The World Bank, originally known as the International Bank for Reconstruction and Development (IBRD), was created to help rebuild nations devastated by the Second World War. While the World Bank became its popular name, the official body at first was the IBRD. Once the reconstruction mission was achieved, the organisation formally adopted the name World Bank, with IBRD continuing as one of its key components.
In the 1960s, the International Development Association (IDA) was established and added to the framework. Today, the term World Bank refers collectively to IBRD + IDA.
Later, three more organisations were included to expand its scope:
- International Finance Corporation (IFC)
- Multilateral Investment Guarantee Agency (MIGA)
- International Centre for Settlement of Investment Disputes (ICSID)
Together, these five institutions form what is known as the World Bank Group, which comprises IBRD + IDA + IFC + MIGA + ICSID.
International Bank for Reconstruction and Development (IBRD)
Launched with a capital of $ 14 billion, the IBRD is jointly owned by its member nations. Its mission began with lending for reconstruction and now focuses on long-term development loans for middle-income countries, funding projects in areas such as poverty alleviation, healthcare, education, and environmental sustainability.
Since 1959, IBRD has maintained the world’s highest credit rating, enabling it to borrow from global markets at low interest rates and reinvest its profits into IDA to support poorer nations.
International Development Association (IDA)
IDA serves the world’s poorest countries, offering long-term, low-interest loans to support development projects. Funded largely by IBRD profits, IDA currently assists 77 of the most economically challenged member nations, with 39 of them located in Africa.
IDA loans typically have a 25–30-year maturity, with the possibility of an extra 5–10-year extension. India graduated from IDA’s eligibility in November 2014, while Bangladesh remains its largest borrower, followed by India in second place.
International Finance Corporation (IFC)
The IFC is the investment arm of the World Bank, designed to stimulate private sector investment within member states. It co-invests alongside private entities, sharing both risks and returns.
To raise funds, IFC and private firms often issue international bonds. These bonds are given locally inspired names to reflect their investment region. For example:
- Masala Bonds for India
- Samurai Bonds for Japan
Multilateral Investment Guarantee Agency (MIGA)
MIGA acts as the insurance arm of the World Bank, protecting investments facilitated by the IFC against non-commercial risks, such as forced nationalisation or political upheaval. This encourages greater international confidence in investing across developing nations.
International Centre for Settlement of Investment Disputes (ICSID)
ICSID provides an impartial forum for resolving investment disputes between member states or between investors and states where the World Bank has a role. Its rulings are binding on all parties involved.
It is noteworthy that India is a member of the World Bank and the wider World Bank Group, but not a member of ICSID.
Conclusion
The World Bank and the World Bank Group play a vital role in global development, offering financial assistance, investment opportunities, risk insurance, and dispute resolution. Together, these institutions form a comprehensive framework that supports sustainable growth, reduces poverty, and fosters economic cooperation worldwide.
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