The World Bank

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The World Bank

The World Bank

The World Bank is an international financial institution which lends money to developing countries so that they can carry out capital programmes – building the infrastructure necessary for society, economy or enterprise to operate. This might mean things like cars, roads, homes, council tax,power grids and other physical structures; or it might mean things like organization, financial institutions, law enforcement etc for governmental infrastructure. This then can provide those developing countries with the capital they need to facilitate their growth and organization. The bank itself will oversee many philanthropic strategies – such as poverty reduction strategies and the ‘clean air initiative’ to help improve air quality in cities.

The World Bank is made up of two groups the ‘International Bank for Reconstruction and Development’ and the ‘International Development Association’. The ‘World Bank Group’ is a term used to include these two institutions as well as three others (the International Finance Corporation, Multilateral Investment Guarantee Agency and International Center for Settlement of Investment Disputes).

The World Bank was formed at the Bretton Woods Conference in 1944 and is based in Washington D.C. It is custom for the World Bank to be headed by an American, and the current president is Robert B Zoellick. However there are 187 member countries who act as ‘shareholders’ allowing them to vote on matters pertaining to the bank. However different countries have different voting power.

The first loan was issued to France and was worth $250 million. Lending started gradually and carefully in order to instil trust in the bank. As of 1947 the loans moved to focus more on non-European countries, and until 1968 all loans were provided only for projects that allowed the borrower to pay loans back (such as power plants or highway systems that would generate profit). After this point the lending moved to meet the needs of people in the developing world and the amount of money lent was greatly increased.

This shift was mostly the result of one Robert McNamara – then the president. He used a technocratic managerial style and moved policies toward improving agriculture and literacy and building schools. A new process allowed potential borrowers to get the funding they needed faster. To fund these projects he used the global band market – so that investors can buy IBRD bonds. Other loans also help to finance these projects.

While this of course reduced poverty, it also increased debt in the developing world which of course may be unsustainable. The loans granted by the World Bank to developing countries are generally low interest or no interest. Some profits from the bank at the end of the fiscal year go back to the financial reserves, or are used to help developing countries with debt relief. This, combine with the Debt Initiative for Heavily Indebted Poor Countries, aims to reduce some of the debt and deflect some of the criticisms that have been leveled at the World Bank.

Posted by admin   @   18 August 2011 9 comments
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Aug 21, 2011
1:59 pm
#1 Rajesh :

The world bank can do so much good. But the leaders of a country must think it through. Is it worth taking out a loan from the world bank? Is it possible to pay back the money? Unfortunately, there still are leaders that are taking loans from the world bank although they cannot pay back.

Aug 21, 2011
4:44 pm
#2 Marton :

The world bank is seen as an evil institution. But it can help many countries. A corrupt country will always say that the world bank create problems. Just manage the money you receive from the world bank well. Then, you will see it can be really helpful.

Aug 28, 2011
11:58 pm
#3 Kava :

I admit that I did not know that the world bank was based in America. I thought it was leaded by europeans. And so, thought it was based in Europe. Seems like I am learning a lot from your website. Beside understading credit ratings, now I know more about the world bank too.

Aug 29, 2011
12:27 am
#4 Leech :

The world bank should be handled with care. They use to ask for high interests. Some countries do not afford to pay back the loans they took. This is very bad for the economy. So imho, the world bank is evil.

Sep 4, 2011
4:44 pm
#5 Molie :

The world bank is a corrupt institution. It is corrupt, but legal. The situation is kinda nasty, when it comes to big boys. Obviously, big boys are the ones leading the world bank. This institution may basically run the world.

Sep 4, 2011
5:15 pm
#6 Vero :

It is being said that one of the world bank’s purpose is to reduce poverty. Actually, they usually manage to increase the poverty rate. By doing that, the world bank leaders get richer.

But there is a good thing too, as someone said. Some developing countries do have advantages from the world bank loans.

Sep 10, 2011
7:19 pm
#7 Shaen :

It is sickening to think of a bank getting richer. While we get poorer. But that is how it always works out . The rich work little to get the money they need. The poor work hard and have little to show for it.

Sep 18, 2011
6:04 pm
#8 Florin :

The World Bank is what makes the world go round. You know that song, money makes the world go round, right? 😀 Well, it’s the same thing. The world bank is really helpful for those countries who can’t do them by themselves. So it is not an evil institution.

Sep 18, 2011
6:30 pm
#9 Vincent :

Of course the world bank is not evil. It helped a lot of countries. If you invest the money properly, you don’t lose anything. So keep it real, boys. Stop with those conspiration theories.

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