The leaders of the Brics countries – Brazil, Russia, India, China and South Africa – have signed a treaty in the Brazilian city of Fortaleza to launch a Brics development bank.

The bank will rival the US- and European-led World Bank and its private lending affiliate, the International Finance Corporation, which have dominated development finance since the second world war. The Brics bank is positioned as a financial institution that will provide developing countries with alternative funding minus the punishing strings attached to World Bank lending, which strip recipient countries of the power to make their own policies. It also promises to make lending processes for developing countries faster, simpler and cheaper.

The Brics members will set up a $100bn contingency reserve pool (called the contingent reserve arrangement, or CRA), to help members who face sudden foreign capital flights. China will contribute $41bn, Russia, Brazil and India $18bn each, and South Africa $5bn.

Developing countries have long failed to get industrial nations to either give them a bigger say in decision-making at the World Bank and IMF, or to get these institutions to ease up on punishing and inappropriate structural adjustment programmes (that wealthy countries themselves would never implement in their own economies) in return for funding.

The new bank and the contingency fund are therefore the first real and practical attempts by developing countries to create a monetary, development-finance and trade alternative to the IMF, World Bank and the dominance of the US dollar.

The bank’s creation will have to be ratified by the parliaments of the individual Brics countries. The hope is that it will start lending two years after ratification. But disputes over such things as voting rights and where the bank should be situated have so far delayed this process. China lobbied to host it, but India feared the domination of Chinese financial institutions. South Africa wanted Johannesburg as a “neutral” venue and also to serve as an African infrastructure bank.

“Africa feels the bank should be established here, particularly because the greater need for the bank is on the continent of Africa,” Jacob Zuma, the South African president, told the World Economic Forum on Africa last year in Cape Town. South Africa’s argument was too narrow, however; and it appears, according to documents prepared for the summit, that the bank will be based in Shanghai.

Africa desperately needs reliable and cheaper long-term development finance, without restrictive World Bank and IMF conditions. The Brics bank could also be a vital source of finance for infrastructure that Africa so desperately needs. But it could also provide finance to expand Africa’s manufacturing sectors – so crucial if the continent wants to create jobs, and reduce inequality and poverty.

The mere presence of a Brics bank that does not adhere to the structural adjustment philosophy of the World Bank and IMF could strengthen the hands of African governments to produce more independent – and relevant – national development policies, rather than the “one size fits all” approach enforced by traditional lenders.

The Brics bank could also help Africans to secure better investment deals in their negotiations with traditional multilateral banks and the private sector.

However, there is no guarantee that a Brics bank would not attach conditions as onerous as those of the World Bank or other development banks – or that it would prioritise the development and infrastructure policies important to African economies, rather than just the Brics economies. Most current development banks in individual states, such as the Brazilian development bank, lend at market rates to African countries.

Also, there is absolutely no guarantee that the Brics bank will be more development-oriented than other developmental banks.

Africans will have to strike smart partnerships with the Brics bank, through African development banks, state-owned enterprises and the private sector. And, crucially, the bank will have to be based on good corporate governance. It must pursue lending that is ecologically sustainable, and must promote inclusive economic growth and development.