World Bank Group

By: EconomyWatch   Date: 8 September 2010

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The World Bank Group, as the name suggests is not a bank a but a financial institution that provides financial as well as technical assistance to the developing countries of the world. Having a membership count of 185 countries it is basically composed of two development bodies, the International Bank of Reconstruction and Development(IBRD) and the International Development Association(IDA).

Both the development bodies of the World Bank Group aim at the uplift of the underdeveloped pockets of the world. The subject of the IBRD are the middle income and the poor countries that are worthy of credit whereas the IDA deals with the poorest countries of the world.

The main function of the World Bank Group is the provision of low interest loans, credit that is interest free as well as aids to the least developed countries for the development in the field of education health and infrastructure.

The structure and function of the main bodies of the World Bank as well as the auxiliary bodies may be detailed under the following heads.

Structure and Function of the IBRDThe International Bank of Reconstruction and Development made its inception in 1944.The structure of the IBRD is just like a cooperative whose goal is to help the middle income countries in terms of loans at low rates of interest,provision of tools helping in risk management. Now a relevant question in this regard is that where from does the IBRD generate such funds. The answer is the world financial market. Its financial strength has grown ever since its issue of the first bond in 1947. As the years rolled over the finances of the IBRD gathered strength and they began to finance the development activities of the poor countries.

Structure and Function of IDAThe IDA took birth in the year1960. It was established with the intention of reducing poverty by the provision of soft loans for the poor and downtrodden countries in the world. The IDA works hand in hand with the International Bank Of Reconstruction and Development. The IDA mostly caters to the African countries. The loans given out by the IDA are free of interest and they are termed as credits. The IDA receives its funds from the government of the rich member countries.

International Finance Corporation (IFC)The International Finance Corporation was founded in 1956 with the intention of enhancing the private investment in the developing countries. With a membership of 179 countries the function of the IFC is the provision of loans, equity, risk management tools and structured finances. It seeks to bring about sustainable development by improving investments in the private sector in the underdeveloped countries. The underdeveloped regions that are covered by the IFC are the Sub-Saharan Africa, East Asia and the Pacific, South Asia, Europe and Central Asia, Latin America an the Caribbean, North Africa and the the Middle East.

MIGAMIGA which is a member of the World Bank group is in charge of improving the Foreign Direct Investment of the developing countries.The less developed countries need lot of investments in the fields of infrastructure, education and an endless list of items. The government faces a major bottleneck in financing all these singlehandedly and there is no way of transferring such a financial burden. Promoting foreign direct investment is imperative in such a situation since the government can shift their focus on more profitable investment alternatives. It is generally observed that the FDI is channelized to countries who have a strong political lobby. In this way the developing countries are deprived of the most precious sources of finance.The MIGA helps to direct FDI in the following fields of infrastructure development,investment in the high risk and low return countries, areas that are controversial in terms of conflicts. It also promotes investment between the developing countries.

International Center for Settlement of Investment Disputes (ICSID)The International Center for Settlement of Investment Disputes, another wing of the World Bank was founded in 1966. Its constitution aimed resolving the disputes that arose between the government and the private investors. It was thought that the settlement of such disputes would enhance the international flow of capital.

Achievements of the World Bank Group

  • World Bank is the largest source of finance in Education.
  • World Bank is one of the largest financier in its war with HIV/AIDS
  • They have led the world in the fight for corruption
  • They provide the strongest debt relief to the heavily indebted countries in the world.
  • They are one of the prominent financiers of biodiversity projects.
  • They are helping in bringing the basic amenities to the poor people.
  • The guiding force in the work of the World Bank is the civil society.
  • The World Bank has helped countries to be free from and and conflicts
  • Last but not the least, the World Bank answers the pains of the poor.

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