What Is The World Bank

The World Bank

One of the most important financial institutions in the world, if not the most important, is the World Bank. The World Bank is an international financial institution that provides leveraged loans to developing countries to help fund capital programs. Through the World Bank, the expressed goal of reducing poverty is worked towards.

Many people confuse the World Bank with the World Bank Group. The World Bank is made up of the International Bank for Reconstruction and Development and the International Development Association, while the World Bank Group is made up of those two organizations, as well as the International Finance Corporation, Multilateral Investment Guarantee Agency and the International Center for Settlement of Investment Disputes.

The World Bank was created in 1944 at the Bretton Woods Conference, which was the same conference where the International Monetary Fund was created. Like the IMF, the World Bank is headquartered in the United States. One interesting note is that while the IMF is traditionally led by a European, the World Bank by custom is always led by an American. The first country to be selected for World Bank aid was France, while Poland and Chile were rejected. The first loan was for $987 million, roughly half of what was originally requested and this was under strict conditions. The World Bank then monitored the use of these funds and it was required by the French government to provide a balanced budget and a plan for repayment to the World Bank. In addition, the United States required that the French government remove any communist elements within its cabinet in order to qualify for the loan. France, which had been decimated by the Second World War, complied.

The World Bank has set forward five factors that are necessary for economic growth within a country, which allows them to help countries improve their financial standing and the standard of living of the country’s citizens. These factors are:

1.   Build capacity to strengthen governments.

2.   Create infrastructure to implement justice systems that aid business and protect the rights of individuals and their property.

3.   Develop financial systems that are strong and can handle tough economic times through concepts like corporate ventures and micro-credit.

4.   Combat corruption by helping countries eradicate it within their borders.

5.   Research and train countries and their citizens, while providing the opportunity for citizens of these countries to get an education.

The World Bank has decided that it would try and reach some very ambition goals by 2015 in order to help make the world a better place. These goals have helped to improve the image of the World Bank from just an international bank, into an organization that is dedicated to making the world a better place. The goals set out by the World Bank for 2015 are:

·   Eradicate Extreme Poverty/Hunger

·   Universal Primary Education

·   Promote Gender Equality

·   Reduce Child Mortality

·   Improve Maternal Health

·   Combat the Spread of Diseases

·   Ensure Environmental Sustainability

·   Develop Global Partnership

Thanks to the World Bank, things are improving on many fronts.

These policies and goals are being pushed by the main voting powers of the World Bank. In 2010, the World Bank revised its voting system to help give developing countries more of a say in the decisions of the organization. Currently the voting powers of the World Bank are split as follows:

1.   United States:  15.85 percent

2.   Japan:  6.84 percent

3.   China:   4.42 percent

4.   Germany:  4.00 percent

5.   France:  3.75 percent

6.   United Kingdom: 3.75 percent

7.   Other members: 61.39 percent

Under the reforms in 2010, countries like Brazil, India, South Korea and Mexico saw their voting power increase. Many developed countries lost voting power while Russia did not see a change in its voting power.