The World Bank's two closely affiliated entities—the International Bank for Reconstruction and Development (IBRD)and the International Development Association (IDA)—provide low or no interest loans and grants to countries that have unfavorable or no access to international credit markets. Unlike other financial institutions, we do not operate for profit. The IBRD is market-based, and we use our high credit rating to pass the low interest we pay for money on to our borrowers—developing countries. We pay for our own operating costs, since we don’t look to outside sources to furnish funds for overhead.
So, where does the money come from to operate the World Bank, and how do we use the funds to carry out our mission?
Fund Generation
IBRD lending to developing countries is primarily financed by selling AAA-rated bondsin the world's financial markets. While IBRD earns a small margin on this lending, the greater proportion of its income comes from lending out its own capital. This capital consists of reserves built up over the years and money paid in from the Bank's 185 member country shareholders. IBRD’s income also pays for World Bank operating expenses and has contributed to IDA and debt relief.
IDA, the world's largest source of interest-free loans and grant assistance to the poorest countries, is replenished every three yearsby 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 nearly 40% of our lending.
Loans
Through the IBRD and IDA, we offer two basic types of loans and credits: investment loans and development policy loans. Investment loans are made to countries for goods, works and services in support of economic and social development projects in a broad range of economic and social sectors. Development policy loans (formerly known as adjustment loans) provide quick-disbursing financing to support countries’ policy and institutional reforms. IDA loans are interest free. For information about the IBRD’s financial products, services, lending rates and charges, please visit the World Bank Treasury.
Each borrower’s project proposal is assessed to ensure that the project is economically, financially, socially and environmentally sound. During loan negotiations, the Bank and borrower agree on the development objectives, outputs, performance indicators and implementation plan, as well as a loan disbursement schedule. While we supervise the implementation of each loan and evaluate its results, the borrower implements the project or program according to the agreed terms. As nearly 30% of our staff is based in some 100 country offices worldwide, three-fourths of outstanding loans are managed by country directors located away from the World Bank offices in Washington.
IDA long term loans (credits) are interest free but do carry a small service charge of 0.75 percent on funds paid out. IDA commitment fees range from zero to 0.5 percent on un-disbursed credit balances; for FY06 commitment fees have been set at 0.30 percent. For complete information about IBRD financial products, services, lending rates and charges, please visit the World Bank Treasury. Treasury is at the heart of IBRD's borrowing and lending operations and also performs treasury functions for other members of the World Bank Group.
Grants
Grants are designed to facilitate development projects by encouraging innovation, co-operation between organizations and local stakeholders’ participation in projects. In recent years, 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
Create initiatives to cut the emission of greenhouse gasses
See how these grants have made a difference at IDA At Work. Visit the Grantswebsite for more information.
Analytic and Advisory Services
While we are best known as a financier, another of our roles is to provide analysis, advice and information to our member countries so they can deliver the lasting economic and social improvements their people need. We do this in several ways: through economic researchon broad issues such as the environment, poverty, trade and globalization and through country-specific economic and sector work, where we evaluate a country's economic prospects by examining its banking systems and financial markets, as well as trade, infrastructure, poverty and social safety net issues, for example.
We also draw upon the resources of our knowledge bank to educate clients so they can equip themselves to solve their development problems and promote economic growth. By knowledge bank we mean the wealth of contacts, knowledge, information and experience we've acquired over the years, country by country and project by project, in our development work. Our ultimate aim is to encourage the knowledge revolution in developing countries.
These are only some of the ways our analyses, advice and knowledge are made available to our client countries, their government and development professionals, and the public:
Another core bank function is to increase the capabilities of our own staff, our partners and the people in developing countries—to help them acquire the knowledge and skills they need to provide technical assistance, improve government performance and delivery of services, promote economic growth and sustain poverty reduction programs. Linkages to knowledge-sharing networks such as these have been set up by the Bank to address the vast needs for information and dialogue about development:
Advisory Servicesand Ask Ushelp desks make information available by topic via telephone, fax, email and the web. There are more than 25 advisory services at the Bank. Staff members who respond to inquiries add value to the work of our own staff, clients and partners by responding quickly to their knowledge needs. Often, they are the first and possibly the only contact the public at large and the people in developing countries have with the World Bank.
Global Development Learning Networkis an extensive network of distance learning centers that uses advanced information and communications technologies to connect people working in development around the world.
B-SPANwebcasting service is an Internet-based broadcasting station that presents World Bank seminars, workshops and conferences on sustainable development and poverty reduction.
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