UNIT 2

WORLD BANK

HISTORY (FIND AGAIN IN DETAILS)

Founded in 1944, the International Bank for Reconstruction and Development—soon called the
World Bank—has expanded to a closely associated group of five development institutions. 
Originally, its loans helped rebuild countries devastated by World War II.  In time, the focus
shifted from reconstruction to development, with a heavy emphasis on infrastructure such as
dams, electrical grids, irrigation systems, and roads.  With the founding of the International
Finance Corporation in 1956, the institution became able to lend to private companies and
financial institutions in developing countries.  And the founding of the International
Development Association in 1960 put greater emphasis on the poorest countries, part of a steady
shift toward the eradication of poverty becoming the Bank Group’s primary goal.  The
subsequent launch of the International Centre for Settlement of Investment Disputes and the
Multilateral Investment Guarantee Agency further rounded out the Bank Group’s ability to
connect global financial resources to the needs of developing countries. 
Today the Bank Group’s work touches nearly every sector that is important to fighting poverty,
supporting economic growth, and ensuring sustainable gains in the quality of people’s lives in
developing countries.  While sound project selection and design remain paramount, the Bank
Group recognizes a wide range of factors that are critical to success—effective institutions,
sound policies, continuous learning through evaluation and knowledge-sharing, and partnership,
including with the private sector.  The Bank Group has long-standing relationships with more
than 180 member countries, and it taps these to address development challenges that are
increasingly global.  On critical issues like climate change, pandemics, and forced migration, the
Bank Group plays a leading role because it is able to convene discussion among its country
members and a wide array of partners.  It can help address crises while building the foundations
for longer-term, sustainable development.
The evolution of the Bank Group has also been reflected in the diversity of its multidisciplinary
staff, who include economists, public policy experts, sector experts, and social scientists, based
at headquarters in Washington, D.C., and in the field.  Today, more than a third of staff are based
in country offices. 
As demand for its services has increased over time, the Bank Group has risen to meet them. For
perspective, the World Bank made four loans totaling $497 million in 1947, as compared to 302
commitments totaling $60 billion in 2015. 

The World Bank Group

The World Bank Group is one of the world’s largest sources of funding and knowledge for
developing countries. Its five institutions share a commitment to reducing poverty, increasing
shared prosperity, and promoting sustainable development.
Together, IBRD and IDA form the World Bank, which provides financing, policy advice, and
technical assistance to governments of developing countries.  IDA focuses on the world’s poorest
countries, while IBRD assists middle-income and creditworthy poorer countries. 
IFC, MIGA, and ICSID focus on strengthening the private sector in developing countries. 
Through these institutions, the World Bank Group provides financing, technical assistance,
political risk insurance, and settlement of disputes to private enterprises, including financial
institutions.

The International Monetary Fund

The IMF works to foster global monetary cooperation, secure financial stability, facilitate
international trade, promote high employment and sustainable economic growth, and reduce
poverty around the world.
The IMF's primary purpose is to ensure the stability of the international monetary system—the
system of exchange rates and international payments that enables countries and their citizens to
transact with each other. It does so by keeping track of the global economy and the economies of
member countries, lending to countries with balance of payments difficulties, and giving
practical help to members.
ORGANISATION

The World Bank is like a cooperative, made up of 189 member countries. These member
countries, or shareholders, are represented by a Board of Governors, who are the ultimate
policymakers at the World Bank. Generally, the governors are member countries' ministers of
finance or ministers of development. They meet once a year at the Annual Meetings of the
Boards of Governors of the World Bank Group and the International Monetary Fund.
The governors delegate specific duties to 25 Executive Directors, who work on-site at the Bank.
The five largest shareholders appoint an executive director, while other member countries are
represented by elected executive directors.
 World Bank Group President Jim Yong Kim chairs meetings of the Boards of Directors
and is responsible for overall management of the Bank. The President is selected by the
Board of Executive Directors for a five-year, renewable term.
 The Executive Directors make up the Boards of Directors of the World Bank. They
normally meet at least twice a week to oversee the Bank's business, including approval of
loans and guarantees, new policies, the administrative budget, country assistance
strategies and borrowing and financial decisions.

