Written by Serene Joshua, contributing writer
Short and sweet – what’s the World Bank?
- The World Bank is a financial organization that has 5 different institutions within it to tackle specific international issues
- The world bank was established in 1944 and had 38 member countries at the time
- Currently, it undertakes many development projects around the world, however, like any institutions it has its drawbacks
What is the World Bank?
In a nutshell, the World Bank is an international organization tied to the United Nations and gives finance, loans, financial advice, policies and development projects to nations that are developing or less developed to help with their economies.
If you take a look at the website, the mission statement of the World Bank is twofold.
One is to end extreme poverty and the way they want to do this is to reduce the number of people currently living in poverty, which is 9.3 percent, to just 3 percent.
The second is to promote shared prosperity by increasing the income of people living in the poorest 40 percent of the population in each country.
Sounds simple enough right? Well, there’s a lot more to this organization so let’s break it down for you.
What does the World Bank do?
In order to achieve their developmental goals, the World Bank has different institutions within its organization that tackle different issues according to their specialty, and all of these institutions fall under The World Bank Group.
The World Bank has five institutions, all of which function by looking at the different financial needs of countries.
These are the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).
Let’s look at these in a bit more detail!
The International Bank for Reconstruction and Development was set up in 1944 by member countries of the World Bank. Its focus is to help development in countries and to do so it provides loans and responds to challenges at both regional and global levels.
The International Development Association was established in 1960 and it aims to reach the poorest countries by providing loans with really low-interest rates. It also provides grants for various development projects.
The International Finance Corporation was founded in 1956 and provides private companies with financial advice in order to encourage them to explore, markets of less developed countries.
The Multilateral Investment Guarantee Agency offers companies with political risk insurance. This means that investors can protect their investments in developing countries in case there are political issues that would affect their investments.
The International Centre for Settlement of Investment Disputes helps to resolve issues between investors and the states or countries they are investing and operating in.
History of the World Bank
Now that we have a general idea of what the World Bank is, let’s look at a little bit of history and context.
The World Bank was created at the 1944 Bretton Woods conference with the aim to give loans and grants to developing countries. The conference was attended by delegates from 44 countries during World War II, including the Soviet Union, the United Kingdom,and the United States. The objective of the meeting was to discuss financial arrangements for the end of the war. It was initially, officially called International Bank for Reconstruction and Development.
The bank had a slow start but eventually, it gave France its very first loan in 1947.
From its establishment to the late 1960s, the World Bank gave loans to countries mostly for infrastructure development like building ports, roadways and energy plants. The reason they did this was so that the receiving country can quickly pay back the loan they took.
Later on, in the 1970s the bank focused on the basic needs of people in developing countries. The number of loans increased and the bank expanded the sectors they gave loans to. Earlier it was just infrastructure, but during this time they invested in the social sector as well, focusing on human development.
In the early 1990s, the bank began to extend its operations to NGOs and organizations fighting climate change after harsh criticism.
Although it was established in 1944, it only started functioning in 1946 and had 38 member countries at the time. Currently, it has 189 countries members and they meet once a year.
As of 2023, the Bank has many different projects in various countries and sectors, well look at a few of these projects in the coming sections, so read on !
Who leads the World Bank?
The president of the world bank has a term of 5 fiscal years, however, some have chosen to leave before it ends. What are fiscal years you might ask?
Well, a fiscal year is the 12 months that companies and organizations use to plan budgets, taxes, financial policies, and all things related to the finances of a company. In India, the fiscal year is from April 1st to March 31st of the following year.
Let’s take a look at all the leaders of the world bank since its inception.
|June 18, 1946, – December 18, 1946.||Eugene Meyer||Laid the foundation for the world bank|
|March 17, 1947 – June 30, 1949||John J. McCloy||Agreements between the bank and the United Nations were made|
|July 1, 1949 – December 31, 1962||Eugene R. Black||The IFC and IDA were created during his term|
|January 1, 1963 – March 31, 1968||George D. Woods||Helped drive the focus as a developmental force|
|April 1, 1968 – June 30, 1981||Robert S. McNamara||Explored new sectors of economies and focused on the needs of the poor|
|July 1, 1981 – June 30, 1986||A. W. Clausen||Provided extra and special development to Africa|
|July 1, 1986 – August 31, 1991||Barber Conable||One of the first to focus on environmental issues and poverty alleviation|
|September 1, 1991 – May 4, 1995||Lewis T. Preston||Helped to add former Soviet Republics as members of the bank|
|June 1, 1995 – May 31, 2005||James D. Wolfensohn||Known as the “Renaissance Banker” and fought against corruption in economies|
|June 1, 2005 – June 30, 2007||Paul D. Wolfowitz||Focused on climate change and established Africa Action Plan (AAP) to especially tackle issues in the continent|
|July 1, 2007 – June 30, 2012||Robert B. Zoellick||Focused and greatly helped in tackling the global financial crisis of 2008 and 2009.|
|July 1, 2012 – February 1, 2019,||Jim Yong Kim||Established its current mission statement of reducing poverty by 2023 and boosting incomes|
|April 9, 2019- June 30, 2023||David Malpass||Increased climate finance in developing countries|
One thing all these presidents have in common is that they are all US citizens. This is because the US is the biggest shareholder in the world bank and nominations from the US usually end up being selected.
However, there is going to be a movement away from this norm, the nomination from the US for the role of the next president has been given to Ajay Banga, a businessman of Indian origin.
What are their biggest projects?
Let’s take a look at some projects carried out by the world bank in order to get a clear picture of their operations.
In 2016, the bank carried out a project in Pakistan known as the National Immunization Support Project for Pakistan. This project cost about 377.41 million dollars and was aimed to increase the number of vaccines given to children up to 2 years old.
In 2017, the World Bank established the Human Capital Project or HCP which aims to protect and invest in people. This means that state leaders should invest and put in more finance to education, healthcare, etc., which will lead to productive individuals who will contribute to making the country better and have a strong economy.
The Learning for the Future project was established in March 2020 for communities of the Kyrgyz Republic and is aimed at improving school readiness and teacher effectiveness in pre-schools. The total cost of this project is 50 million US dollars.
In India, the World Bank has helped with many initiatives like the Sarva Shiksha Abhiyan program which was established in 2001. This program aims to provide elementary education to around 200 children across the country. The Word Bank contributed 500 million US dollars between 2001 and 2003 and an additional 600 million US dollars later on.
Fun Fact- The World Bank has loaned the most money to India, about 39.58 Dollars, as of 2020.
What are the drawbacks?
It sounds like they’re doing a great job right? Well, they are! However, like any organization, the world bank has its drawbacks as well.
The bank has 6 large shareholders- the United States, Japan, China, Germany, France, and the United Kingdom and these countries have a larger voting power on what should be done.
This means that other countries have only a small number of votes and can’t do much about the decision-making. This is a huge drawback because the world bank is meant for undertaking developmental projects in these less developed countries, but they don’t have much of a say in these policies as it is left to the 6 largest shareholding countries.
In fact, currently, The World Bank has a staff of more than 10,000 people but only one-fourth of them work in developing countries.
Well the World Bank continues to have several projects and with Ajay Banga being the possible new president of the bank we can expect much more development in many communities and areas affected by climate change.
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