What Is The World Bank?
The World Bank is an international financial institution created at the end of World War II whose mission is to provide loans and credits to developing countries for projects that alleviate poverty and promote social and economic development. The Bank's public sector lending is done through the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). IBRD loans are made with favorable interest rates and rather long repayment schedules. IDA credits are extended to the poorest of the poor countries (defined largely in terms of per capita income) at no interest, with very relaxed loan repayment schedules. The IBRD and IDA also provide loans and guarantees in support of private sector projects. However, the majority of Bank financing for private sector operations is done through the International Finance Corporation (IFC) and the Multilateral International Guarantee Agency (MIGA).
Thus, the World Bank Group consists of IBRD, IDA, IFC and MIGA. In general IBRD and IDA make loans for public sector projects, and IFC and MIGA promote private sector investment. IBRD and IDA share the same staff, and must meet the World Bank's policies and procedures. The IFC is in the process of revising its environmental and social policy framework.
A Compliance Adviser/ Ombudsman (CAO) function for IFC and MIGA began operation in July 1999. The CAO was designed in part to address the concerns of the local communities who are adversely affected by IFC and MIGA-supported projects and to advise senior management. The CAO reports directly to the President of the Bank. For more information about using and contacting the CAO.
The World Bank is owned and governed by national governments, which become members by subscribing to capital stock. To join IBRD, countries must first be members of the International Monetary Fund (IMF). The amount of shares each member is allocated reflects its quota in the IMF. There are 184 member governments of IBRD. These countries are represented by a Board of Executive Directors, which has 24 members. Voting power is determined by shares, so the more economically powerful countries control a greater percentage of the vote. For instance, the United States as the largest shareholder controls approximately 17% of the vote. The Board must approve all projects financed by the Bank that are proposed by the Bank Management. The President of the Bank is appointed by the Board, and also serves as Chairman of the Board.
The World Bank gives project-oriented loans and guarantees to developing country governments but it also exerts enormous influence through macroeconomic policy prescriptions, research and technical advice. The Bank also makes loans for economic restructuring, and as such has enormous influence on how development is carried out.
Most project-related loans and credits promote infrastructure projects (such as roads, bridges and dams), or agriculture projects (such as crop intensification, fish farming, and irrigation). Bank-financed projects can involve significant social and environmental costs, such as displacement of local communities, disruption of indigenous peoples, and the destruction or degradation of the environment. The Bank has had difficulty in effectively mitigating these social and environmental impacts, despite the fact that it has developed many important policies and procedures to try to address these impacts.
