Development Lending and Institution Building

Development is a process which involves change, change from a state of under-development to better conditions of life. It is in terms of this process that the term “developing nations” is used to describe the countries with a backward economy which they are in the process of developing. If development involves change, the institution-building that goes with it can also be described as institutional change. Development lending is thus, by definition, linked with institutional change. Any development needs institutions that meet its operational requirements, and the creation of such institutions often affects vested interests. Thus development lending and institutional change often involve conflict between reformers and those with vested interests within the borrower country.