past few years, financial institutions such as the World Bank and International Monetary Fund have failed to tackle challenges in the developing world.
For example, while the BRICS, Brazil, Russia, India, China and South Africa, make up more than one-fifth of the global economy, they have just 11 percent of the voting power at the IMF.
Reform, as they say, has been slow at the IMF with numerous roadblocks.
In 2008 and again in 2010, quota reform was intended to double total financial commitments from all member countries, while at the same time giving BRICS countries a larger voting share. Because this required additional contributions by member governments of richer countries, several balked for different reasons.
The BRICS bank will have initial capital of $50 billion and will be equally funded by the five members. They will also have equal voting rights.
Within the next couple of years, the capital will be expanded to $100 billion. A reserve currency pool, worth more than $100 billion, will be established with China pledging $41 billion.
Capital will be used to finance infrastructure and "sustainable development projects" in BRICS countries initially. But eventually other low-and middle-income countries will be able to buy in and apply for funding.
The World Bank estimates that there is a $1 trillion infrastructure investment "gap" in developing countries. Existing multilateral development banks are able to fill approximately 40 percent of that.
As demand for infrastructure is expected to grow, the BRICS bank will give countries another, and possibly, better option. The new bank will also draw on the experience and expertise from other financial institutions, while promoting innovation and efficiency in its operational system.
As a multilateral financial institution, which is dominated by emerging economies, the BRICS bank will boost cooperation among developing countries. This will bring positive changes to the existing financial system.
BRICS countries have also created a $100 billion Contingency Reserve Arrangement. This is designed to provide additional liquidity protection to member countries during a "balance of payments" crisis.
Unlike the capital funding of the BRICS bank, which is equally shared, CRA has been structured slightly differently. China will provide 41 percent of the funding, with Brazil, India and Russia providing 18 percent, and South Africa 5 percent.
As far as internal governance is concerned, the bank will have its headquarters in Shanghai and its first president will be Kundapur Vaman Kamath, a veteran Indian banker.
Of course, China also plays an important role in the Asian Infrastructure Investment Bank. In fact, the two banks should complement each other because their business scope is different.
This week, the five BRICS countries will have a meeting in Moscow to confirm the bank's new leadership and map out the lender's plan for the next first five years. This will help the lender play a vital, and straightforward, role in the world.
