World Bank (the Bank), is an internationally supported bank that provides loans to developing countries for development programs with the stated goal of reducing poverty. The World Bank differs from the World Bank Group in that the former comprises only the International Bank for Reconstruction and Development and the International Development Association, while the latter incorporates these entities in addition to three others.
The World Bank was formally established on December 27, 1945, following the ratification of the Bretton Woods agreement. The concept was originally conceived in July 1944 at the United Nations Monetary and Financial Conference. Two years later, the Bank issued its first loan: $250 million to France for post-war reconstruction, the main focus of the Bank’s work in the early post-World War II years. Over time, the “development” side of the Bank’s work has assumed a larger share of its lending, although it is still involved in post-conflict reconstruction, together with reconstruction after natural disasters, response to humanitarian emergencies and post-conflict rehabilitation needs affecting developing and transition economies.
The World Bank is one of the two Bretton Woods Institutions which were created in 1944 to rebuild a war-torn Europe after World War II. Later, largely due to the contributions of the Marshall Plan, the World Bank was forced to find a new area in which to focus its efforts. Subsequently, it began attempting to rebuild the infrastructure of Europe’s former colonies. Since then it has made a variety of changes regarding its focus and goals.
From 1968-1981 it focused largely on poverty alleviation. From the ’80s and into the 1990s its main focus was both debt management and structural adjustment. Today the focus is on the achievement of the Millennium Development Goals (MDGs), goals calling for the elimination of poverty and the implementation of sustainable development. Of the two constituent parts of the Bank, the IBRD lends primarily to “middle-income countries” at interest rates which reflect a small mark-up over its own (AAA-rated) borrowings from capital markets; while the IDA provides low or no interest loans and grants to low income countries with little or no access to international credit markets. The IBRD is a market based non-profit organization, using its high credit rating to make up for the relatively low interest rate on its loans, while the IDA is funded primarily by periodic “replenishments” (grants) voted to the institution by its more affluent member countries.
The Bank’s mission is to aid developing countries and their inhabitants achieve development and the reduction of poverty, including achievement of the MDGs, by helping countries develop an environment for investment, jobs and sustainable growth, thus promoting economical growth and through investment in and empowerment of the poor to enable them to participate in development. The World Bank sees the five key factors necessary for economic growth and the creation of a business environment as:
1. Capacity Building – Strengthening governments and educating government officials
2. Infrastructure creation – implementation of legal and judicial systems for the encouragement of business, the protection of individual and property rights and the honoring of contracts
3. Development of Financial Systems – the establishment of strong systems capable of supporting endeavors from micro credit to the financing of larger corporate ventures
4. Combating corruption – Support for countries’ efforts at eradicating corruption
5. Research, Consultancy and Training – the World Bank provides platform for research on development issues, consultancy and conduct training programs (web based, on line, video/tele conferencing and class room based) open for those who are interested from academia, students, government and non-governmental organization (NGO) officers etc.
The Bank obtains funding for its operations primarily through the IBRD’s sale of AAA-rated bonds in the world’s financial markets. The IBRD’s income is generated from its lending activities, with its borrowings leveraging its own paid-in capital, plus the investment of its “float”. The IDA obtains the majority of its funds from forty donor countries who replenish the bank’s funds every three years, and from loan repayments, which then become available for re-lending.
The Bank offers two basic types of loans: investment loans and development policy loans. The former are made for the support of economic and social development projects, whereas the latter provide quick disbursing finance to support countries’ policy and institutional reforms. While the IBRD provides loans with a relatively low interest rate, the IDA’s “credits” are interest free. The project proposals of borrowers are evaluated for their economical, financial, social and environmental aspects prior to their approval.
The Bank also distributes grants for the facilitation of development projects through the encouragement of innovation, cooperation between organizations and the participation of local stakeholders in projects. IDA grants are predominantly used for:
• Debt burden relief in the most indebted and poverty struck countries
• Amelioration of sanitation and water supply
• Support of vaccination and immunization programs for the reduction of communicable diseases such as malaria
• Combating the HIV/AIDS pandemic
• Support civil society organizations
• Creating initiatives for the reduction of greenhouse gases
The Bank not only provides financial support to its member states, but also analytical and advisory services to facilitate the implementation of the lasting economic and social improvements that are needed in many under-developed countries, as well as educating members with the knowledge necessary to resolve their development problems while promoting economic growth.
Main article: List of World Bank members
The International Bank for Reconstruction and Development (IBRD) has 185 member countries, while the International Development Association (IDA) has 166 members. Each member state of IBRD should be also a member of the International Monetary Fund (IMF) and only members of IBRD are allowed to join other institutions within the Bank (such as IDA).
The President of the Bank, currently Robert Zoellick, is responsible for chairing the meetings of the Boards of Directors and for overall management of the Bank. The Executive Directors make up the Board of Directors, usually meeting twice a week to oversee activities such as the approval of loans and guarantees, new policies, the administrative budget, country assistance strategies and borrowing and financing decisions.
