The World Bank
is an international financial organization that initially served the purpose of financing the recovery processes ongoing in the countries most affected from the atrocities of World War II. Nowadays, the main goal of the institution is to reduce world poverty by financing the underdeveloped countries.
The Bank was established in 1945 as a result of the Bretton-Wood Conference. The structure is owned by 186 member countries and comprises the following two institutions:
- International bank for reconstruction and development (IRDB)
- International Development Association (IDA).
The main focus of the IRDB is financing middle-income and creditworthy poor countries, while the latter concentrates its efforts on the poorest countries in the world. The bank provides low-interest development and investment loans and grants to underdeveloped countries for areas such as health, education, infrastructure, environmental and natural resource management, etc. The bank has two main sources of generating revenue for its operations. One is through the IRDB’s sale of AAA-rated bonds in the financial markets, and the other is through funding of the IDA by forty donor countries, obliged to replenish their funding every three years.
From its inauguration to present, four distinct periods can be distinguished as far as the main activity of the World Bank is concerned. The first is the period from the Bank’s inception till the late 60s. Typical for these years is a policy of fiscal conservatism as the Bank was very selective in approving loan projects. The majority of loan recipients were countries whose projects were expected to directly enable the country to repay its debt. (e.g. power plants, road infrastructure, harbors). The second distinct period of the World Bank’s function stretches from the late 60s till the beginning of 80s and is characterized by a shift in the Bank’s main focus on the elimination of poverty and meeting the needs on the most underdeveloped countries.
Projects such as building of hospitals and increasing the global literacy rate played a central role in the Bank’s endeavors. As a negative consequence, however, third-world countries’ foreign debt increased dramatically over this period. This development led to a shift in efforts to help poor countries which service their debt throughout the whole next decade. An essential part of those efforts consisted of attempting to modernize and accelerate the economies of the borrowing countries. This was, however, done at the expense of reduced funding for health, education, and increase in global literacy. For this reason, the shift was met with large criticism from different plurality groups. From the beginning of the 90s onwards, as a response to the large criticism, the Bank has shifted its focus to a number of environmental issues such as funding of projects for the reduction of greenhouse gases and ensuring the environmental sustainability of the planet. The bank’s current mission is to assist countries in combating poverty by promoting economic growth, healthy investment environment, and sustainability. The bank enlists five key factors that help to achieve a healthy business environment:
- Strengthening the function of governments
- Implementing legal and judicial systems which promote business endeavors and protect the property and rights of the countries’ citizens
- Support individual countries’ efforts to fight against corruption
- Support the development of stable financial systems
- Support for research and development activities.
The World Bank is managed by a President, who serves a renewable 5-year mandate and is appointed directly by the US President. So far in the Bank’s history, all presidents have been US citizens as the United States is the largest shareholder of the bank. The president chairs the Board of Directors who usually meets twice a week to oversee the bank’s ongoing activities.
Since 1999, the World Bank has adopted a set of philosophies for individual countries’ development, known as the Comprehensive Development framework, which comprises the following guidelines:
- Strategies for development should be comprehensive and long-term oriented;
- Strategies should be based around local stakeholders’ participation in the individual countries;
- Individual countries’ performance should be evaluated on a measurable criteria;
- Countries should manage and coordinate the aid received through stakeholder partnerships.
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