The World Bank Group 101: The Bank of All the World
Foreword
This series of articles provides a detailed explanation of the work conducted by the World Bank, a well-known international financial institution, and its importance. The World Bank Group is one of the world’s largest providers of sources, knowledge, and funding for low and middle-income countries. Through issuing loans and grants the World Bank can facilitate the development of struggling nations in their fight of eradicating poverty, inspire prosperity, and promote sustainability. A detailed analysis of the past and present engagement of the five divisions of the World Bank Group will address the respective frameworks of the five organisations. Each article will focus thoroughly on the function and activity of each of the following organisations: The International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID). As an institution dedicated to establishing long-term economic development, the World Bank is an organisation whose continuous technical and financial support has successfully implemented projects and reforms on a global level. The World Bank Group 101 series aims to break down the function of the World Bank Group and its five member organisations. Every article in the series aims to offer an overview of the mission of the respective WBG institutions and their never-ending war against poverty and many other global issues concerning the majority of the countries of the world.
The World Bank Group 101 series consists of six articles:
The World Bank Group 101: The Bank of All the World
The World Bank Group 101: A Tale of Reconstruction and Development
The World Bank Group 101: A Narrative on the Association of Development
The World Bank Group 101: Encircling Risk Management and Investment Warranty
The World Bank Group 101: A Story on International Arbitration
The World Bank Group 101: The Global Resolution of Financial Disputes
The World Bank Group 101: The Bank of All the World
“Working for a world free of poverty” is the motto that has accompanied the world’s largest development institution since its establishment in July 1944, in Bretton Woods, New Hampshire, United States of America (World Bank Group - International Development, Poverty, & Sustainability, n.d.). The World Bank is an international financial institution that has positively influenced global economic development on a global level. However, an institution of the size of the World Bank, which undertakes responsibilities of the highest scale and finances projects worth millions of dollars may be complex to understand. This article aims to offer an overview of the mission of the World Bank, its function, its creation, and its importance through its achievements.
Putting an end to extreme poverty and promoting shared prosperity in a sustainable way are the two main missions of the World Bank Group (World Bank Group - International Development, Poverty, & Sustainability, n.d.). When it comes to sustainability one of the greatest issues that the World Bank is battling against is climate change. The World Bank Group is the biggest multilateral funder of climate investments in developing countries, making the World Bank a leader in climate change action, one of the most pressing issues of our age. To fulfil their goals and achieve and satisfy the annual plan, the World Bank Group conducts careful planning and strategising of loan and grant issuing to developing countries to finance projects that will elevate the economic development of each respective country. However, the greatest importance of the Bank’s continuous work lies in both the latest advancements and the past struggles of the dire circumstances of its creation.
The Genesis
At the end of World War II (1939 – 1945), the ongoing devastation and destruction which had incurred during the past seven years between the Allies — Great Britain, the United States of America, and the Soviet Union — and the Axis — Germany, Italy, and Japan — left all parties involved in a vulnerable state (Hughes, 2022). The need for the development of post-war countries led to the birth of the World Bank Group, at the time known as the International Bank for Infrastructure and Development, and its sister organisation, the International Monetary Fund (Masters, 2019). The International Monetary Fund began its operations in 1946, and at the time had only 38 members (World Bank Group, n.d.). The first loan issued by the International Bank for Infrastructure and Development was to France, hereby the need to shorten the institutional name to “The Bank” rose in popularity amongst representatives of the USA and UK governments, and in 1956 when the IFC was established, the World Bank was officialised (World Bank Group, n.d.).
The Bank’s Fundamental Framework
More than half a century later, the World Bank Group is composed of five organisations IBRD, IDA, IFC, MIGA, and ICSID whose reach has expanded all over the world, coming in aid of developing countries, leading 2,600 projects currently (Masters, 2019). The World Bank Group counts 189 member countries today, represented by the Board of Governors, who are senior finance and development officials delegated from member countries. The Board of Governors acts as the policymaker and protects the interests of the shareholders. Every member is identified as a shareholder, the largest being the United States of America, the United Kingdom, France, Germany, China, and Japan. Certain powers are delegated to the Board of Directors of the World Bank which is made up of 25 executives and the president. The president of the World Bank Group as of April 2019 is former U.S. Treasury Department official and Wall Street economist David Malpass (World Bank Group, n.d.). Since its creation, the head of the World Bank has always been an American, thus leading to speculations that the domination of the West prevails over the institution’s oath of serving the developing world (Masters, 2019).
Although many critics argue that the World Bank has exceeded its usefulness, supporters of the World Bank argue that the Bank remains the world’s universal arbiter of best development practices (Masters, 2019). To maintain the efficiency and efficacy of simultaneous problem-solving and project management the need to have five organisations within the institution was born. The five organisations that compose the World Bank Group are the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).
