The World Bank is an international financial institution with a mandate of poverty alleviation and provides leveraged loans to developing countries for capital programs. The World Bank was established in 1944 and is headquartered in Washington, D.C. The Bank came into formal existence on December 27, 1945 following international ratification of the Bretton Woods agreements, which emerged from the United Nations Monetary and Financial Conference. The World Bank differs from the World Bank Group, in that the World Bank comprises only two institutions: International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA). Whereas the World Bank Group (WBG) is a family of five international organizations, namely International Finance Corporation (IFC),Multilateral Investment Guarantee Agency (MIGA), International Centre for Settlement of Investment Disputes (ICSID), IBRD and IDA.
The World Bank’s (i.e. the IBRD and IDA’s) activities are focused on developing countries, in fields such as:
- human development (e.g. education, health),
- agriculture and rural development (e.g. irrigation, rural services),
- environmental protection (e.g. pollution reduction, establishing and enforcing regulations),
- infrastructure (e.g. roads, urban regeneration, electricity),
- and governance (e.g. anti-corruption, legal institutions development).
The World Bank envisions inclusive and sustainable globalization an endeavors to provide low-interest loans, interest-free credits and grants to developing countries for a wide range of development programs that include investments in education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. The IBRD aims to reduce poverty in middle-income and creditworthy poorer countries, while IDA focuses on the world’s poorest countries. The six strategic themes underlying World Bank’s assistance program include aid to the poorest countries, fragile states and the Arab world, to middle-income countries, to solving global public goods issues, and to delivering knowledge and learning services.
Although technically the World Bank is part of the United Nations system, its governance pattern is different from that of the United Nations. Each institution in the World Bank Group is owned by its member governments, which subscribe to its basic share capital, and have proportional voting rights. The World Bank is more like a cooperative, where its 186 member countries are shareholders. The shareholders are represented by a Board of Governors. Generally, the governors are ministers of finance or ministers of development of the member countries. They meet once a year at the Annual Meetings of the Boards of Governors of the World Bank Group and the International Monetary Fund.
The president of World Bank presides over the meetings of the Boards of Directors and is responsible for overall management of the Bank. The President is elected by the Board of Governors for a five-year, renewable term. Traditionally, the Bank president is a U.S. national nominated by the United States, which is the largest shareholder. The Executive Directors constitute the Boards of Directors. The Board meets at least twice a week to oversee the Bank’s business, including approval of loans and guarantees, new policies, the administrative budget, country assistance strategies and borrowing and financial decisions.
IBRD and IDA offer low or no interest loans and grants to countries that have less access to international credit markets. IBRD lending to developing countries is primarily financed by selling AAA-rated bonds in the world’s financial markets for which IBRD earns a small margin. The greater proportion of IBRD’s income comes from lending out its own capital, which is constituted by reserves built up over the years and money paid in from the World Bank’s shareholders.
IDA is the world’s largest provider of interest-free loans and grants to the poorest countries. “IDA’s funds are replenished every three years by 40 donor countries. Additional funds are regenerated through repayments of loan principal on 35-to-40-year, no-interest loans, which are then available for re-lending. IDA accounts for more than 40% of World Bank lending.”
The World Bank provides two basic types of loans and credits through IBRD and IDA, namely investment operations and development policy operations. Prior to sanctioning and disbursing the loan, the World Bank assesses the borrower’s project proposal to ensure its feasibility. The borrower carries out the implementation of each loan while the Bank does a general supervision.
The World Bank has a Trust Fund to which donor governments and a number of private and public institutions make deposits. These resources are leveraged for a broad range of big and small budget development initiatives ranging from Carbon Finance, the Global Environment Facility, the Heavily Indebted Poor Countries Initiative, and the Global Fund to Fight AIDS, Tuberculosis, and Malaria to much smaller and simpler programs. The Bank also mobilizes donor resources for “IDA concessionary financing and grants, as well as funds for non-lending technical assistance and advisory activities to meet the special needs of developing countries, and for co-financing of projects and programs.” In addition, the Bank offers direct grants to civil society organizations for the upliftment of poor and marginalized groups.
IDA grants, which are either funded directly or managed through partnerships have been used to relieve the debt burden of heavily indebted poor countries, improve sanitation and water supplies, support vaccination and immunization programs to reduce the incidence of communicable diseases like malaria, combat the HIV/AIDS pandemic, support civil society organizations and create initiatives to cut the emission of greenhouse gases.
The World Bank also provides analysis, advice and information to member countries through economic research and data collection on broad issues such as the environment, poverty, trade and globalization. In addition, the bank focuses on country-specific, non-lending activities like evaluating a country’s economic prospects by examining its banking systems and financial markets, as well as trade and infrastructure issues. The Bank conducts poverty assessments and public expenditure reviews and prepares country expenditure reports for the benefit of client countries.
In 2008, the World Bank provided $46.9 billion for 303 projects in developing countries worldwide. The Bank is currently involved in more than 1,800 projects in various sectors. The projects are as diverse as providing micro credit in Bosnia and Herzegovina, raising AIDS-prevention awareness in Guinea, supporting education of girls in Bangladesh, improving health care delivery in Mexico, and helping East Timor rebuild upon independence and India rebuild Gujarat after a devastating earthquake.
The World Bank works in liaison with international institutions and donors, civil society and professional organizations to augment the coordination of aid policies and practices in countries, at the regional and global level. The adoption of the Millennium Development Goals (MDGs) in 2000 facilitated a global partnership to focus on reaching seven specific targets to reduce poverty, hunger, disease and illiteracy.
Global Water Partnership, Education for All, Joint United Nations Programme on HIV/AIDS, Roll Back Malaria, The Carbon Fund, Consultative Group to Assist the Poorest, Financial Sector Reform, and Strengthening Initiative are some of the global partnerships in which the World Bank participates.