The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to developing countries. The group is the largest development bank in the world. It is headquartered in Washington, D.C., United States. The bank's stated mission is to achieve the twin goals of ending extreme poverty and building shared prosperity. Historically, within the group, the IBRD and IDA were collectively known as the World Bank due to their emphasis on global lending.
The World Bank was established along with the International Monetary Fund at the 1944 Bretton Woods Conference. Initially, its loans helped rebuild countries devastated by World War II. Over time, it has shifted its focus to development, with a stated mission of eradicating extreme poverty and boosting shared prosperity. It has been criticized for its structural adjustment programs, governance, environmental record, and policies detrimental to social welfare.
The group comprises five organizations, as established over time:
International Bank for Reconstruction and Development (IBRD), 1944 International Development Association (IDA), 1960 International Finance Corporation (IFC), 1956 International Centre for Settlement of Investment Disputes (ICSID), 1965 Multilateral Investment Guarantee Agency (MIGA), 1988
History Founding
The World Bank was created at the 1944 Bretton Woods Conference (1–22 July 1944), along with the International Monetary Fund (IMF). The president of the World Bank is traditionally an American. The World Bank and the IMF are both based in Washington, D.C., and work closely with each other.
Although many countries were represented at the Bretton Woods Conference, the United States and United Kingdom were the most powerful in attendance and dominated the negotiations. The intention behind the founding of the World Bank was to provide temporary loans to low-income countries that could not obtain loans commercially. The bank may also make loans and demand policy reforms from recipients.
The agreement at Bretton Woods implied that both the World Bank and IMF would be headquartered in the United States. US treasury secretary Henry Morgenthau Jr. intended them to be located in New York, but his successor Fred M. Vinson unilaterally decided that they would be in Washington, D.C. instead, noting that "the institutions would be fatally prejudiced in American opinion if they were placed in New York, since they would then come under the taint of 'international finance'". The World Bank Group came into formal existence on 27 December 1946, following international ratification of the Bretton Woods agreements. The Conference also provided the foundation of the Osiander Committee in 1951, responsible for the preparation and evaluation of the World Development Report. Commencing operations on 25 June 1946, the bank approved its first loan on 9 May 1947 (US$250 million to France for postwar reconstruction - in real terms, the largest loan the bank has issued to date).
Cold War era
In its early years, the bank made a slow start for two reasons: it was underfunded, and there were leadership struggles between the US executive director and the president of the organization. When the Marshall Plan went into effect in 1947, many European countries began receiving aid from other sources. Faced with this competition, the World Bank shifted its focus to non-European allies. Until 1968, its loans were earmarked for the construction of infrastructure works, such as seaports, highway systems, and power plants, that would generate enough income to enable a borrower country to repay the loan. In 1960, the International Development Association was formed (as opposed to a UN fund named SUNFED), providing soft loans to developing countries.
Before 1974, the reconstruction and development loans the World Bank made were relatively small. Its staff was aware of the need to instill confidence in the bank. Fiscal conservatism ruled, and loan applications had to meet strict criteria.
The first country to receive a World Bank loan was France in 1947. The bank's president at the time, John McCloy, chose France over two other applicants, Poland and Chile. The loan was for US$250 million, half the amount requested, and came with strict conditions. France had to agree to produce a balanced budget and give priority of debt repayment to the World Bank over other governments. World Bank staff closely monitored the use of the funds to ensure that the French government met the conditions. In addition, before the loan was approved, the United States Department of State told the French government that its members associated with the Communist Party would first have to be removed. The French government complied and removed the Communist coalition government—the so-called tripartite. Within hours, the loan to France was approved.
From 1974 to 1980, the bank concentrated on meeting the basic needs of people in the developing world. The size and number of loans to borrowers greatly increased, as loan targets expanded from infrastructure into social services and other sectors.
These changes can be attributed to Robert McNamara, who was appointed to the presidency in 1968 by Lyndon B. Johnson. McNamara implored bank treasurer Eugene Rotberg to seek out new sources of capital outside of the northern banks that had been the primary sources of funding. Rotberg used the global bond market to increase the capital available to the bank. One consequence of the period of poverty alleviation lending was the rapid rise of debt of developing countries. From 1976 to 1980, developing world debt rose at an average annual rate of 20%.
The World Bank Administrative Tribunal was established in 1980, to decide on disputes between the World Bank Group and its staff where allegation of non-observance of contracts of employment or terms of appointment had not been honored.
McNamara was succeeded by U.S. President Jimmy Carter's nominee, Alden W. Clausen, in 1980. Clausen replaced many members of McNamara's staff and crafted a different mission emphasis. His 1982 decision to replace the bank's Chief Economist, Hollis B. Chenery, with Anne Krueger was an example of this new focus. Krueger was known for her criticism of development funding and for describing developing countries' governments as "rent-seeking states".
During the 1980s, the bank emphasized lending to service debt of developing countries, and structural adjustment policies designed to streamline the economies of developing nations. UNICEF reported in the late 1980s that the structural adjustment programs of the World Bank had been responsible for "reduced health, nutritional and educational levels for tens of millions of children in Asia, Latin America, and Africa".
