What are the Functions & Objectives of the World Bank

World Bank and International Monetary Fund (IMF) were simultaneously established under Bretton Woods Agreement officially known as the United Nations Monetary and Financial Conference. Both the organizations were formally established in December 1945. The World Bank is an internationally recognized bank that provides financial and technical assistance to developing countries all over the world. Moreover, it also works in aiding their advancement, in an economy with the goal to reduce the poverty. The World Bank has a total of 189 members, headquartered in Washington DC. World Bank includes two institutions (IBRD and IDA) whereas the World Bank Group consists of a total of five institutions that share a commitment to reducing poverty, increasing shared prosperity, and promoting sustainable development. Those 5 institutions are IBRD, IDA, IFC, MIGA, and ICSID. Details and functions of all the institutions are mentioned below. At the present time, the president of the World Bank is Jim Young Kim. Moreover, the World Bank headquarters are located in Washington DC and have more than 10000 staff all over the world.

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Table of content

• Organizations Associated with World Bank
• Main Objectives of World Bank
• World Bank Function
• Where Does The World Bank Get Its Money? - World Bank Capital Sources
• Indian lending by the World Bank

Organizations Associated with World Bank:

There are a total of five organizations of the World Bank Group that are providing loans to developing countries. Below is the list of Organizations Associated with the World Bank:
(1) The International Finance Corporation (IFC)
 
(2) The Multilateral Investment Guarantee Agency (MIGA)
 
(3) The International Bank for Reconstruction and Development (IBRD)
 
(4)The International Development Association (IDA)
 
(5) The International Centre for Settlement of Investment Disputes (ICSID).
 
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Main Objectives of World Bank:

1. Providing long-term capital to all the members' countries for development and economic reconstruction.
2. Inducing long-term capital investment for assuring balanced development of International trade and BOP equilibrium.
3. Promoting Capital investment in members countries in the following ways:
a. Providing guarantees on capital investment and private loans.
b. If capital is not available despite the provision of a guarantee, the IBRD makes loans for productive activities on reasonable terms.

World Bank Functions:

At the moment, the World Bank plays an important role in providing loans for development projects to member countries, particularly underdeveloped countries. The bank makes loans for various development projects ranging in duration from 5 to 20 years.
 
i. The bank can make loans to member countries worth up to 20% of its paid-up capital.
 
ii. The bank also makes loans to private investors who are members of its own guarantee, but private investors must obtain permission from their home country. Banks charge service fees ranging from 1% to 2%.
 
iii. The World Bank determines the amount of loan service, interest rate, and terms and conditions.
 
iv. Generally, banks make loans for specific projects that have been duly submitted to the bank.

Where Does The World Bank Get Its Money? - World Bank Capital Sources

The World Bank's initial authorised capital of $10,000,000,000 was divided into one lakh shares, each worth $1. The World Bank's permitted capital has increased from $ 24 billion to $27 billion. The following is how member nations repay their portion of the World Bank:

I. Only 2% of the allowed share is paid back in gold, US dollars, or SDRs. 

ii. Each member nation has the option to repay 18% of its capital share in its own currency. 

iii. When the World Bank requests it, the member nation deposits the remaining 80%.

Indian lending by the World Bank

India has borrowed money from the World Bank for a variety of initiatives involving infrastructure, rural development, and poverty alleviation, among other things. IDA funds are one of the government of India's most advantageous external loans, and they are mostly employed in social sector initiatives that help to realise the millennium development goals. In 1948, India received the first World Bank loan of US$ 86 billion. IBRD's disbursed and outstanding debt as of March 2011 is $11.28, while IDA's is $27 billion.
Only 25% of the loans sanctioned by the World Bank were allocated to established nations in Europe; instead, 75% went to emerging nations in Africa, Asia, and Latin America. Nevertheless, due to their significant financial support of the World Bank, most countries still hold that rich nations do have a good grasp of the organization's governing body. The five United Nations member states that are not members of the World Bank are Andorra, Cuba, Liechtenstein, Monaco, and North Korea