The World Bank Group was created in 1944 during the United Nations Monetary and Financial Conference, better known as the “Bretton Woods Conference” because it was held in Bretton Woods, New Hampshire, in the United States.
The Bretton Woods Conference consisted of delegates from 44 countries who were members of the victorious Allies in World War II. Initially, the International Bank of Reconstruction and Development (IBRD) was created to finance the rebuilding of Western Europe, but this mission was later expanded to encompass development projects across the entire globe, so the organization was renamed “The World Bank.”
The bank officially opened its doors for business in 1946 and a year later the first loan request arrived to the bank’s headquarters in Washington DC. It was a one-page letter, from the French Government, requesting a $500 million loan for post-war reconstruction. According to the WB website:
“The overall requirements included $106 million for equipment, $180 million for coal and petroleum products, and $214 million for raw materials. The equipment included ships, freight cars, trucks, radio, and electrical equipment, and coal mining equipment. The list of raw materials included fertilizers, copper, tin, synthetic rubber, animal fats, and chemicals.”.
In 1968, the World Bank pivoted from reconstruction to sustainable development, which sought to reconcile the needs for economic growth with environmental protection. At the same time, the bank began to focus on the use of capital flows in developing countries to help narrow the income disparity between developed and poorer countries.
In the early 1980s, as many states became unable to service their external debt to multilateral lending institutions, including the World Bank, the organization evolved to a more proactive approach in writing, creating, and shaping economic and social policies in developing countries. Loans were only to be given after borrowing countries agreed to structural adjustment programs (SAPs) designed by the World Bank that required the implementation of economic stabilization strategies, including budget cuts and the privatization of state-run enterprises.
What is the World Bank?
The World Bank (WB) is both the name of an umbrella organization (called the World Bank Group) as an international financing institution that provides grants and loans to some 100 developing countries. Generally speaking, when the term “World Bank” is used, it refers to the financing activities as opposed to the other services and products provided by the World Bank Group.
The World Bank Group (WBG) is a collection of five international development organizations: 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 Center for Settlement of Investment Disputes (ICSID).
Together, the IBRD and IDA are responsible for providing grants and loans to the developing world, the activities generally referred to as that of “The World Bank” in common speech.
The Bank employs more than 10,000 people at offices located in 130 countries. World Bank employees serve as policy advisers to finance ministers as well as providing financial consultancy services in developing countries.
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The World Bank is the planet’s largest multilateral creditor organization, and more than 120 countries currently have outstanding debts to the World Bank.
A total of 189 UN-recognized countries plus Kosovo are members of at least one component of the World Bank Group. The only UN-recognized governments which are not members of the World Bank Group are Andorra, Cuba, Liechtenstein, Monaco, and North Korea.
Taiwan is the largest economy that is not a member of the World Bank.
What Does the World Bank do?
The initial goal of the World Bank was to provide loans to countries rebuilding after World War II, with a heavy emphasis on infrastructure such as roads, dams, electrical grids, and agricultural irrigation systems. However, starting in 1960 with the creation of the International Development Agency (IDA), the eradication of poverty became the primary goal of the organization.
The bank works with a myriad of organizations – contractors. According to DevelopmentAid database, there are over 40,000 organizations and individuals in the list of the Bank’s contractors.
Who Owns the World Bank?
Technically, the World Bank Group (WBG) is operated as part of the United Nations but is not accountable to either the General Assembly or the Security Council. Instead, the World Bank is owned by its member governments which each hold a portion of World Bank shares. Members are then given votes in proportion to the amount of shares they own.
The largest shareholder of the World Bank is the United States, which currently owns 17.25% of the capital stock. The next seven countries with the largest percentage of shares are Japan (7.8%), China (5.6%), Germany (4.3%), Britain and France (each with 3.99%), India (3.2%), Russia (2.8%), and Canada (2.7%).
Shareholders vote for a president as well as a board of directors which has 25 executive directors, plus the president, whose mandate lasts five years. The World Bank Group also has two executive vice presidents, three senior vice presidents, and 24 vice presidents.
Because the World Bank was founded in the United States, and the largest shareholder of the World Bank is and has always been the United States, the president of the World Bank is and has always been an American, although two presidents were dual citizens.
With the World Bank opening for business on June 25, 1946, its first President, Eugene Meyer, resigned unexpectedly six months later, in December 1946, with no clear successor in sight.
The source of funding is different for the five different organizations within the World Bank Group. The IBRD raises funds by issuing bonds in developed countries whereas the IDA is primarily funded from contributions from its shareholders. The IFC, on the other hand, is primarily funded by private investors interested in for-profit business ventures while the ICSID is a forum for settling disputes between investors and countries. MIGA functions primarily as an insurance company and credit guarantor (underwriter) and is self-supporting through its business activities.
What Does “The World Bank” Stand For?
The World Bank Group (WBG) refers to five interrelated organizations that provide loans, grants, investment opportunities, and underwriting services to more than 140 countries around the world, whereas the term “World Bank” (WB) usually refers solely to the loans and grants for poverty eradication programs.
Although it is referred to as a “bank,” the World Bank does not operate in the same way that chartered banks do. Instead, the World Bank is designed to offer capital assistance to developing countries in the form of issuing loans, giving grants, providing underwriting services, giving financial advice, setting budgets, operating forums for international arbitration and dispute mediation, and steering private investments.
What are the World Bank’s Goals?
The World Bank currently has two goals that it wants to achieve by the year 2030: to reduce the level of extreme poverty (individual income of less than $1.90 per day) to below 3% of the global population (9,2% in 2021) and to increase overall prosperity by promoting income growth opportunities for the poorest 40% of the population in every country.
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