Membership
The International Bank for Reconstruction and Development (IBRD) has 189 member countries, while the International Development Association (IDA) has 175. Each member state of IBRD should also be a member of the International Monetary Fund (IMF) and only members of IBRD are allowed to join other institutions within the bank (such as IDA). The five United Nations member states that are not members of the World Bank are Andorra, Cuba, Liechtenstein, Monaco, and North Korea. Kosovo is not a member of the UN, but is a member of the IMF and the World Bank Group, including the IBRD and IDA. Other non-members are Palestine, the Holy See (Vatican City), Taiwan, and the following de facto states: Abkhazia, Northern Cyprus, the Sahrawi Arab Democratic Republic, Somaliland, South Ossetia, and Transnistria.
The Republic of China joined the World Bank on 27 December 1945. After the Chinese Civil War, the government fled to Taiwan and continued its membership in the WBG until 16 April 1980, when the People's Republic of China replaced the ROC. Since then, it uses the name "Taiwan, China".
All of the 188 UN members and Kosovo that are WBG members participate at a minimum in the IBRD. As of May 2016, all of them also participate in some of the other four organizations (IDA, IFC, MIGA, and ICSID).
WBG members by the number of organizations in which they participate: Only in the IBRD: The IBRD and one other organization: Nauru, San Marino The IBRD and two other organizations: Antigua and Barbuda, Brunei, Kiribati, Marshall Islands, Namibia, Tuvalu, Venezuela The IBRD and three other organizations: India, Mexico, Belize, Jamaica, Dominican Republic, Brazil, Bolivia, Uruguay, Ecuador, Dominica, Saint Vincent and the Grenadines, Guinea-Bissau, Equatorial Guinea, Angola, South Africa, Seychelles, Libya, Somalia, Ethiopia, Eritrea, Djibouti, Bahrain, Qatar, Iran, Malta, Poland, Russia, Belarus, Kyrgyzstan, Tajikistan, Turkmenistan, Thailand, Laos, Vietnam, Palau, Tonga, Vanuatu, Maldives, Bhutan, Myanmar, Suriname All five WBG organizations: the rest of the 139 WBG members
Voting power In 2010, voting powers at the World Bank were revised to increase the voice of developing countries, notably China. The countries with most voting power are now the United States (15.85%), Japan (6.84%), China (4.42%), Germany (4.00%), the United Kingdom (3.75%), France (3.75%), India (2.91%), Russia (2.77%), Saudi Arabia (2.77%) and Italy (2.64%). Under the changes, known as 'Voice Reform – Phase 2', countries other than China that saw significant gains included South Korea, Turkey, Mexico, Singapore, Greece, Czech Republic, Hungary, Brazil, India, and Spain. Most developed countries' voting power was reduced, along with a few developing countries such as Nigeria. The voting powers of the United States, Russia and Saudi Arabia remained unchanged.
The changes were brought about to make voting more universal in regards to standards, rule-based objective indicators, and transparency among other things. Now, developing countries have an increased voice in the "Pool Model", backed especially by Europe. Additionally, voting power is based on economic size in addition to the International Development Association contributions.
List of 20 largest countries by voting power in each World Bank institution The following table shows the subscriptions of the top 20 member countries of the World Bank by voting power in the following World Bank institutions as of December 2014 or March 2015: the International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), the International Development Association (IDA), and the Multilateral Investment Guarantee Agency (MIGA). Member countries are allocated votes at the time of membership and subsequently for additional subscriptions to capital (one vote for each share of capital stock held by the member).
+ The 20 Largest Countries by Voting Power (Number of Votes) Rank Country IBRD Country IFC Country IDA Country MIGA World 2,201,754 World 2,653,476 World 24,682,951 World 218,237 1 358,498 570,179 2,546,503 32,790 2 166,094 163,334 2,112,243 9,205 3 107,244 129,708 1,510,934 9,162 4 97,224 121,815 1,368,001 8,791 5 87,241 121,815 908,843 8,791 6 87,241 103,747 810,293 5,756 7 67,690 103,653 661,909 5,754 8 67,155 82,142 629,658 5,754 9 59,004 82,142 573,858 5,597 10 54,877 62,392 521,830 5,451 11 54,651 56,931 498,102 5,196 12 42,948 51,410 494,360 4,048 13 42,613 48,129 488,209 3,803 14 42,348 44,863 412,322 3,245 15 36,591 40,279 312,566 2,869 16 36,463 38,929 275,755 2,832 17 34,718 37,826 275,474 2,491 18 33,296 32,402 258,209 2,436 19 30,910 30,862 231,685 2,075 20 26,293 28,895 218,506 2,075
Organizational structure
Together with four affiliated agencies created between 1957 and 1988, the IBRD is part of the World Bank Group. The group's headquarters are in Washington, D.C. It is an international organization owned by member governments; although it makes profits, they are used to support continued efforts in poverty reduction.FAQ-About The World Bank , Worldbank.org.