The International Bank for Reconstruction and Development is an international financial institution first established in 1944. Today, it is one of the five institutions under the World Bank Group. The IBRD’s main function is to give out loans to middle-income countries. On the other hand, the International Development Association was established in 1960 and is a World Bank group organisation mainly focused on offering both loans and grants to the world’s poorest countries. The International Finance Corporation is a World Bank member organisation established in 1956 which serves as an advisor for investment, asset management, financial risk, and development of the private sector in under-developed countries. The International Centre for Settlement of Investment Disputes is an institution of arbitration established in 1966 by the World Bank to provide the resolution and reconciliation of disputes between nations and investors. Lastly, the Multilateral Investment Guarantee Agency is a financial institution established in 1988 by the WBG. The main function of MIGA is to protect foreign direct investment in developing countries, by providing political risk insurance and credit guarantee.
A Bank of Priorities
Currently, the framework of the World Bank is focused on the following top priorities: food security, climate change, International Development Association, and World Bank Data. To the World Bank, food security is defined as the ability of all people, at all times, to have physical, financial, and immediate access to safe, clean, and healthy food to lead an active and fit life. As of today, data estimates that 9% of the world’s population, amounting to almost 700 million people live in extreme poverty. The term extreme poverty refers to living on less than one dollar and ninety cents a day (Poverty Trends: Global, Regional and National, n.d.). As an organization whose priority is to ensure food security, the World Bank Group stays on top of the ongoing inflation around the world which has significantly impacted the prices of food around the world. From the impact of the pandemic to war in Ukraine to trade regulation, the Bank takes everything into account to provide a detailed report addressing the measures to be taken to ensure food security for the citizens of the world.
The increase in food prices has triggered a rise in poverty around the world through escalating hunger and lack of nutrition. The World Bank report of 2021 demonstrated the clear setbacks of the COVID-19 pandemic on poverty reduction and the achievability of the 17SDG-s set by the United Nations. The current price soar of food, fuel, energy, and gas has deepened the obstacles set by the pandemic and has impeded global economic recovery.
The IMF released a paper alongside the WBG 2021 report where the International Monetary Fund reports that a minimum of 7 billion dollars in spending are required to aid the fragile households of the most affected nations by the heightened food and fertilizer price points. According to WBG and IMF data, a total of 48 countries have been massively affected, requiring an additional 50 million dollars of investment funds to terminate food insecurity for all 48 countries in the following 12 months (Tackling the Global Food Crisis: Impact, Policy Response, and the Role of The, 2022). The number of people experiencing food insecurity, alongside the number of countries affected by the inflation crisis, is expected to rise to 222 million people and 53 countries in the near future based on the FAO-WFO report (Hunger Hotspots FAO-WFP Early Warnings on Acute Food Insecurity October 2022 to January 2023 Outlook | World Food Programme, 2022).
Due to the breakout of war in Ukraine, sanctions and trade bans surged in number amounting to 21 countries having implemented 26 food export bans, and eight countries having implemented 12 export-limiting measures as of October 10th, 2022 (World Bank Group, n.d.). To facilitate a full-scale global retaliation to the proceeding food security crises the WBG has made available 30 billion dollars over a period of 15 months for domains such as agriculture, nutrition, social protection, clean water, and irrigation. This abovementioned fund will focus its financial resources on the production of food and fertilization, the advancement of the food and nutrition systems, the facilitation of trade, and the support of vulnerable entities (World Bank Group, n.d.).
Climate change is another priority and great concern of the World Bank amongst other international institutions that fear for the future of the next generations to come. The Climate Change Action Plan 2021 - 2025, introduced by the WBG strives to advance the aspects of climate change through the WBG’s Green, Resilient, and Inclusive Development (GRID) approach (World Bank Group, n.d.). The Bank Group has a cut-out role to play in supporting member countries to be prepared for the low-carbon, resilient transition, which will allow the countries to build climate-smart economies that are green, resilient, and inclusive. The GRID pursues the WBG’s mission of poverty eradication accompanied by sustainable prosperity as the ultimate solution to the five-year Climate Action Plan, where the WBG will support countries and the private sector clientele to utilise climate finance positively. The Action Plan represents a shift from green projects to green economies, and from inputs to impacts. The Plan’s focal points lie in integrating climate and development, identifying and prioritising action and driving climate finance and private capital to keep global temperature rise below 2°C (World Bank Group, n.d.). The main means of carrying out the Climate Change Action Plan are adaptation and resilience. Good adaptation equates to satisfactory, safer, and better development outcomes. However, in order to ensure good development, good measures of adaptation need to be resiliently put in place and continuously tracked and measured (World Bank Group, n.d.). The Action Plan which the WBG aims to implement is a plan of both financial and human investment. Communities need to be prepared prior to undertaking smarter development technologies crucial to facing climate change and ensuring health, education, and better quality of life.
