World Bank

The World Bank is headquartered in Washington DC. It is an international financial institution.  The president of the World bank is David Malpass, who was an American. Further,  Anshula Kant is the CFO and MD of the world bank. The main objectives of IBDR are for developing and under-developing countries by granting loans and providing financial assistance for the development of the country. Here, all information on functions of world bank, objectives of IBRD, the role of IBRD are given in detail. 

World Bank Groups

The World Bank headquarters in Washington DC is part of the World Bank Group. In 1944, the Bretton Woods Conference joined hands with the International Monetary Fund (IMF) and established the world bank groups. The main objectives of the world bank are to provide financial assistance for the low and middle-income countries and helping them by providing loans for various projects. Both the world bank and IMF are working on the same path. 

The five international organizations together are known as the world bank group. All are working together to provide loans for developing countries. 

1. The International Bank for Reconstruction and Development (IBRD)

2. The International Development Association (IDA)

3. The International Finance Corporation (IFC)

4. The Multilateral Investment Guarantee Agency (MIGA)

5. The International Centre for Settlement of Investment Disputes (ICSID). 

Here, IBDR contains members from 189 nations and IDA contains members from 173 nations. Both IBDR and IDA are combined together and named the world bank.  But the role of world bank is similar to the IBRD functions 

Objectives of World Bank

1. The world banks are providing long-term capital to the member countries. They are helping for the economic reconstruction and development of the country. 

2. It helps the countries for long-term capital investments for maintaining a balance of payment equilibrium and supports the development of international trade.

3. The world bank helps to promote capital investments in the member countries by providing guarantees for private loans or capital investment.

4. The IBDR also provides loans for productive activities based on specific conditions for the countries development. 

5. It also helps the countries for developing projects and to bring smooth transfer for the peaceful economy in the country. 

How Does The World Bank Works? 

The world bank is playing an important role in funding the member countries’ development work, especially for the developing and underdeveloped countries. The world bank can provide loans for various projects for the duration of five to twenty years. 

Usually, the world bank can allocate loans to member countries based on their paid-up capital. The world bank will provide up to 20% of their shares. These world banks also provide loans for private investors, who are from their member countries on their own guarantee. Also, world banks will ask for the permission of the native country from the private investors. For that, the world bank will charge 1% or 2% as a service charge. 

The members of the world bank will decide the quantum of loan service, terms and conditions, interest rate, based on their repayment capacity.  Usually, the world bank will approve loans for the member countries on particular duty projects, based on the needs of the member countries. 

The member countries that are borrowed the money from the world bank will repay the loans using their reserve currencies or from the sanctioned loans. 

Resource For World Bank For Financing 

Initially, the authorized capital of the world bank was 10,000 million. The authorized capital was divided into 1 lakh shares and the cost of each share are ＄1. Later, the authorized capital was reached  ＄24 bn. Recently the authorized capital of the world bank increased to ＄27 bn. Usually, the members of developed countries sponsor the world bank. 

Repayment of World Bank Shares

The world bank allows only 2% of their share to be in gold, US dollar or SDR. Also, the world bank provides leverage up to 18% of the capital shares to maintain in their own currency. Also, the world bank demands the member countries deposit the rest of 80% of their shares. 

History Behind Development of World Bank

In 1944, Bretton Woods Conference joined hands with International Monetary Fund (IMF) and created the World Bank. Usually, Americans will be the president of the world bank. Both the world bank and IMF work together in Washington DC and work together closely.  

IBRD was established initially in the  Gold Room at the Mount Washington Hotel. The United States and the United Kingdom were the two most powerful countries in the world bank and are dominated the negotiations. The IBRD was founded with the intention of providing temporary loans to low-income countries. The IBRD bank also receives demand policy reforms from recipients. 

In the initial years, the IBRD had slow starts because of two reasons. They are underfunded and the leadership struggle between the US Executive Director and the president of the organization. In 1947, the Marshall plan out and helped many European countries. This increased competition for the world bank. So, the world bank started concentrating on non-European countries. Till 1968, they provided loans for infrastructure works like seaports, highway systems, and power plants. That provided enough income for the borrower country to repay the loan to World Bank. In 1960, the International Development Association stated to provide soft loans for developing countries. 

France was the first country to receive a loan from the World Bank. John McCloy was the president of the world bank, who approved loans for France. Following France, Poland and Chile also received the loans. The bank approved to provide only half the amount of the requested amount with some conditions. The members working in the World bank monitored the activities of the French government to receive back the loan amount. Also, France agreed to produce a balanced budget and give priority to debt repayment to the world bank. Before approving the loan, the United States requested France to make some changes to their government. After making the changes, the US approved the loan within few hours as per the request of France. 

World Bank’s Financial Aid To India 

The world bank also enhanced its financial support for India to work on various projects. Mainly for working in the area of poverty reduction, rural development, infrastructure development, and many more. The government of India utilized the fund from International Development Authority on a large scale for the social sector projects and for the achievement of the millennium development goals. In 1948, the government of India received a loan amount of about US$ 86 bn from the world bank for the first time. Later, the World bank-sponsored India on various projects. 

The developing countries like Africa, Asia, and Latin America received about 75% of the sanctioned loans from the World Bank. The remaining 25% of the loans are received by the developed countries in Europe. Many developed countries are also taking care of the World bank by making the largest contribution to the exchequers of the bank and providing loans.