Our eyes should be on how well the European Investment Bank is lending money in the developing world.

The frisson of excitement that has greeted the ambitious suggestion by Michel Camdessus, the former head of the International Monetary Fund, to create a new body called the European Development Bank (“Radical reforms to European lending”, 4 March) overlooked one key point.

The main remit of the group of experts led by Camdessus was not to peer into a crystal ball; rather, national governments and the European Parliament tasked the group to assess the “relevance, performance…consistency with the relevant EU external policies and strategies and of the additionality and value-added of European Investment Bank external operations”.

How much value, then, has been added by the external lending of the European Investment Bank (EIB)? According to the Lisbon treaty and a European Court of Justice decision from November 2008, that lending must bring about sustainable development and reduced poverty.

The EIB has recently claimed that investments into, for example, mining industries in African, Caribbean and Pacific countries “create permanent direct and indirect jobs, offer training that contributes to local skills, and provide health, education and sanitation infrastructure to local communities”.

But consider the case of Zambia. Between 2005 and 2008, the EIB loaned €150 million to Zambia’s mining sector (equivalent to three-quarters of its active portfolio in the country), mostly to Western multinationals. Not only did the EIB’s concentration on mining ignore the priorities set in the country strategy papers agreed by Zambia and the European Commission (in which the mining sector is not listed as a priority), but it also failed the test of poverty reduction.

That investment created jobs, but they were low-paid, sub-contracted jobs with few, if any, benefits attached and with little, if any, job security. The companies funded by the EIB have often degraded the local environment and damaged local communities. These companies have taken on no responsibilities to maintain or develop the social infrastructure in the region, they have paid very small mining royalties, and they have sought years of tax breaks.

These realities are not restricted to Zambia or to the mining sector. The EIB’s external lending is far too often unable to square some well-intentioned EU goals with the bank’s choice of commercial beneficiaries and projects. This failing is compounded by the bank’s hands-off approach, which sees it disburse money but spend too little time overseeing and evaluating how its projects are executed.

Insufficient scrutiny of these failings ought to have been remedied by the Camdessus report. Instead of getting ahead of themselves with talk and conjecture about a new mega-development bank, the Parliament, the Commission and the Council of Ministers would do well to stick to the here and now – and strive to ensure that the EIB’s multi-billion lending outside the EU considers the interests of people and their environment ahead of the interests of big business. Longer-term, radical changes will be needed at the EIB if it is to become involved in development lending in any real sense.

By Desislava Stoyanova