The Vice Presidents of the Bank are its principal managers, in charge of regions, sectors, networks and functions. There are 24 Vice-Presidents, 3 Senior Vice Presidents and 2 Executive Vice Presidents.
5. AREAS OF OPERATION
The World Bank is active in the following areas:
• Agriculture and Rural Development
• Conflict and Development
• Development Operations and Activities
• Economic Policy
• Financial Sector
• Health, Nutrition and Population
• Information and Communication Technologies
• Information, Computing and Telecommunications
• International Economics and Trade
• Labor and Social Protections • Law and Justice
• Macroeconomic and Economic Growth
• Poverty Reduction
• Private Sector
• Public Sector Governance
• Rural Development
• Social Development
• Social Protection
• Urban Development
• Water Resources
• Water Supply and Sanitation
COMPREHRENSIVE DEVELOPMENT FRAMEWORK
According to the World Bank, in virtually all successful assistance projects the country itself was the driving factor. The Bank therefore strives to help governments lead and implement their own development strategies and thus take a stronger hand in their own future development. The strategy was initiated by the former president of the bank, James Wolfensohn. Since 1999, it has followed a set of philosophies known as the Comprehensive Development Framework .
These philosophies state that:
• Development strategies should be comprehensive and shaped by a long-term vision
• Development goals and strategies should be “owned” by the country, based on local stakeholder participation in shaping them
• Countries receiving assistance should lead the management and coordination of aid programs through stakeholder partnerships
• Development performance should be evaluated through measurable results on the ground in order to adjust the strategy to outcomes and a changing world.
POVERTY REDUCTION STRATEGIES
For the poorest developing countries in the world the Bank’s assistance plans are based on Poverty Reduction Strategies; by combining a cross-section of local groups with an extensive analysis of the country’s financial and economical situation the World Bank develops a strategy pertaining uniquely to the country in question. The government then identifies the country’s priorities and targets for the reduction of poverty, and the World Bank aligns its aid efforts correspondingly.
The Bank supports certain kinds of poor people’s organisations such as the Self-Employed Women’s Union and Shack/Slum Dwellers International.
Forty-five countries pledged US$25.1 billion in “aid for the world’s poorest countries”, aid that goes to the World Bank International Development Association (I.D.A.) which distributes the gifts to eighty poorer countries. While wealthier nations sometimes fund their own aid projects, including those for diseases recently, and although I.D.A. is the recipient of criticism, Robert B. Zoellick, the president of the World Bank, said when the gifts were announced on December 15, 2007, that I.D.A. money “is the core funding that the poorest developing countries rely on”.
World Bank Institute
The World Bank Institute (WBI) creates learning opportunities for countries, World Bank staff and clients, and people committed to poverty reduction and sustainable development. WBI’s work program includes training, policy consultations, and the creation and support of knowledge networks related to international economic and social development.
8.2. Global Development Learning Network
The Global Development Learning Network (GDLN) is a partnership of over 120 learning centers (GDLN Affiliates) in nearly 80 countries around the world. GDLN Affiliates collaborate in holding events that connect people across countries and regions for learning and dialogue on development issues. Offering a combination of distance learning tools such as interactive videoconferencing and the internet, and expert facilitation and learning techniques, GDLN Affiliates enable individuals, teams, and organizations working in development around the world to communicate, share knowledge, and learn from each others’ experiences in a timely and cost-effective manner.
GDLN clients are typically NGOs, government, private sector and development agencies who find that they work better together on subregional, regional or global development issues and challenges using the facilities and tools offered by GDLN Affiliates. Clients also benefit from the ability of Affiliates to help them choose and apply these tools effectively, and to tap development practitioners and experts worldwide. GDLN Affiliates facilitate around 1000 videoconference-based activities a year on behalf of their clients, reaching some 90,000 people worldwide. Most of these activities bring together participants in two or more countries over a series of session. A majority of GDLN activities are organized by small government agencies and NGOs.
Some critics of the World Bank believe that the institution was not started in order to reduce poverty but rather to support US business interests, and argue that the bank has actually increased poverty and been detrimental to the environment, public health, and cultural diversity. Some critics also claim that the World Bank has consistently pushed a “neo-liberal” agenda, imposing policies on developing countries which have been damaging, destructive and anti-developmental. A number of intellectuals in developing countries have argued that the World Bank is deeply implicated in contemporary modes of donor and NGO driven imperialism and that its intellectual output functions to blame the poor for their condition.
It has also been suggested that the World Bank is an instrument for the promotion of US and ‘Western’ interests in certain regions of the world, Seven South American nations have established the Bank of the South in order to minimize US influence in the region. Criticisms of the structure of the World Bank refer to the fact that the President of the Bank is always an American, nominated by the President of the United States (though subject to the approval of the other member countries). There have been accusations that the decision-making structure is undemocratic, as the US effectively has a veto on some constitutional decisions with just over 16% of the shares in the bank; moreover, decisions can only be passed with votes from countries whose shares total more than 85% of the bank’s shares. A further criticism concerns internal governance and the manner in which the World Bank is alleged to lack transparency to external publics.