Analysis of the World Bank
The World Bank is an international financial organization established for the purpose of providing the financial and technical assistance to the developing countries. It supports the efforts of countries aiming at investing in human resources by building schools, health centers, and electricity facilities, as well as improving water networks.
The World Bank is not a ‘bank’ in the general sense; it is an international community of nations or shareholders. In the course of its development, the World Bank has undergone various structural changes; therefore, the term ‘World Bank’ was understood variously at different stages. Therefore, this paper provides an insight into the World Bank as a financial institution by discussing its background, closely related organizations, kinds of loans, activities, and issues that the organization is currently facing.
The World Bank is the biggest financial organization in the world, which was created in 1944 (Kapur, et al. 75). At the Bretton Woods Conference, the delegates from 45 countries discussed the issues of economic recovery of the world after the World War II. From 1945 to 1968, the World Bank did not provide active lending due to the increased requirements for borrowers (Kapur, et al. 80). Since 1989, the World Bank’s policy has undergone significant changes under the influence of criticism of various non-governmental organizations, in particular those related to the environmental protection (Kapur, et al. 85). The World Bank is the company whose shareholders are 188 countries (Kapur, et al. 87). They are represented by the Board of Governors, which is the highest structure that determines the policy of the Bank. The Ministers of Finance of the member countries are the rulers of the Bank. The Governing Council meets once a year during the Annual Meetings of the Boards of Governors of the World Bank Group and International Monetary Fund (Kapur, et al. 91). Every three years, the World Bank develops a framework document called ‘Strategy of the World Bank Group,’ which is used as the basis of cooperation with countries (Kapur, et al. 101). The strategy helps to link the program of the Bank with the specific goals of each of the borrowing countries. It includes projects and programs that can make the impact on the solution to the problems of poverty and contribute to the dynamic social and economic development.
The closely related organizations of the World Bank, such as the International Bank for Reconstruction and Development (and the International Development Association, provide loans at low interest rates to the countries that do not have access to international capital markets (Kapur, et al. 132). Unlike other financial institutions, the World Bank does not seek to make a profit. The International Bank for Reconstruction and Development operates on a market basis, using its high credit rating, enabling it to receive funds at low interest rates in order to provide loans to its customers in the developing world at low interest rates, as well. The Bank covers operating expenses related to these activities without using the external sources of financing.
The World Bank provides two kinds of loans: the development loans and investment loans. The investment loans finance the production of goods, services, jobs, and socioeconomic development in different sectors of the country (Woods 62). The development loans are available through the allocation of financial resources in order to support policy and institutional reforms.
The received borrower’s application for funding for the project is estimated to make sure that the project is sustainable in economic, financial, social, and environmental relationships. The financial institution and the borrower are discussing the structure of the project and its components, expected results, implementation plan, and benchmarks of the effectiveness of the project. In the process of implementation and development of the project, the financial organization monitors the use of funds and estimates the results of projects (Woods 81). Additionally, the World Bank also provides different grants as the financial support for the country or project. The purpose of grants is to promote the development of projects by stimulating the cooperation between organizations and the participation of local stakeholders in the project work.
Furthermore, the World Bank provides not only the financial support to the member countries. Its activities are also aimed at providing analytical and advisory services that the developing countries may require. The analysis of the countries’ policies, the development of appropriate recommendations in order to improve the socioeconomic situation in the country, as well as improving the people’s living conditions are part of the World Bank’s activities (Woods 145). The Bank is engaged in research work in a wide range of issues such as the environment, poverty, trade and globalization, economy, and work in specific sectors.
Nevertheless, the World Bank has notable problems regarding its leadership. Despite the fact that it is the biggest financial organization, its influence in the world became less relevant. It is caused by the fact that such countries as China and India are developing their financial organizations; therefore, they have no need of the World Bank (The Editorial Board of the New York Times). The head of the World Bank Jim Yong Kim created a plan of restructuration of the institution. According to the Editorial Board New York Times, his main aim is to fight the poverty by 2030. However, the economists claim that the plan will not achieve the expected results. The main problem is the crisis of leadership. It means that the same people occupy the ruling positions in the Bank. The institution is not using the election method to set its authorities (The Editorial Board of the New York Times). In turn, it leads to the absence of a new competitive strategy that could help the organization.
To conclude, the World Bank is the biggest financial organization that provides financial help to the developing countries. The institution was created during the Bretton Woods Conference in 1944. The Bank includes two institutions such as the International Development Association and the International Bank for Reconstruction and Development. These organizations provide such types of loans as development loans and the investment loans. The World Bank does not work to make a profit. It operates on a market basis, using its high credit rating. It gives the opportunity to earn funds at low interest rates to provide loans to the customers in the developing world. Nowadays, the institution faces the crisis of leadership, which causes the absence of the new competitive strategy.