The Brics group of emerging economies on Tuesday launched its New Development Bank (NDB) in Shanghai.
The bank is backed by Brazil, Russia, India, China and South Africa – collectively known as Brics countries.
The NDB will lend money to developing countries to help finance infrastructure projects.
The bank is seen as an alternative to the World Bank and the International Monetary Fund, although the group says it is not a rival.
“Our objective is not to challenge the existing system as it is but to improve and complement the system in our own way,” NDB President Kundapur Vaman Kamath said.
The Brics nations have criticised the World Bank and the IMF for not giving developing nations enough voting rights.
The banks is expected to issue its first loans early next year.