 MEMBER COUNTRIES
The organizations that make up the World Bank Group are owned by the governments of
member nations, which have the ultimate decision-making power within the organizations on all
matters, including policy, financial or membership issues.
Member countries govern the World Bank Group through the Boards of Governors and the
Boards of Executive Directors. These bodies make all major decisions for the organizations.
To become a member of the Bank, under the IBRD Articles of Agreement, a country must first
join the International Monetary Fund (IMF). Membership in IDA, IFC and MIGA are
conditional on membership in IBRD.
In tandem with the IMF, and in consultation with other World Bank Group staff, the Corporate
Secretariat Vice Presidency coordinates the process for new membership and maintains the
information relating to the status of membership which includes the membership lists.
 BOARD OF GOVERNORS
The Boards of Governors consist of one Governor and one Alternate
Governor appointed by each member country. The office is usually
held by the country's minister of finance, governor of its central
bank, or a senior official of similar rank. The Governors and
Alternates serve for terms of five years and can be reappointed.
If the country is a member of the Bank and is also a member of
the International Finance Corporation (IFC) or the International Development
Association (IDA), then the appointed Governor and his or her alternate
serve ex-officio as the Governor and Alternate on the IFC and IDA
Boards of Governors. They also serve as representatives of their
country on the Administrative Council of the International Center for
Settlement of Investment Disputes (ICSID) unless otherwise noted. Multilateral
Investment Guarantee Agency (MIGA) Governors and Alternates are
appointed separately.
Role of the Boards of Governors

All powers of the Bank are vested in the Boards of Governors, the
Bank's senior decision-making body according to the Articles of
Agreement. However, the Boards of Governors has delegated all
powers to the Executive Directors except those mentioned in the
Articles of Agreement. These powers include:
Admit and suspend members;
Increase or decrease the authorized capital stock;
Determine the distribution of the net income of the Bank;
Decide appeals from interpretations of the Articles of Agreement by
the Executive Directors;
Make formal comprehensive arrangements to cooperate with other
international organizations;
Suspend permanently the operations of the Bank;
Increase the number of elected Executive Directors; and
8 Approve amendments to the Articles of Agreement.
  BOARD OF DIRECTORS

The World Bank Group Boards of Directors refers to four separate

Boards of Directors, namely the Board of the International Bank for
Reconstruction and Development (IBRD), the International Development Agency (IDA),
the International Finance Corporation (IFC) and the Multilateral Investment
Guarantee Agency (MIGA). Each Board is responsible for the general
operations of their respective organization. The Executive Directors
as individuals cannot exercise any power nor commit or represent
the Bank unless specifically authorized by the Board of Directors to
do so. Executive Directors are appointed or elected by the
Governors.  Separate elections are held for the Bank and MIGA
Board of Directors.  Bank Executive Directors serve ex-officio as
Directors for IFC and IDA.  The current Boards of the World Bank
Group consist of 25 Directors*
The first Board consisted of 12 Executive Directors, as provided under the IBRD Articles of
Agreement, Article V Section 4(b), of which five were appointed and seven were elected.

PRESIDENT
Jim Yong Kim  , M.D., Ph.D., is the 12th President of the World Bank Group. Soon after he
assumed his position in July 2012, the organization established two goals to guide its work: to
end extreme poverty by 2030; and to boost shared prosperity, focusing on the bottom 40% of the
population in developing countries. In September 2016, the World Bank Group Board
unanimously reappointed Kim to a second five-year term as President

ACHIEVEMENTS

1. General Progress:

(i) The Bank's membership has increased from the initial number of 30 countries to 68 countries
in 1960 and to 151 countries in 1988.
(ii) The subscribed capital has increased from the initial amount of $ 10,000 million to $ 19,300
million in 1960 and further to $ 91,436 million in 1988. This increased capital has led to the
expansion of the Bank's lending capacity.
(iii) In 1960, the Bank approved loans worth $ 659 million which went up to $ 14,762 million in
1988.
(iv) The disbursement of loans increased from $ 544 million in 1960 to $11636 million in 1988.
(v) In 1960, 31 operations were approved for financial assistance. In 1988, the number of
operations approved increased to 118.
(vi) Cumulatively, up to June 1988, the IBRD has provided loans worth $155049 million

2. Lending Operations:
It is clear from Table-2 that till June, 1988, the IBRD has granted loans worth $155049 million.
About 22% of the Banks aggregate lending is for energy, 21% for agriculture and rural
development, 18% for transportation and communications and 10% for industry and small scale
enterprises.