As previously mentioned throughout this article, one of the two main missions of the World Bank is to reduce and eventually eradicate poverty around the world. The International Development Association, IDA, is the World Bank institution dedicated to providing help to the poorest of the world’s countries. IDA strives to reduce poverty through offering zero to low-interest loans referred to as credits, and grants to poor countries, hence why the expansion of the work of the IDA is a top priority of the Bank at the moment. Through the IDA credits and grants struggling nations boost their economy, reduce inequality, and improve life quality.
Since its establishment, the Bank has come a long way thanks to technological advancement and innovation. The World Bank designed its Open Data site to facilitate access for all people to World Bank. The Open Data site enables anyone to find, download, and use data from the Bank’s past and present projects, and activities (World Bank Group - International Development, Poverty, & Sustainability, n.d.). The reason why the World Bank data is a priority of the WBG is that the Bank is seeking to further innovate its data retention system to make it as transparent and accessible as possible to all interested scholars, researchers, and individuals. The resources of the Bank are vast, and numerous, similarly the decisions that concern those resources hold great importance in the economic development of the world.
Accounts of Achievements
As of 2022, there are 152 developing countries around the world based on the data of the IMF and World Bank (List of 152 Developing Countries of the Third World, n.d.). The World Bank’s reach extends to over 170 countries; however, eradicating poverty is no easy feat. Over the past 40 years, the World Bank has successfully aided five countries in ending extreme poverty throughout their states: China, Moldova, Vietnam, and the Kyrgyz Republic (These Countries Have Seen the Biggest Falls in Extreme Poverty, 2022). The term developing countries refers to all countries with less developed industrial fundamentals and a lower Human Development Index (HDI) compared to other countries. The World Bank divides the world’s economies into four divisions based on gross national income (GNI) to better target their functioning capital needs; high, upper-middle, lower-middle, and low-income countries (Poverty Trends: Global, Regional and National, n.d.).
Due to its position as a global economy developer, the World Bank must gather vast information and expertise in various fields, hence why the Bank is one of the world’s largest research centers of development in various fields. The World Bank has several specialized research departments that provide their training and knowledge to members of the WBG in the fields of health, law, nutrition, education, finance, justice, and environment (World Bank Group, n.d.).
Throughout the years, the Bank has achieved numerous accomplishments. The establishment of trust funds, initiatives, and action plans stands out in the long curriculum of successful projects. To mention a few impactful and valuable propositions of the WBG (World Bank Group, n.d.):
The Global Water Security and Sanitation Partnership Trust Fund
Debt Management Facility
Global Financing for Women, Children, and Adolescents
Swiss State Secretariat for Economic Affairs (SECO) - International Finance Corporation (IFC) – East Asia and Pacific Advisory Trust Fund
Nepal Earthquake Reconstruction Multi-Donor Trust Fund
Emergency Employment Investment Project (EEIP)
The Bank has been able to offer technical and financial support to its members through their projects. Building schools, clean water systems, providing electricity and healthcare, fighting diseases, offering vaccination, protecting the environment, and establishing secure and sustainable infrastructure are only a few of the activities conducted by the World Bank and its sister organization the IMF over the past decades (The IMF and the World Bank, n.d.).
Conclusion
The World Bank Group has been a crucial institution in the field of global economic development since its establishment in 1944. Regardless of its numerous achievements, the importance of the existence of the WBG lies in its arbitrary role and research facilities to fulfill its never-ending quest of eradicating poverty and building a sustainable economy. The mission of the WBG needs several decades of dedication and a united front between the members and the Bank. Overcoming extreme poverty is possible but requires patience, time, and unity. The projects financed by the loans and grants issued by the WBG are carefully distributed based on the wants and needs of the acquiring state. No institution is perfect, especially an institution the size of WBG. However, all the projects undertaken by the Bank aim to positively impact the education, healthcare, justice system, and poverty management of the host country.
Bibliographical References
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Hunger Hotspots FAO-WFP early warnings on acute food insecurity October 2022 to January 2023 Outlook | World Food Programme (2022, September 21). FAO/WFP. https://www.wfp.org/publications/hunger-hotspots-fao-wfp-early-warnings-acute-food-insecurity-october-2022-january-2023
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These countries have seen the biggest falls in extreme poverty (2022, May 20). World Economic Forum. https://www.weforum.org/agenda/2020/03/chart-of-the-day-these-countries-have-seen-the-biggest-falls-in-extreme-poverty/
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Visual Sources
Cover Image: Vector illustration of people send money to each other from one part of the world to another. (n.d.). [Illustration]. Pro Vector. Retrieved from https://www.vecteezy.com/vector-art/12669895-vector-illustration-people-send-money-to-each-other-from-one-part-of-the-world-to-another-concept-of-the-world-bank-payment-system
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