World Bank Headquarters, Functions, Objectives

Table of Content:-

  1. Headquarters of world bank
  2. What is world bank?
  3. Functions of world bank
  4. World Bank vs. IMF
  5. Difference between IMF and World Bank
  6. Objectives of World Bank
  7. Organisational Structure of the World Bank

Headquarters of World Bank

World Bank was established in 1945 under the Bretton Woods Agreement of 1944 to tackle the problem of international investment. The headquarters of the World Bank is situated in Washington D.C. The World Bank is a major source of technical and financial assistance to developing countries around the world. Its mission is to reduce poverty with professionalism and passion for lasting results. It aims to help people help themselves and their environment by sharing knowledge, providing resources, building capacity and forging partnerships in the public and private sectors.

What is world bank?

It is an international financial institution that provides loans to developing countries for their capital programs. The primary objective of the World Bank is to reduce poverty. According to the law, all decisions made by the World Bank must be guided by a commitment to promote international trade, foreign investment, and facilitate capital investment.

It is an inter-governmental institution, corporate in form, and its member governments entirely own the capital stock. Initially, only nations that were members of the International Monetary Fund (IMF) could be members of the World Bank.  However, over time, the authorities subsequently relaxed this restriction on membership. It provides loans to countries to improve economic development. It maintains profit-oriented objectives. Additionally, It engages in co-financing agreements to extend economic impact.

Functions of World Bank

It is not a bank in common sense; it is made up of two unique development institutions owned by 187 member countries: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Each institution plays a different but interconnected role in advancing the vision of inclusive and sustainable globalisation. The IBRD  has a primary objective of reducing poverty in middle-income and creditworthy poorer countries, while IDA concentrates its efforts on the world’s most impoverished countries.

Their work is complemented by the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for the Settlement of Investment Disputes (ICSID). So now World Bank has a total of 5 associates under its operation.

It offers a comprehensive range of financial assistance to developing nations, including low-interest loans, interest-free credits and grants to developing countries for a wide array of purposes that include investments in health, education, infrastructure, public administration, financial and private sector development, agriculture and environmental and natural resource management.

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World Bank vs. IMF

The World Bank and IMF are Bretton Woods Twins. Both institutions were established to promote international economic cooperation but a basic difference is found in economic assistance given by these two institutions. World Bank provides long-term loans for promoting balanced economic development,  whereas the International Monetary Fund (IMF) provides short-term loans to member countries to address balance of payment (BOP) disequilibrium. Both these financial institutions are complementary to each other. The eminent World economist George Schultz suggested at the American Economic Association Conference in January 1995 the merger of IMF and the World Bank.

The International Monetary Fund and World Bank both are international organisations looking for the interest of developing countries in the world. Both these institutions played important roles in the development of developing countries and in bringing the people nearer to each other.

But their aims and functions differ in certain respects:

Difference between IMF and World Bank

The differences between the IMF and the World Bank are given below in detail:

Table: Difference between IMF and World Bank

International Monetary Fund  World Bank
Oversees the International Monetary System. Seeks to promote the economic development of the world’s less affluent nations.
Promotes orderly exchange relations and exchange stability among its member countries. Assists developing countries by offering long-term financing for their development projects and programs.
Encourages private enterprises in developing countries using its affiliate, the International Finance Corporation (IFC). Provides to the poorest developing countries whose per capita GNP Is less than $865 a year special financial assistance through the International Development Association (IDA).
Encourages private enterprises in developing countries using its affiliate, the International Finance Corporation (IFC). Encourages private enterprises in developing countries by means of its affiliate, the International Finance Corporation (IFC).
Draws its financial resources principally from the quota subscriptions from its member countries. It primarily obtains most of its financial resources by borrowing from the International bond market.
Has at its disposal fully paid-in quotas now totalling SDR 212 billion (about $300 billion). Has an authorised capital of $184 billion, of which members pay about 10 per cent.
IMF has a staff of 2,300 drawn from 187 member countries. World Bank has a team of 7,000 drawn from 180 member countries.

Objectives of World Bank

According to Clause-1 of the Agreement made at the time of the establishment of the World Bank, it was assigned the following objectives:

1) The objective is to offer sustainable financial resources to member countries for their economic reconstruction and development in the long term. The World Bank primarily provides capital for the following purposes:

  • i)To rehabilitate war-ruined economics.
  • ii) To finance productive effects according to Perce time requirements.
  • iii) To develop resources and production facilities in underdeveloped nations.

2) To promote long-term capital investment to ensure a balance of payments equilibrium and balanced development of international trade. They adopted this objective to increase the productivity of member countries, improve economic conditions, and raise the standard of living of people among them.

3) To promote capital investment in member countries, they must employ the following ways.:

  • i) To provide a guarantee on capital investment or private loans.
  • ii) If private capital is not available even after providing a guarantee, then it offers loans for productive activities under favourable conditions.

4) The objective is to offer a guarantee for loans provided to both small and large units and other projects of member countries.

5) To ensure the implementation of development projects to bring about a smooth transference from wartime to a peaceful economy.

Organisational Structure of the World Bank

A three-tier structure manages the World Bank, including the following:

Organisational Structure of the World Bank

1) Board of Governors

The Board of Governors has full control and authority over the Bank’s activities. Each member country appoints normally its Finance Minister as a Governor and the Governor of its Central Bank as Alternate Governor for the Board of Governors of the World Bank for 5 years. The Altemate Governor exercises his voting right only in the absence of the Governor. The strength of the voting rights of the Governor depends upon the country’s contribution to the share capital of the Bank.  The strength of these voting rights is directly proportional to the amount of capital invested by the country.

2) Executive Directors

A body of 21 Executive Directors supervises the Bank’s overall operations. Out of these 21 directors, five are appointed by the five largest shareholders of the World Bank, viz., UK, USA, France, Germany, and Japan. The Governors of the remaining member countries elect the remaining 16 Directors. These 21 Directors elect the President of the Bank, who assumes the responsibility of presiding over the monthly meetings of the Executive Directors.

The Scope of the decisions of the Executive Directors includes the following:

  • i) Policy-making within the framework of the Articles of Agreement is a crucial aspect of operations.
  • ii) Loans and credit proposals.

The Executive Directors present to the Board of Governors:

  • i) Audited annual accounts.
  • ii) Administrative budget.
  • iii) Annual report on the operation and policies of the Bank.

3) President

The president of the Bank normally does not have voting rights except in case of exercising equal rights. The day-to-day operations of the bank are efficiently managed by a team of Senior Vice Presidents and Directors from various departments, who provide valuable assistance to him.

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