During World War II, the economies of many countries suffered greatly. World trade came to a complete standstill. Therefore, there was a need to reorganize the global markets and develop the economies of different countries in a planned manner. This is the first step in the establishment of the World Bank.
The International Bank for Reconstruction and Development (IBRD) was established at the Bretton Woods Conference to rebuild and develop these economies. This bank itself came to be known as the World Bank. Later in 1960 the International Development Association (IDA) was established. At present, these two banks or institutions are collectively known as the World Bank.
International Bank for Reconstruction and Development (IBRD)
The International Bank for Reconstruction and Development (IBRD) was established on 31 December 1945. Membership of the IMF automatically leads to membership of the IBRD.
The main function of IBRD is to provide long term credit for reconstruction and development. The IBRD only lends to middle-income countries and low-income countries that can repay the debt. It is checked whether the loan has been used only for reconstruction and development.
Activity wise at the time of loan disbursement. This loan is for long term. The interest rate on this loan is linked to LIBOR (London Inter Bank Offered Rate). The interest rate is reset every six months. The ultimate goal of IBRD is to reduce poverty, so IBRD is striving to achieve SDG (Sustainable Development) No. 1 to be achieved by 2030. (SDG 1 - The end of all forms of poverty in the world.)
IBRD is headquartered in Washington DC. It has the status of a specialized agency of the United Nations, similar to the International Monetary Fund. The financial year of IBRD is from 1st July to 30th June. This organization works like a co-operative society. The Board of Governors is its policy making body. The board consists of the finance minister or development minister of the member state.
There are 25 Executive Directors working for the day to day affairs of the Bank. Capital for the IBRD is raised through the sale of long-term debt securities in global financial markets.
IDA (International Development Association)
The main function of the International Development Association is to provide interest-free loans to the poorest countries. It gives loans only to very poor countries, it is also called credit subsidy because the interest rate on these loans is zero percent.
The repayment period of IDA loans is 35 to 45 years. Membership of the IDA is open to all members of the World Bank. But not everyone gets a loan. Only poor countries get loans. Along with these two institutes, three more institutes are functioning. All these five entities are collectively known as the World Bank Group.
IFC (International Finance Corporation) – This corporation was established in July 1956. The main function of the IFC is to provide financial assistance to the private sector in developing countries. IFC's mission is to invest in the private sector, raise capital internationally, provide business advice to enterprises, and promote sustainable development in various countries.
MIGA (Multilateral Investment Guarantee Agency) - This organization was established in 1988. MIGA promotes growth in foreign direct investment in developing countries. This is the main function of this organization.
ICSID (International Center for Settlement of Investment Disputes) - This organization was established in 1956. ICSID is the body for settlement of international disputes. But India is not a member of this organization.
The above five entities are collectively known as the World Bank Group. The current chair of the World Bank Group is a woman, Kristalina Georgieva. Following the resignation of America's Jim Yong Kim, the then CEO has been made acting chairman.
Important publications of the World Bank are the World Development Report and Global Economic Prospects. The World Bank Group has set quotas for the share of member countries without raising capital from global financial markets. According to this quota, the member states have to deposit capital. India's quota is SDR 6992.3 million