The five emerging economies, known as the BRICS, are meeting at a two-day summit in Fortaleza, Brazil. Their World Bank alternative, tentatively named the New Development Bank, will start with $50 billion — $10 billion from each member — to fund poverty relief in developing countries.
Reuters news agency reports the bank is projected to make its first loan in 2016.
The BRICS will also set up a $100 billion fund in contingency reserves, as an alternative to the International Monetary Fund.
China will provide $41 billion for the IMF alternative, with $18 billion each from Brazil, India and Russia, and $5 billion from South Africa.
The location of the new bank’s headquarters has not been decided. Shanghai, Moscow, New Delhi and Johannesburg are all reported contenders.
The IMF has been criticized for demanding too much in costly domestic reforms in exchange for its aid to developing countries.
Some also accuse the U.S. Congress of being reluctant to provide extra money to the IMF to help poor countries around the world.