Why are international financial institutions important? This paper reassesses the role of the loans issued with the support of the League of Nations. These long-term loans constituted the financial basis of the League's strategy to restore the productive basis of countries in Central and Eastern Europe in the aftermath of the war. We argue that the League's loans accomplished the task for which they were conceived because they allowed countries in financial distress to access capital markets. The League adopted an innovative system of funds management and monitoring that ensured compliance of borrowing countries with its programs. We provide empirical evidence that financial markets viewed the League's role as an external, multilateral agent positively, solving the credibility problem of borrowing countries allowing them to engage in economic and institutional reforms. This success was achieved despite the League's own lack of lending resources. We also demonstrate that this multilateral solution performed better than the bilateral arrangements adopted by other governments in Eastern Europe because of its lower borrowing and transaction costs.