What Is the Role of the World Bank?

What Is the World Bank?

The World Bank is an international organization dedicated to providing financing, advice, and research to developing nations to aid their economic advancement. The World Bank supplies qualifying governments with low-interest loans, zero-interest credits, and grants to support the development of individual economies. Debt borrowings and cash infusions help with global education, healthcare, public administration, infrastructure, and private-sector development.

History

The World Bank was formed in 1944 from the Bretton Woods Agreement, secured under the auspices of the United Nations in the latter days of World War II. The Bretton Woods Agreement created a collective international monetary system, the World Bank, and the International Monetary Fund (IMF).

The World Bank and the IMF supported European and Asian countries monetarily for post-war reconstruction efforts. Both outlasted the collective international monetary system, which ended under President Nixon in the 1970s. The World Bank and the IMF are headquartered in Washington, D.C.

The World Bank and its subsidiary groups operate within their provisions and develop their proprietary financial assistance products, all with the same goal of serving countries' capital needs internationally. The IMF is structured like a credit fund. Together, they provide different types of financial lending and financing support.

Structure

Since its inception, the World Bank has expanded from one institution to a group of five unique and cooperative institutional organizations, known as the World Bank Group:

• International Bank for Reconstruction and Development (IBRD): An institution that provides debt financing to governments that are considered middle-income countries.
• International Development Association (IDA): A group that gives interest-free loans to the governments of poor countries.
• International Finance Corporation (IFC): The IFC focuses on the private sector and provides developing countries with investment financing and financial advisory services.
• Multilateral Investment Guarantee Agency (MIGA): Promotes foreign direct investments in developing countries.
• International Centre for Settlement of Investment Disputes (ICSID): Provides arbitration services during international investment disputes.
  

Project Examples

• Human Capital Project: Created in 2017, this project helps countries invest in and develop their people to be productive citizens. World leaders are urged to prioritize education, healthcare, and social protections to realize a stronger economy. The project outlines goals such as affordable childcare and women's access to employment opportunities.
• Human Capital Index (HCI): The Human Capital Index summarizes a nation's investments in its human capital, specifically concerning health and education. The index helps identify what is lost from a lack of investments in human capital. It prompts leaders to remedy these deficiencies.
• Education and Healthcare Analysis: The World Bank measures the effectiveness of a nation's educational and healthcare systems to identify what should be continued and what should be changed.
• National Immunization Support Project for Pakistan: Established in 2016 for $377.41 million to increase the equitable distribution of vaccines to children ages 0 to 23 months. The project created a governance structure and addressed logistics, monitoring, and evaluation systems. It aligned skilled human resources and increased the awareness of and promoted the program among Pakistan's citizens, including across the country's school curriculum.
• Learning for the Future: Created to enhance children's readiness for school and the effectiveness of secondary instruction in specific Kyrgyz Republic communities. The program sought 500 community-based kindergarten programs, which will allow for the enrollment of 75,000 children. The project finances a training program for 500 new teachers and provides digital resources to complement existing learning resources.

World Bank Financials

The World Bank is an organization, rather than a bank. Its financials are not comparable to traditional financial institutions. For the fiscal year 2024, the World Bank distributed $36.902 billion in IBRD loans, $23.094 billion in IDA credits, and $8.101 billion in IDA grants. The IBRD loans money to creditworthy countries. For the fiscal year ended June 30, 2024, the IBRD recorded net interest revenues of $3.209 billion and allocable income of $1.849 billion. Its equity-to-loans ratio was 21.5%.

The IDA issues credits, which are interest-free loans or loans with low interest. It helps poorer nations with grant money. The World Bank recorded a net loss of $3.573 billion for the fiscal year ended June 30, 2024, an adjusted net income of $780 million, and a deployable strategic capital (DSC) ratio of 34.8%, which is the available capital divided by the capital needed to support the portfolio.

IFC provides funds and guidance to the private sector to help developing nations stay on a growth trajectory. For the fiscal year ended June 30, 2024, the World Bank recorded a net income gain of $1.485 billion and a total comprehensive income gain of $1,810 billion. Its Capital Utilization Ratio (CUR) was 61%. MIGA ensures investments in and loans to the poorest countries improve the welfare of a nation's citizens. For the fiscal year ended June 30, 2024, MIGA recorded net income of $180 million.

The Bottom Line

The World Bank is an international financial organization that provides funding to developing countries to support development. Financial assistance may come in the form of low-interest loans, zero-interest credits, or grants. The organization also provides policy advice and technical assistance to countries.