History of the World Bank

Table of Content

The World Bank (WB) was established during the Bretton Woods Conference and expanded by incorporating other institutions as new responsibilities were acknowledged. In the beginning, its main goal was to lend money for Europe’s reconstruction after World War II. Over time, it also started providing loans to developing countries to support their progress. To be a member of the WB, prior membership in the International Monetary Fund (IMF) is necessary. The WB obtains funding through subscription quotas, borrowing from the international capital market via bonds, loan repayments, and retained earnings.

The current institutions that comprise the WB group include: 1. IBRD (International Bank for Reconstruction and Development), 2. EDI (Economic Development Institute), 3. IFC (International Finance Corporation), 4. IDA (International Development Association), 5. MIGA (Multilateral Investment Guarantee Agency), and 6. ICSID (International Center for Settlement of Investment Disputes).

This essay could be plagiarized. Get your custom essay
“Dirty Pretty Things” Acts of Desperation: The State of Being Desperate
128 writers

ready to help you now

Get original paper

Without paying upfront

The IBRD, established in 1946, had two primary objectives: to rebuild Europe after World War II and invest in developing countries. Originally focused on Europe’s reconstruction, this was accomplished by 1955. European lending ceased in 1967 but resumed in 1989 to aid Central and Eastern Europe. Additionally, the IBRD provides financial assistance for projects in the developing world that cannot secure private funding. It employs a neoliberal approach to identify eligible economic development initiatives. As the dominant provider of development aid, the IBRD plays a crucial role in fostering worldwide economic growth.

The International Bank for Reconstruction and Development (IBRD) is a financial institution that gives official loans to sovereign entities. The IBRD is recognized for its careful management and profitability, conducting thorough economic and financial assessments to achieve a targeted return on investment (ROI) of 10% before approving loans. Though about 40% of projects do not meet the 10% ROI goal, the average ROI of the IBRD is approximately 20%. However, there are concerns within the organization regarding the decreasing average ROI. Currently, the IBRD holds outstanding loans totaling over $104 billion.

The Economic Development Institute, also referred to as the Banks college, was founded in 1955 with funding from the Ford and Rockefeller Foundations. Its primary goal is to offer instruction in economic and financial management for government officials hailing from developing nations. The institute advocates for neoliberal economic viewpoints and development philosophies.

The International Finance Corporation (IFC) was created in 1956 as a subsidiary of the bank with an authorized capital of $100 million. It functions independently with its own staff, membership, and resources. Approximately 80% of its funds originate from international capital markets, while the remaining portion is obtained through transfers from the IBRD. The primary objective of the IFC is to offer loans exclusively to the private sector in developing nations and attract additional investment from alternative origins. In recent times, there has been notable growth in IFC lending, partly attributed to expansion into Eastern Europe.

The International Development Association (IDA) was established in 1960 to provide assistance to the world’s poorest nations. Unlike the International Finance Corporation (IFC), the IDA operates as a part of the IBRD rather than having its own separate organization. Despite not having dedicated staff or resources, it functions as a “lending window” within the IBRD. Its main purpose is to offer concessional loans to countries with a per capita income below $805. Currently, it holds outstanding loans amounting to $455 billion, primarily sourced from affluent member subscriptions instead of capital markets.

Established in 1988, the Multilateral Investment Guarantee Agency (MIGA) serves to support foreign investors in developing nations by providing insurance coverage for political risks. MIGA provides a guarantee of up to 90% of the invested amount, with a maximum limit of $90 million.

Established in 1966, the International Center for Settlement of Investment Disputes offers arbitration services for investment disputes involving foreign investors and host country governments. Additionally, it provides guidance to developing countries’ governments on creating foreign investment laws and regulations.

The World Bank follows a standardized process for all its projects. This process includes five stages: Identification, Preliminary Study, Project Implementation, Training, Start Up and Supervision, and Evaluation. Each stage is crucial in analyzing and minimizing errors during the entire project lifecycle.

The text highlights the three phases in the World Bank’s lending philosophy. The first phase, known as “Project Lending,” spanned from 1946 to 1968. During this period, there was a strong focus on developing economic infrastructure, with around 70% of lending dedicated to such projects. The primary goal was to create a conducive business environment and position the country for economic growth, aligning with WW Rostow’s Five Stages View. However, this philosophy yielded only limited results as there was no significant impact on the broader economy.

During his tenure as WB President from 1968 to 1981, Robert McNamara led the second phase of WB policy known as “Program Lending,” which aimed to address the basic human needs of those living in extreme poverty. At that time, welfare provision was the responsibility of individual states. The Improvement in Physical Quality of Life Index (PQLI) was used to assess the quality of life in developing countries.

Under McNamara’s leadership, there was a significant increase in both the speed and volume of lending by the WB, along with a shift towards achieving specific goals. Furthermore, research capabilities were expanded and staff became more internationalized, leading to a strong reputation for expertise on development issues.

The “Policy Lending” phase, which is the third stage of development, adheres to the neoliberal model. To tackle the debt crisis, two loan types were introduced: Structural Adjustment Loans (SALS) and Sectoral Adjustment Loans (SECALS). These measures sought to reduce state intervention by promoting privatization and implementing austerity measures, significantly affecting the impoverished population.

The World Bank (WB) is embarking on a new phase with the appointment of James Wolfensohn as President, signifying the start of a fourth era in bank lending. While under Wolfensohn’s leadership, the WB remains committed to large-scale projects, there is now a greater readiness to terminate those that prove unsuccessful. To strengthen control over projects, Wolfensohn aims to enhance business regulations and financial systems while involving the private sector more extensively. The agenda will also prioritize introducing new concepts like sustainable development. Notably, one of Wolfensohn’s major accomplishments is launching the “Heavily Indebted Poor Countries Initiative” (HIPC), announced during a Development Committee Meeting in Washington on September 30, 1996 by both the WB President and IMF Managing Director.

The HIPC Initiative allows impoverished countries that demonstrate good policy performance to break free from unmanageable debt and concentrate their efforts on achieving sustainable development and poverty reduction. This initiative operates on the belief that the key solution for these countries lies in attaining a debt that can be sustained in order to promote sustainable development.

Personally, in my opinion, James Wolfensohn has the potential to bring about a transformation in the World Bank. His strong background as a policy maker in sustainable development and his deep concern for the environment make him the perfect candidate to lead the WB towards a new direction, one that responds effectively to the evolving needs of developing nations. Moreover, his proposed policies will address the concerns of organizations regarding the WB’s contribution to environmentally friendly projects. This, in turn, will instill a renewed sense of hope in developing countries, empowering them to pursue their development goals.

Category: English

Cite this page

History of the World Bank. (2018, Dec 13). Retrieved from


Remember! This essay was written by a student

You can get a custom paper by one of our expert writers

Order custom paper Without paying upfront