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What is the World Bank?

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Square Down Arrow Icon  What is the World Bank?
Square Down Arrow Icon  How is the World Bank Group Organized?
Square Down Arrow Icon  What is the Difference Between the World Bank and a Commercial Bank?
Square Down Arrow Icon  What is the Difference Between the World Bank and IMF?
Square Down Arrow Icon  How Does the World Bank Lend Money?
Square Down Arrow Icon  How are Countries Represented at the World Bank?


What is the World Bank?

The World Bank is one of the world’s largest sources of funding and knowledge to support governments of member countries in their efforts to invest in schools and health centers, provide water and electricity, fight disease and protect the environment. This support is provided through project or policy-based loans and grants as well as technical assistance such as advice and studies.

 

The goal of the World Bank is to reduce poverty and to improve the living standards of the people in low and middle-income countries.

 

The World Bank was established in 1944, as the International Bank for Reconstruction and Development. Recently the "World Bank" name has come to be used for the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). When it first began operations to speed post World War II reconstruction, it had 38 members, now it has 184, almost all the countries in the world. As membership grew and their needs changed, the World Bank expanded and is currently made up of five different agencies.

The World Bank is present in 100 countries and has a staff of approximately 10,600 people from around the world. One of the Bank’s main strengths is the international experience provided by its diverse staff.

All support to a borrowing country is guided by a single strategy (called the Country Assistance Strategy) that the country itself designs with help from the World Bank and many other donors, aid groups, and civil society organizations.

More information:
Right Arrow Icon  "What is the World Bank" Main Page
Right Arrow Icon  The Organization of the World Bank Group
Right Arrow Icon  How are Citizens Represented at the World Bank?



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How is the World Bank Group Organized?

As membership grew, and needs changed, the World Bank expanded and now comprises five different agencies that together make up the World Bank Group:

 

Right Arrow Icon  The International Bank for Reconstruction and Development provides assistance to middle income countries. IBRD obtains most of its funds through the sales of bonds in international capital markets.

Right Arrow Icon  The International Development Association assists the poorest countries with a per capita income of less than $885--to which it provides interest-free loans, technical assistance and policy advice.

Right Arrow Icon  The International Finance Corporation (IFC) promotes growth in client countries by financing private sector investments.

Right Arrow Icon  The Multilateral Investment Guarantee Agency (MIGA) helps encourage foreign investment by providing guarantees to foreign investors against loss caused by non-commercial risks in developing countries, thereby creating investment opportunities in those countries.

Right Arrow Icon  The International Centre for Settlement of Investment Disputes provides facilities for the settlement by conciliation or arbitration of investment disputes between foreign investors and their host countries.

 

 

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What is the Difference Between the World Bank and a Commercial Bank?

The World Bank is not a bank in the traditional sense. It is an international organization owned by the 184 countries -- both developed and developing -- that are its members.

While the World Bank lends and even manages funds much like a regular bank, it is different in many important ways. The financial support and advice the World Bank provides its member countries is designed to help them fight poverty. And unlike commercial banks, the World Bank often lends at little or no interest to countries that are unable to raise money for development anywhere else.

Countries that borrow from the World Bank also have a much longer period to repay their loans than commercial banks allow.  In some cases, they don’t have to start repaying for 10 years.

Basically, the World Bank borrows the money it lends. It has good credit because if has large, well-manages financial reserves. This means it can borrow money at low interest rates from capital markets and channel it to developing countries, often at much lower rates of interest than these countries would receive on their own.

More information:
Right Arrow Icon  World Bank Operations: repayment conditions for loans


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What is the Difference Between the World Bank and the IMF?

People sometimes confuse the World Bank with the International Monetary Fund (IMF), which was also set up at the Bretton Woods conference in 1944. Although the IMF’s functions complement those of the World Bank, it is a totally separate organization. While the World Bank provides support to developing countries, the IMF aims to stabilize the international monetary system and monitors the world’s currencies.

 

More Information:
Right Arrow Icon  The IMF Website



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How Does the World Bank Lend Money?

The World Bank offers two basic types of loans: investment loans for goods, work, and services to support economic and social development projects in a broad range of sectors; and adjustment loans to support policy and institutional reforms.

World Bank financial assistance is provided to member countries through the following two channels: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).

 

During loan negotiations, the World Bank agrees with the borrowing country on the development objective of the project or program, outputs, performance indicators (to measure the impact and success of the project) and a plan to put it all into practice. Once a loan is approved and becomes effective, the borrower puts the project or program into practice according to the terms agreed with the World Bank.

 

The World Bank supervises how each loan is used and evaluate the results. All loans are governed by operational policies, which make sure that operations are economically, financially, socially and environmentally sound.


More information: 

Right Arrow Icon  World Bank Operations: types of financial assistance

Right Arrow Icon  Where Does the Money Go?

 

 

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How are Countries Represented at the World Bank?

The World Bank is run like a cooperative, with member countries as shareholders. The number of shares a country has is based roughly on the size of its economy. The United States is the largest single shareholder, with 16.41 percent of the votes, followed by Japan (7.87 percent), Germany (4.49 percent), the United Kingdom (4.31 percent), and France (4.31 percent). The rest of the shares are divided among the other member countries.

 

Every member government is represented by an executive director. The five largest shareholders (France, Germany, Japan, the United Kingdom and the United States) appoint an executive director each, while other member countries are represented by 19 executive directors.

 

The 24 executive directors based in Washington D.C. make up our Board of Directors. They normally meet twice a week to oversee business, including reviewing loans and guarantees, new policies, the administrative budget, country support strategies, and borrowing and financial decisions.

 

 

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