2015

World Bank Organization

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Hailey College of
Commerce
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[WORLD BANK
ORGANIZATION]
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WORLD BANK
The World Bank is a United Nations international financial institution that provides
loans to developing countries for capital programs. The World Bank is a component of the
World Bank Group, and a member of the United Nations Development Group. The World
Bank's official goal is the reduction of poverty. According to its Articles of Agreement, all
its decisions must be guided by a commitment to the promotion of foreign investment
and international trade and to the facilitation of capital investment.

Motto of the World Bank

Working for a World Free of Poverty

Profile of the World Bank

Formation
Type
Legal Status
Purpose
Headquarters
Co-ordinates of Geo Tagging
Region of Operation
Membership
Languages
President
Main Organ
Parent Organization

July 1944 (70 years ago)

International Financial Organization
Treaty
Crediting
Washington D.C., United States
38.53 North ; 77.02 West
Worldwide
188 Countries (IBRD) 172 countries (IDA)
Arabic,
Chinese,
English,
French,
Russian, Spanish
Jim Yong Kim
Boards of Directors
World Bank Group

World Bank Group

The World Bank is not to be confused with the United Nations World Bank Group, a
member of the United Nations Economic and Social Council, and a family of five
international organizations that make leveraged loans to poor countries.
(i)
International Bank for Reconstruction and Development (IBRD)
(ii) International Development Association (IDA)
(iii) International Finance Corporation (IFC)
(iv) Multilateral Investment Guarantee Agency (MIGA)
(v) International Centre for Settlement of Investment Disputes (ICSID)

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History
Lord Keynes (right) and Harry Dexter White are the "founding fathers" of both the
World Bank and the International Monetary Fund (IMF). The World Bank was created at
the 1944 Bretton Woods Conference, along with three other institutions, including the
International Monetary Fund (IMF). The World Bank and the IMF are both based in
Washington, D.C., and work closely with each other.
The Gold Room at the Mount Washington Hotel where the IMF and World Bank
were established 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 .

19441968
Before 1968, the reconstruction and development loans provided by the World
Bank were relatively small. The Bank's 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. 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 it 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 State Department told the French government
that its members associated with the Communist Party would first have to be removed.
The French government complied with this diktat and removed the Communist coalition
government. Within hours, the loan to France was approved. 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 countries.
Until 1968, its loans were earmarked for the construction of income-producing
infrastructure, such as seaports, highway systems, and power plants that would generate
enough income to enable a borrower country to repay the loan.

19681980
From 1968 to 1980, the bank concentrated on meeting the basic needs of
people in the developing world. The size and number of loans to borrowers was greatly
increased as loan targets expanded from infrastructure into social services and other

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sectors. These changes can be attributed to Robert McNamara, who was appointed to
the presidency in 1968 by Lyndon B. Johnson. McNamara imported a technocratic
managerial style to the Bank that he had used as United States Secretary of Defense
and President of the Ford Motor Company. McNamara shifted bank policy toward
measures such as building schools and hospitals, improving literacy and agricultural
reform. McNamara created a new system of gathering information from potential
borrower nations that enabled the bank to process loan applications much faster. To
finance more loans, McNamara told bank treasurer Eugene Rotberg to seek out new
sources of capital outside of the northern banks that had been the primary sources of
bank 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 third world debt. From 1976 to 1980 developing world debt rose at an average
annual rate of 20%.In 1980, the World Bank Administrative Tribunal was established 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.

19801989
In 1980, McNamara was succeeded by US President Jimmy Carter's nominee, A.W.
Clausen. Clausen replaced many members of McNamara's staff and instituted a new
ideological focus. His 1982 decision to replace the bank's Chief Economist, Hollis B.
Chenery, with Anne Krueger was an indication of this new focus. Krueger was known for
her criticism of development funding and for describing Third World governments as
"rent-seeking states." During the 1980s, the bank emphasized lending to service
Third-World debt, 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".

1989present
Beginning in 1989, in response to harsh criticism from many groups, the bank
began including environmental groups and NGOs in its loans to mitigate the past effects
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of its development policies that had prompted the criticism. It also formed an
implementing agency, in accordance with the Montreal Protocols, to stop ozone-depletion
damage to the Earth's atmosphere by phasing out the use of 95% of ozone-depleting
chemicals, with a target date of 2015. Since then, in accordance with its so-called "Six
Strategic Themes," the bank has put various additional policies into effect to preserve the
environment while promoting development. For example, in 1991, the bank announced
that to protect against deforestation, especially in the Amazon, it would not finance any
commercial logging or infrastructure projects that harm the environment.
In order to promote global public goods, the World Bank tries to control
communicable disease such as malaria, delivering vaccines to several parts of the world
and joining combat forces. In 2000, the bank announced a "war on AIDS", and in 2011,
the Bank joined the Stop Tuberculosis Partnership. Less recently, a project in Seychelles
to promote local tourism by the name of project MAGIC was launched in 2010. Its
successor project TIME was scheduled to be launched in 2012.
Traditionally, based on a tacit understanding between the United States and
Europe, the president of the World Bank has always been selected from candidates
nominated by the United States. In 2012, for the first time, two non-US citizens were
nominated. On 23 March 2012, U.S. President Barack Obama announced that the United
States would nominate Jim Yong Kim as the next president of the Bank. Jim Yong Kim was
elected on 27 April 2012.

