What is World Bank?

World Bank:

“World Bank” is the name that has come to be used for the IBRD and International Development Association. The world bank works to turn a rich country’s resources into a poor country’s growth.

The Principles followed by the IBRD in lending areas under:

1. It must lend only for productive purposes and must stimulate economic growth in the developing countries where it lends.

2. It must give due regard to the prospects of repayment.

3. Each loan is made to the government of a nation or must be guaranteed by the government concerned.

4. The bank decided to lend must be based on economic consideration.

5. The loan must be used to meet the foreign exchange component of the projects.

Objectives of the World Bank:

The purposes of the bank are as follows:

A)  To assist in the reconstruction and development of territories of the members by facilitating the investment of capital for productive purposes.

B)  To promote private investment by means of guarantee or participation in loans and other investments made by private investors.

C)  When private capital is not on reasonable terms, to supplement private investment by providing on suitable conditions finance for the productive purpose out of it own capital funds raised by it and it’s other resources.

D)  To arrange the loans or guaranteed by it in relation to international loans through other channels so that the more useful and agents will be dealt with first.

E)  To assist in bringing about a smooth transition from a wartime to a peacetime economy.

Lending Activities of the World Bank:

The world bank can provide or facilitates loans in any of the following ways:

1. By making or participating in direct loans out of its own fund.

2. By making or participating in direct loans out of funds raised in the market of a member,  or otherwise borrowed by the bank.

3. By guaranteeing in whole or in part loans made by private investors through the usual investment channels.

The bank adopts the following policies with respect to its loans and guarantees:

1. All loans are made to governments or they must be guaranteed by governments.

2. Repayment is to be made within ten to twenty-five years.

3. Loans are made only under circumstances in which other sources are not readily available.

4. Investigations are made on the probability of repayment, considering both the soundness of the project and the financial responsibility of the government.

5. Sufficient surveillance is maintained by the Bank over the carrying out the project to ensure that it is relatively well executed and managed.

6. Loans are sanctioned on economic and not political consideration.

7. Loans are meant to finance the foreign exchange requirements of specific projects, normally the borrowing country should mobilise its domestic fund.

Organisations of the World Bank:

There are four organisation under world bank:

A)  International Bank for Reconstruction and Development.

B)  International Finance Corporation.

C)  International Development Association.

D)  Multilateral Investment Guarantee Agency.

IBRD loans, made to governments directly on the guarantee given by them, are repeatable over 15 years with a grace period of 5 years. These loans are normally given for projects likely to offer a commercially viable rate of return.

The world Bank collaborates with the IMF in implementing structural adjustment programmes in developing countries.

It has also collaborated with the UNDP and UN environment programme which aims at assisting developing countries in implementing projects that benefit the global environment.

Management of the World Bank:

The world bank is managed by:

A)  The Board Of Governors.

B)  The Executive Directors.

C)  The President.

D)  The Advisory Committee and Loan Committee.

Capital of the World Bank:

The IBRD started with an authorized capital of $ 10 billion divided into 100,000 shares of $100,000.

The shares are available only to members countries. Only 20% of the total capital is available for lending purposes.


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