Inside the World Bank

You can't deposit or withdraw money at the World Bank. And you can't have checking or savings account either. Despite its name, the World Bank is an international development organization owned by more than 180 countries—both developed and developing. Its role is to reduce poverty by lending money to the governments of its poorer members—often called developing countries—to improve the health of their economies and to improve the standard of living of their people.

The Bank is also one of the world's largest research centers in development economics, which includes the study of poverty, trade, globalization, and the environment. It has specialized departments that use this knowledge to advise countries in such areas as health, education, nutrition, finance, justice, law and environment.

Another part of the Bank, the World Bank Institute, offers training to government and other officials in the world through local research and teaching institutions.

When Was the Bank Established?
The World Bank was established in 1944 to help rebuild Europe and Japan after World War II, and its official name was the International Bank for Reconstruction and Development (IBRD). When it first began operations in 1946, it had 38 members. Today, most of the countries in the world are members. Which countries belong to the Bank?

How Is the Bank Organized?
As it has grown, the World Bank has created new organizations within itself that specialize in different activities. All these organizations together are called the World Bank Group. The World Bank Group consists of:

• International Bank for Reconstruction and Development
  IBRD, the original "World Bank," which lends to low- and middle-income countries
• International Development Association
  IDA, which lends to low-income countries
• International Finance Corporation
  IFC, which lends to the private sector
• Multilateral Investment Guarantee Agency
  MIGA, which encourages private companies to invest in foreign countries
• International Centre for Settlement of Investment Disputes
  ICSID, which helps private investors and foreign countries work out differences when they don't agree

Who Runs the Bank?
The World Bank is like a giant cooperative where its members are shareholders. The number of shares a country has is based roughly on the size of its economy. The United States is the largest single shareholder, followed by Japan, Germany, the United Kingdom, and France. The rest of the shares are divided among the other members.

Who Makes the Decisions?
A Board of Governors represents the Bank's government shareholders. Generally, these governors are ministers, such as Ministers of Finance or Ministers of Development. The governors are the ultimate policymakers in the World Bank. They meet once a year at the Bank's Annual Meetings.

At the Annual Meetings all of the Bank's (and IMF's) governors come together to decide how best to address global development issues and decide what the world should focus on in the upcoming year (and near future) to help reduce poverty in the world.

Because the governors meet only once a year, they give specific duties to their Executive Directors, who work on-site at the Bank. Every member government is represented by an Executive Director. The five largest shareholders (France, Germany, Japan, the United Kingdom and the United States) appoint an executive director each, while other member countries are represented by 19 Executive Directors.

The Bank's 24 Executive Directors oversee the Bank's business, including approving loans and guarantees, new policies, the administrative budget, country assistance strategies, and borrowing and financial decisions.

How Many People Work for the Bank?
The Bank employs more than 10,000 people from 165 nations, including anthropologists, economists, educators, engineers, environmental scientists, financial analysts, health specialists and many others.

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Loans

To Whom Does the Bank Give Loans?
The Bank lends money to middle-income countries at interest rates lower than the rates on loans from commercial banks. In addition, the Bank lends money at no interest to the poorest developing countries, those that often cannot find other sources of loans. Countries that borrow from the Bank also have a much longer period to repay their loans than commercial banks allow. And they don't have to start repaying for several years.

Where Does the Bank Get Its Money?
The Bank borrows the money it lends. It has good credit because it has large, well-managed financial reserves. This means it can borrow money at low interest rates from capital markets all over the world to then lend money to developing countries on very favorable terms.

The Bank's financial reserves come from several sources - from funds raised in the financial markets, from earnings on its investments, from fees paid in by member countries, from contributions made by members, particularly the wealthier ones, and from borrowing countries themselves when they pay back their loans.

Does the Bank Pay for All Development?
The World Bank lends only a portion of the money needed for a project. The borrowing country must get the rest from other sources or use its own funds. Eventually, since the country has to pay back its loans, it ends up paying for most, if not all, of the project itself.

World Bank loans are for specific development projects as well as help in planning how to go about developing a project. For example, World Bank loans help countries

• Supply safe drinking water
• Build schools and train teachers
• Increase agricultural productivity
• Manage forests and other natural resources
• Build and maintain roads, railways, and ports
• Reduce air pollution and other environmental problems
• Extend telecommunications networks
• Generate and distribute energy
• Expand health care, especially for women and children
• Modernize

The World Bank also tries to encourage investment and lending by countries, companies and private investors. In addition, the Bank lends money to hire people who are experts in their industry and to help countries to reshape their economies to make them more efficient and productive.

But sometimes it isn't the money that the Bank provides that is the most important kind of support, often it is the advice and experience the Bank's staff bring to a project, or the environmental and social standards it applies.

How Much Money Does the Bank Lend?
In an average year the World Bank lends roughly $18 billion to the governments of about 80 developing countries to support more than 225 projects.

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How Does a Project Work?

A project begins when a developing country identifies a need, designs a project (develops the plan), and asks the Bank for a loan. Experts from the borrowing country and the World Bank study the plan carefully. Bank staff appraise the project and ask a lot of questions like:

• Will the project help the country's economy?
• Will it benefit the poorest people and increase economic opportunities for women?
• What impact would it have on the environment, both now and in the future?
• Can other funding sources be found?
• Will the country be able to maintain the project once funding ends?

Negotiations take place on how best to implement the strategy. Once an agreement is reached, and the loans are approved, work can begin. The Bank carefully monitors progress and pays out the loan in installments.

Assessing the effect of projects the Bank supports is essential in developing countries. Resources are scarce and must be used where they can have the largest effect. Monitoring helps project managers know if programs are reaching the people they are aimed at or if these programs are ineffective and wasteful. Monitoring and assessment also provide information and data on which future projects are designed.

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