Organization and Structure:

The organization of the bank consists of the Board of Governors, the Board of
Executive Directors and the Advisory Committee, the Loan Committee and the
president and other staff members. All the powers of the bank are vested with the
Board of Governors who are supreme policy is making body of the bank. The board
consists of one Governor and one Alternative Governor appointed for five years by each
member country. Each Governor has the voting power which is related to the financial
contribution of the Government which he represents.
The Board of Executive Directors consists of 21 members, 6 of them are
appointed by the six largest shareholders, namely the USA, the UK, West Germany,
France, Japan and India. The rest of the 15 members are elected by the remaining
countries. Each Executive Director holds voting power in proportion to the shares held
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by his Government. The board of Executive Directors meets regularly once a month to
carry on the routine working of the bank. The president of the bank is pointed by the
Board of Executive Directors. He is the Chief Executive of the Bank and he is
responsible for the conduct of the day-to-day business of the bank. The Advisory
committees appointed by the Board of Directors. It consists of 7 members who are
expects in different branches of banking. There is also another body known as the Loan
Committee. This committee is consulted by the bank before any loan is extended to a
member country

Membership
There are 184 member countries that are shareholders in the IBRD, which is the
primary arm of the WBG. To become a member, however, a country must first join the
International Monetary Fund (IMF). The size of the World Bank's shareholders, like that of
the IMF's shareholders, depends on the size of a country's economy. Thus, the cost of a
subscription to the World Bank is a factor of the quota paid to the IMF.
There is an obligatory subscription fee, which is equivalent to 88.29% of the quota
that a country has to pay to the IMF. In addition, a country is obligated to buy 195 World
Bank shares (US$120,635 per share, reflecting a capital increase made in 1988). Of
these 195 shares, 0.60% must be paid in cash in U.S. dollars while 5.40% can be paid in
a country's local currency, in U.S. dollars, or in non-negotiable non-interest bearing
notes. The balance of the 195 shares is left as "callable capital," meaning the World Bank
reserves the right to ask for the monetary value of these shares when and if necessary. A
country can subscribe a further 250 shares, which do not require payment at the time of
membership but are left as "callable capital." (Learn more about the IMF in An
Introduction to the International Monetary Fund.)
The president of the World Bank comes from the largest shareholder, which is the United
States, and members are represented by a Board of Governors. Throughout the year,
however, powers are delegated to a board of 24 executive directors (EDs). The five largest
shareholders - the U.S., U.K., France, Germany and Japan - each have an individual ED, and
the additional 19 EDs represent the rest of the member states as groups of constituencies. Of
these 19, however, China, Russia and Saudi Arabia have opted to be single country

constituencies, which mean that they each have one representative within the 19 EDs.
This decision is based on the fact that these countries have large, influential economies,
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which requires that their interests be voiced individually rather than diluted within a
group. The World Bank gets its funding from rich countries as well as from the issuance of
bonds on the world's capital markets.

Capital Resources of World Bank:

The initial authorized capital of the World Bank was $ 10,000 million, which was
divided in 1 lakh shares of $ 1 lakh each. The authorized capital of the Bank has been
increased from time to time with the approval of member countries. On June 30, 1996,
the authorized capital of the Bank was $ 188 billion out of which $ 180.6 billion (96% of
total authorized capital) was issued to member countries in the form of shares. Member
countries repay the share amount to the World Bank in the following ways:
1. 2% of allotted share are repaid in gold, US dollar or Special Drawing Rights (SDR).
2. Every member country is free to repay 18% of its capital share in its own currency.
3. The remaining 80% share deposited by the member country only on demand by
the World Bank.

Objectives:
The following objectives are assigned by the World Bank:
To provide long-run capital to member countries

for

economic

reconstruction and development.

To induce long-run capital investment for assuring Balance of Payments

(BoP) equilibrium and balanced development of international trade.

To provide guarantee for loans granted to small and large units and other
projects of member countries.

To ensure the implementation of development projects so as to bring about a

smooth transference from a war-time to peace economy.

To promote capital investment in member countries by the following ways;

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