World Bank - Facts, Objectives and Functions

World Bank is an international financial institution that provides loans to developing countries for development programs.
World Bank
  • World Bank was formed on July 1944  at the Bretton Woods Conference. 
  • Headquarter of World Bank is located at Washington D.C. (U.S.A.)
  • The main purpose of the world bank is ''Reduction of Poverty''.
  • Current member nations of world bank are 188.
  • Now the president of the World Bank is Jim Yong Kim.
  • World Bank is comprises of two institutions - International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).
  • World Bank is member of the United Nations Development Group as well as World Bank Group.
  • World Bank Group includes - International Bank for Reconstruction and Development (IBRD), International Development Association, International Finance Corporation, Multilateral Investment Guarantee Agency, International Center for Settlement of Investment Disputes.
  • The president of the world bank comes from the largest shareholder. Members are represented by a Board of Governors. 
  • If a country wants to be a member of world bank, it has to purchase the shares of world bank group institutions as per agreement, rules and regulations set.
  • The five largest shareholders are U.S. , U.K. , France, Germany and Japan.
  • The largest shareholders nations has their own Executive Directors.

Objectives and Functions of World Bank

  • To help in reconstruction and development of member countries.
  • Spread peace all over the world regarding financial terms.
  • Helps to the economies of those countries destroyed by wars.
  • Helps to developing and less developed countries by crediting the finance.
  • To promote private foreign investments.
  • To promote long term balanced growth of international trade.
  • Maintenance of equilibrium in balance of payments of member countries and also to increase the standard of living as well as labor conditions of developing and less developed countries.
  • Investment of money in productive purposes only. 
  • World Bank provides various technical services to member countries. "The Economic Development Institute" and a "Staff College" has established by world bank in Washington.
  • World Bank can grant loans to a member country up to 20% of that country;s share in the paid up capital.
  • The interest rate, quantities of loans and all any other terms and conditions are determined by world bank itself.
  • The borrower nation has to repay either in reserve currencies or in the currency in which the loan was sanctioned.

Membership

  • Any country can become the member of world bank if 75% of the existing member countries approved the application.
  • Any member nation can also resign from its membership voluntarily or if any country violates the rules of the world bank.

Management

  • Management of world bank includes - Board of Governors, Board of Executive Directors, Loan Committee, Advisory Committee, President and other members of the staff. 
  • Board of Governors of the world bank includes one Governor (Finance Minister) and one alternate governor (governor of central bank) appointed by each member country for a term of 5 years. Each governor has voting power in relation to its financial contribution to the capital of the bank. Board is required to meet at least once in a year.
  • Executive Directors are 21 and out of this 6 are appointed by the six largest shareholders like USA, UK, Germany, France and Japan. The remaining 15 members are elected by the rest of member countries. It meets once a month to carry on daily routine work.
  • President is appointed by board of executive directors.
  • World Bank perform its functions with the help of two committees - Advisory Committee and the Loan Committee. Advisory Committee includes 7 experts appointed by the Board of Governors. Loan Committee is constituted by the executive directors and loan is provided as per the economies of member countries.

Lending Procedures

  • Loans out of its own funds
  • Loans out of borrowed capital 
  • Loans through Bank's Guarantee

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