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What is IBRD?

One of five institutions that make up the World Bank Group, the IBRD is structured something like a cooperative owned and operated for the benefit of its member countries. Founded in 1944, it is the part of the World Bank that works with middle-income and creditworthy poorer countries to promote sustainable, equitable and job-creating growth; to reduce poverty; and to address issues of regional and global concern. IBRD's 24-member Board is made up of 5 appointed and 19 elected Executive Directors who represent its 187 member countries.

How does it pursue its goals?

IBRD helps members achieve results by delivering financial products, knowledge and technical services and strategic advice, while using its capacity to call members together to discuss ways to further their specific development objectives. It strives to increase its impact in middle-income countries by working closely with the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA); capitalizing on middle-income countries' own accumulated knowledge and development experiences; working closely with the International Monetary Fund (IMF) and other multilateral development banks; and collaborating with foundations, civil society partners and donors in the development community.

Where does IBRD get the money to finance projects in developing countries?

IBRD gets its money from the capital markets. Investors see IBRD bonds as a safe and profitable place to put their money and their cash finances projects in middle-income countries. Annual funding volumes vary from year to year, and are currently around $10-15 billion. The World Bank has become one of the most established borrowers on the world's capital markets since issuing its first bond in 1947 to finance the reconstruction of Europe after World War Two. It has had a triple A rating since 1959.

Who pays for IBRD's operating expenses?

IBRD covers its operating expenses primarily out of its income. IBRD's earns an income every year from the return on its equity and from the small margin it makes on lending. This pays for IBRD's operating expenses, goes into reserves to strengthen the balance sheet and also provides an annual transfer to the International Development Association (IDA). IBRD has raised the bulk of the money loaned by the World Bank to alleviate poverty around the world. This has been done at a relatively low cost to taxpayers, with governments paying in $11 billion in capital since 1946 to generate more than $400 billion in loans.

Which countries are eligible to be IBRD clients?

IBRD clients are middle-income and credit-worthy lower income countries. The Bank classifies a country according to the wealth of its population. Middle-income countries are defined as having a per capita income of between around US$1,000 and US$10,000, which may qualify them to borrow from IBRD. Low-income countries with a per capita income of less than $1,000 usually do not qualify for IBRD loans unless they are creditworthy. However, low-income countries are eligible to receive low or no interest loans and grants from IDA. India, Indonesia and Pakistan are examples of creditworthy low-income countries which are eligible for a blend of financial assistance from both IBRD and IDA.

Why do middle income countries still turn to IBRD?

Middle-income countries that are served by IBRD have made enormous economic strides in the last few years but they still face daunting challenges to reduce poverty to meet the Millennium Development Goals, which set specific targets to be met by 2015. These countries account for two-thirds of the world's population and are home to more than 70% of the developing world's poor people who live on less than $2 a day. . While private capital flows have risen substantially, this flow has been concentrated in a limited number of countries. Only a minority of middle-income countries can be regarded as established bond market borrowers able to access the market regularly at a stable cost. Other countries within the group have only sporadic access or none at all. Therefore, the majority of middle-income countries continue to rely on IBRD to mobilize investments in infrastructure, health, education, clean energy and the environment. IBRD helps clients gain access to capital and financial risk management tools in larger volumes, on better terms, at longer maturities, and in a more sustainable manner than they could receive from other sources. Unlike commercial banks, IBRD is driven by development impact rather than profit maximization. IBRD has also supported middle-income countries in times of crisis when their access to capital has dried up.

How strong is the demand for IBRD services from its clients?

Some middle-income countries no longer see the need for significant financial support from IBRD, because they have large foreign currency reserves and are in a good budget position. However, others still have large investment needs that include funds for public infrastructure projects and social services. Increasingly, IBRD is meeting the more sophisticated demands of its middle-income clients by proviiding financial services that protect them against exchange and interest rate risks and the turbulence of the commodity markets. In fiscal 2007, it carried out $5.4 billion in interest rate and currency risk management transactions on behalf of its members. In the same period, IBRD committed $12.8 billion for 112 projects. The Bank assists client countries not only through its finance but also by providing access to its development knowledge resources. The Bank's knowledge activities range from conducting country research, to developing analytic and conceptual frameworks for country assistance, to building the capacity for sustainable development within client countries.




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