AIRA MAY A.

LABHANAN
BSA2
FINANCIAL MARKETS-CHAPTER 7 ACTIVITY/ASSESSMENTS
1. Research about World Bank and why is it important to the international financial
market.
The World Bank
The World Bank Group (WBG) was founded in 1944 as an extension of the International
Bank for Reconstruction and Development (IBRD) to help reconstruct Europe after WWII. It is
one of several groups working to shape the global economy.
Today, the World Bank is an international agency that fights poverty by providing
development aid to middle- and low-income countries. The World Bank aspires to alleviate
poverty by assisting individuals in self-help by providing loans, advice, and training in both the
private and public sector. There are complementing entities that aid the World Bank Group's
goals of providing assistance.
In order to carry out its purpose in its member countries, the World Bank established
various sectors to handle their funding needs. Most of them took the shape of financial
institutions or dispute resolution bodies.
The International Bank for Construction and Development (IBRD) assists low- and
middle-income countries that are creditworthy. It also serves as an umbrella for the World Bank’s
more specialized organizations. The International Bank for Reconstruction and Development
(IBRD) was the World Bank’s founding branch in charge of postwar reconstruction. A country
must be a member of the IBRD before it may join the WBG’s affiliates (the International
Development Association, the International Finance Corporation, the Multilateral Investment
Guarantee Agency, and the International Centre for Settlement of Investment Disputes.
The International Development Association provides loans to the world’s poorest nations.
These loans are referred to as “credits” and are practically interest free. They have a 10-year
grace period and a maturity of 35–40 years.
The Multilateral Investment Guarantee Agency (MIGA) supports direct foreign
investment into a country by offering security against the investment in the event of political
turmoil. These guarantees come in the form of political risk insurance, meaning that MIGA
offers insurance against the political risk that an investment in a developing country may bear.
The International Centre for Settlement of Investment Disputes facilitates and works
towards a settlement in the event of a dispute between a foreign investor and a local country.
 The International Finance Corporation (IFC) works to promote private sector investments
by both foreign and local investors. It provides advice to investors and businesses, and it offers
normalized financial market information through its publications, which can be used to compare
across markets. The IFC also acts as an investor in capital markets and will help governments
privatize inefficient public enterprises.
The International Finance Corporation (IFC) is an organization dedicated to helping the
private sector within developing countries. It provides investment and asset management services
to encourage the development of private enterprise in nations that might be lacking the necessary
infrastructure or liquidity for businesses to secure financing.
The IFC was founded in 1956 as a World Bank Group sector dedicated to reducing
poverty and creating jobs via the promotion of private entrepreneurship. To this goal, IFC
guarantees that private firms in developing countries have access to markets and funding. Its
most recent objectives include the development of sustainable agriculture, improving small
enterprises' access to financing, infrastructure improvements, and climate, health, and education
policy. The IFC is administered by its 184 member countries and has its headquarters in
Washington, D.C.
In 2017, a classic example of an IFC investment occurred. The IFC invested in
Pakistan’s dairy industry. Pakistan is the world’s fourth-largest milk producer, yet demand has
regularly surpassed supply. Coupled with insufficient infrastructure and an outmoded supply
network, Pakistan’s dairy industry is increasingly failing to deliver on expectations. Small
subsistence farms account for approximately 80% of the industry’s output, making it inefficient.
The World Bank is important to the global financial market for a variety of reasons. For
starters, it contributes significantly to global poverty reduction by giving loans to developing-
country governments. This financial support is critical for these countries to pursue projects and
policies aimed at strengthening their economies and inhabitants' living standards. Second, the
World Bank is active in financing investment and capital mobilization in international financial
markets, both of which are critical for developing countries' long-term economic progress. By
providing financial products and policy guidance, the World Bank assists these countries in
addressing systemic difficulties and navigating financial obstacles, contributing to global
financial stability.
Furthermore, the World Bank’s efforts to provide advisory services and perform cutting-
edge research on economic, financial, development, and policy issues have a substantial impact
on the global economy. This assistance not only promotes the long-term development of
emerging markets, but also supports their integration into the global trading system, allowing
enterprises to expand globally and engage more actively in global commerce.
The World Bank's relevance In the worldwide financial market extends to its function in
ensuring financial stability and supporting international trade. The World Bank’s holistic
approach to development helps to create a more stable and predictable global financial climate,
which is critical for investors. The World Bank indirectly supports international trading and
investments by assisting emerging and developing countries in ensuring long-term market
access, making the international financial market more appealing and important to investors.
In conclusion, the World Bank’s diverse role in providing financial assistance,
mobilizing capital, providing policy advice, and conducting research is critical in promoting
sustainable growth, financial stability, and global integration in developing nations. As a result,
the worldwide financial market becomes more appealing and important to investors by
increasing investment opportunities and lowering the risks associated with financial instability
and systemic concerns.

2. Essay: Why is international financial market important to investors?

The International financial market is significant to investors for a number of reasons.

First, it provides a diverse range of investment alternatives, allowing investors to broaden their
portfolios beyond domestic markets. Diversification not only decreases risk but also has the
potential to boost returns by providing investors with access to rapidly rising markets and a
greater selection of investment vehicles such as foreign shares, bonds, and currencies.
Investors may profit from foreign asset diversification. When an investor’s entire
portfolio is not reliant on a single country’s economy, cross-border economic variations can
provide risk-reduction opportunities. A stock portfolio representing firms from multiple
European countries is less risky than a portfolio representing firms from a single European
country. Furthermore, access to international markets enables investors to distribute their funds
across a broader range of industries than could be available domestically. This is especially true
for investors who live in nations where businesses are concentrated in a small number of
industries.
Investors may anticipate overseas enterprises to do better than those in their home
country. For example, the relaxation of restrictions in Eastern European countries resulted in
improved economic conditions. Such circumstances drew foreign investors and creditors.
Second, the international financial market promotes the movement of capital across
boundaries, allowing countries to borrow and invest globally. Access to global capital markets is
critical for both developed and emerging nations, since it fuels economic growth by supporting
infrastructure projects, corporate expansion, and government borrowing.
Some investors buy financial products denominated in a currency that is predicted to rise
against their own. The performance of such an investment is heavily influenced by currency
fluctuations over time.
 Furthermore, the international financial market responds to worldwide economic trends
and events, providing investors with opportunities to profit from changes in exchange rates,
interest rates, and global economic growth rates. By understanding and reacting to these global
financial dynamics, experienced investors can improve their investing plans for greater returns.
Finally, investing in the global financial market exposes investors to new technology,
industries, and corporate governance models, broadening their investment experience and
expertise. This exposure can lead to better investing selections and possibilities to invest in
ground-breaking ideas before they become popular in the investor’s own nation.
Given the immense opportunities and rewards afforded by the worldwide financial
market, it’s no surprise that it’s so important to investors trying to optimize their investment
potential and achieve financial success.

REFERENCES:
Financial Markets Book- Lascano
https://www.investopedia.com/terms/w/worldbank.asp
https://www.walshmedicalmedia.com/open-access/international-finance-scope-importance-
advantages-and-disadvantages-109767.html#:~:text=International%20finance%20is%20an
%20important,and%20judge%20the%20foreign%20markets.
https://www.investopedia.com/terms/i/international-finance.asp