3. Term Loans:
The Bank grants medium and long-term loans (i.e., payable over a period of 15-20 years) for
reconstruction and development purposes to the member countries. The actual term of a loan
depends upon the estimated useful life of the equipment or plant financed.

4. Loans for Reconstruction:

In the initial years of its establishment, the World Bank's loans were mainly directed to the
European countries (whose economies were shattered during the World War II) for financing
their programmes of reconstruction. The Bank provided loans worth about $ 5, 00 million for
reconstruction purpose.

5. Traditional Development Loans Policy:

In 1948, the Bank started paying attention to lending for development purposes. The traditional
development loan policy of the Bank has been to help the member nations to strengthen the
foundations of their economies for rapid economic development.
Therefore, the major portion of the Bank's assistance has gone to finance infrastructure of the
borrowing country.
About half of the loans have been for the development of electric power projects and the other
half for the development of other sectors, i.e. transport, agriculture and industry.

6. New Loan Strategy:

Recently, however, the Bank has changed its development loan strategy and lays more emphasis
of financing schemes which directly influence the well-being of poor masses of the member
countries, especially the developing countries.
The bank's adoption of the new strategy of 'development with justice' has led to the following
changes in the sectoral finance.
(i) The amount of agricultural loans has increased more rapidly than in any other sector. The
emphasis in agricultural has also shifted from basic irrigation infrastructure to storage,
marketing, seed multiplication, forestry, fishery, etc.
(ii) The bank now also takes interest in the activities of the development of rural areas such as (a)
spread of education among the rural people ; (b) development of feeder roads in rural areas ; and
(c) electrification of the villages.
(iii) The main features of the Bank's assistance to the industrial sector are: (a) considerable
increase in the direct lending to industries, particularly the public sector industries; (b) more
emphasis on the heavy industries like mining, steel, fertilisers, pulp and paper ; (c) greater
attention to fertilisers projects for agricultural industrial development; (d) greater emphasis on
labour-intensive small scale industries and primary export-oriented industries ; and (e) support
for development finance companies.
(iv) In the electric power sector, the Bank's emphasis has shifted from generation and
transmission of electricity to distribution of electric power and rural electrification.
(v) Other schemes financed by the Bank include water supply and sewerage, housing and other
facilities for the urban poor, tourism, etc.

7. Assistance to Underdeveloped Countries:

The World Bank has a special role in accelerating the process of economic and welfare schemes
in these countries. The following are the main aspects of Bank's assistance to the underdeveloped
countries :
(i) Bulk of the Bank's financial assistance has been given to the underdeveloped countries for the
promotion of development.
(ii) Through its 'third window", the Bank has made available loans to the underdeveloped
countries at tower interest rates.
(iii) The Bank organises meetings of creditor countries for extending assistance to the developing
countries. Aid India Club is one such example.
(iv) The Bank also provides technical assistance to the developing countries by making available
training facilities through its various institutions.
(v) The Bank has established two subsidiary institutions for promoting development in the less
developed countries; (a) In 1956, International Finance Corporation was established to stimulate
productive investment in developing countries, (b) In 1960, International Development
Association was established to provide liberal and concessional finance to the developing
countries.
(vi) The IBRD's lending to the poorest countries (i.e., those with per capital income less than
$425 in 1986) has increased from an annual average of $1122 million during 1979-83 to 3439 in
1988.

ECOSOC

The Economic and Social Council is at the heart of the United Nations system to advance
the three dimensions of sustainable development – economic, social and environmental. It
is the central platform for fostering debate and innovative thinking, forging consensus on
ways forward, and coordinating efforts to achieve internationally agreed goals. It is also
responsible for the follow-up to major UN conferences and summits.
The UN Charter established ECOSOC in 1945 as one of the six main organs of the United
Nations.