The World Bank funds two basic types of operations: investment operations and development policy operations. Investment operations provide funding (in the form of IBRD loans or IDA credits and grants) to governments to cover specific expenditures related to economic and social development projects in a broad range of sectors. Development Policy operations provide untied, direct budget support to governments for policy and institutional reforms aimed at achieving a set of specific development results.
A major effort is currently underway to reform the Bank’s investment lending model - the Investment Lending Reform Concept Note was discussed at the Bank's Board in February 2009 - so that it responds better to borrowers’ needs and the changing global environment. Investment Lending reform will provide clients more flexible instruments, a faster response time and better development outcomes.
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Investment Operations | Development Policy Operations
Investment loans, credits and grants provide financing for a wide range of activities aimed at creating the physical and social infrastructure necessary to reduce poverty and create sustainable development. Over the past two decades, investment operations have, on average, accounted for 75 to 80 percent of the Bank's portfolio.
The nature of investment operations has changed over time. Originally focused on hardware, engineering services, and bricks and mortar, investment lending and grants have come to focus more on institution building, social development, and improving the public policy infrastructure needed to strengthen private sector activity.
Eligibility. Investment loans are available to International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA) borrowers who are not in arrears with the Bank Group.
Eligibility. Investment operations are available to International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA) borrowers who are not in arrears with the Bank Group.
Disbursement. Funds are disbursed against specific foreign or local expenditures related to the investment project, including pre-identified equipment, materials, civil works, technical and consulting services, studies, and incremental recurrent costs. Procurement of these goods, works, and services is an important aspect of project implementation. To ensure satisfactory performance, the loan or credit agreement may include conditions of disbursement for specific project components.
Instruments. The large majority of investment loans are either Specific Investment Loans or Sector Investment and Maintenance Loans. Adaptable Program Loans and Learning and Innovation Loans were recently introduced to provide more innovation and flexibility in how funds can be used. Other instruments tailored to borrowers' specific needs are Technical Assistance Loans, Financial Intermediary Loans, and Emergency Recovery Loans.
Development Policy operations can be stand-alone operations or more frequently be part of a programmatic series of operations. In programmatic operations, the Bank supports the implementation of a medium-term program of policy reforms through a series of annual operations, each of which is disbursed against a mutually agreed set of policy and institutional actions. In low-income countries where a national poverty reduction strategy (PRS) has been officially adopted by the government and where a Development Policy series supports PRS implementation, Development Policy operations may also be called Poverty Reduction Support Credits (PRSCs). They typically consist of a programmatic series of three annual operations.
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