World Bank|When and why the World Bank was formed?
The World Bank is an international financial institution that is working with the sole motive of having World Free of Poverty. The main function that provides credit to developing countries for the projects which lead to the economic development of the country.
Since July 2012, Jim Yong Kim is the president of World Bank. The president is responsible for chairing the meetings of the Boards of Directors and for overall management of the World Bank Group. The term length of the president is 5 years which is renewable.
World Bank presently has 188 member countries with South Sudan being the 188th country to join World Bank in 2012. India joined the World Bank in 1944(when the Bank was formed) and is among the top annual borrowers. The Corporate Office of World Bank in India is in New Delhi.
When and why the World Bank was formed?
- The World Bank was established in 1944 Bretton Woods Conference in July 1944 with it’s headquarter in Washington, D.C, USA.
- The World Bank is not a private institution that and so is not owned by a specific person.
- To promote capitalist policies and strengthen the power of the corporate sector. International institutions like World Bank and International Monetary Fund (IMF) were created at the end of World War II by the U.S. and British governments.
The World Bank Group has 5 institutions namely
- The International Bank for Reconstruction and Development (IBRD): The main function performed by IBRD is to lend money to governments of middle-income and credit worthy low-income countries.
- The International Development Association (IDA): IDA provides interest-free loans and grants to governments of the poorest countries & is considered the soft lending window of the World Bank.
- The International Finance Corporation (IFC): IFC is the largest global development institution that provides credits to businesses which help in the growth of economy focusing mainly on encouraging the private sector in developing countries to achieve sustainable growth.
- The Multilateral Investment Guarantee Agency (MIGA): The Multilateral Investment Guarantee Agency is an international financial institution which offers political risk insurance and credit enhancement guarantees. It promotes foreign direct investment (FDI) into developing countries to support economic growth, reduce poverty, and improve people’s lives.
- The International Centre for Settlement of Investment Disputes (ICSID): It provides international facilities for a reconciliation of investment disputes between governments or organizations of different countries.
World Bank provides low-interest loans and grants to developing countries. The investment projects include education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. The projects are co-financed with governments, other multilateral institutions, commercial banks, export credit agencies, and private sector investors.
The loan amount provided by the World Bank is raised by collecting funds from the member countries. Interest rates on World Bank loans are revised every six months and typically, the Bank charges borrowers a rate of interest 0.5 percent above its own cost of borrowing on the international market.
The World Bank Group has set two goals for the world to achieve by 2030:
- End extreme poverty by decreasing the percentage of people living on less than $1.90 a day to no more than 3%.
- Promote shared prosperity by fostering the income growth of the bottom 40% for every country.
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