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The World Bank

The World Bank. Banking and Credit Mr. Yates. What is the World Bank, and what does it do?. The World Bank is a vital source of financial and technical assistance to developing countries around the world.

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The World Bank

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  1. The World Bank Banking and Credit Mr. Yates

  2. What is the World Bank, and what does it do? • The World Bank is a vital source of financial and technical assistance to developing countries around the world. • It helps governments in developing countries reduce poverty by providing them with money and technical expertise they need for a wide range of projects—such as: • education, health, infrastructure, communications, government reforms, and for many other purposes..

  3. World Bank entities • The term "World Bank" refers only to: • the International Bank for Reconstruction and Development (IBRD), and • the International Development Association (IDA).

  4. World Bank Group • The term "World Bank Group" incorporates five closely associated entities that work collaboratively toward poverty reduction: the World Bank (IBRD and IDA), and three other agencies: • The International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).

  5. History • The World Bank is one of five institutions created at the Bretton Woods Conference in 1944. (post WWII conference) • The International Monetary Fund, a related institution, is the second. Delegates from many countries attended the Bretton Woods Conference. • The most powerful countries in attendance were the United States and United Kingdom, which dominated negotiations

  6. History continued • Although both are based in Washington, D.C., the World Bank is, by custom, headed by an American, while the IMF is led by a European. • Careful screening of loans centered on ability to pay back the loans, use of the loans, and reduction of the spread of communism

  7. France • One of the first loans went to France and it was held up until they eliminated communist members of the cabinet • The US State Department told the French government to remove certain people and the loan was then approved within hours!

  8. Who owns this bank? • The Bank is like a cooperative in which 187 member countries are shareholders. • List: • http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/ORGANIZATION/BODEXT/0,,pagePK:64020055~theSitePK:278036,00.html

  9. Who runs this bank? • The Board of Executive Directors and the president of the Bank—who serves as chairman of the board— • are responsible for the conduct of the general operations of the Bank, oversee the work of the Bank on a daily basis, and perform their duties under powers delegated to them by the Board of Governors. • The directors meet twice a week in Washington, D.C., to approve new loans and review bank operations and policies.

  10. The Board of Governors • The Board of Governors is made up of shareholders—187 member countries—who are the ultimate policymakers at the Bank. • Generally, the governors are member countries' ministers of finance or ministers of development. • They meet once a year at the Annual Meetings of the Boards of Governors of the World Bank Group

  11. Executive directors • Because the governors meet only annually, they delegate specific duties to the 24 Executive Directors, who work on-site at the Bank. • According to the Articles of Agreement, the five largest shareholders, France, Germany, Japan, the United Kingdom, and the United States, each appoint an executive director

  12. How many employees? • Some 10,000 development professionals from nearly every country in the world work at the Bank in Washington, D.C., or in more than 100 Country Offices. • They are economists, educators, environmental scientists, financial analysts, anthropologists, engineers and many others. • Approximately 3,000 work in country offices in the developing world. • They apply skills and the Bank's resources to bridge the economic divide between poor and rich countries, to turn rich country resources into poor country growth, and to achieve sustainable poverty reduction.

  13. Where does the bank get its money? • They raise money in several different ways to support the low-interest and no-interest loans (credits) and grants that the World Bank (IBRD and IDA) offers to developing and poor countries.

  14. Yeah, but where’s the money coming from? • IBRD lending to developing countries is primarily financed by selling AAA-rated bonds in the world's financial markets. • IBRD bonds are purchased by a wide range of private and institutional investors in North America, Europe, and Asia.

  15. And there is backup… • Shareholder support is also very important for the Bank. • This is reflected in the capital backing which has been received from shareholders in meeting their debt service obligations to IBRD. • They also have US$178 billion in what is known as "callable capital," which could be drawn from our shareholders as backing, should it ever be needed to meet IBRD obligations for borrowings (bonds) or guarantees. • They have never had to call on this resource.

  16. What happens with profit? • They often do have a surplus at the end of the fiscal year, which is earned from the interest rates charged on some loans and from fees charged for some of our services. • Some of the surplus goes to IDA—the part of the bank that provides grants and interest free loans to the world's poorest countries. • The rest of the surplus is either used for debt relief for heavily indebted poor countries, added to financial reserves, or helps them respond to unforeseen humanitarian crises.

  17. Well, there’s still poverty… • For the Bank, the bottom line is that there has been progress, but there has not been enough. • They continue to do all they can to make sure successful projects and approaches are shared more widely so there's a greater impact on poverty reduction. • At the same time, they have learned from past mistakes and constantly work to improve our policies and programs.

  18. Successes • During the past 40 years, life expectancy in developing countries has risen by 20 years—about as much as was achieved in all of human history prior to the mid-20th century. • During the past 30 years, adult illiteracy in the developing world has been nearly halved to 25 percent. • During the past 20 years, the absolute number of people living on less than US$1 a day has begun to fall for the first time, even as the world's population has grown by 1.6 billion people. • During the last decade, growth in the developing world has outpaced that in developed countries, helping to provide jobs and boost revenues poor countries' governments need to provide essential services.

  19. Criticisms • The Bank’s role in development and in the wider globalization of the world's economy has often been misunderstood. • On one hand, this occurred because they did not explain the Bank's mission or their work very well. • On the other, critics tried to blame the bank for any or all of the perceived problems associated with globalization— • the growing integration of economies and societies around the world resulting from increased flows of goods, services, capital, technology, and ideas—an economic force that the Bank does not control. 

  20. Criticisms of the US’ role… • Unlike the United Nations, where each member nation has an equal vote, voting power at the World Bank and IMF is determined by the level of a nation's financial contribution. • Therefore, the United States has roughly 17% of the vote, with the seven largest industrialized countries (G-7) holding a total of 45%. • Because of the scale of its contribution, the United States has always had a dominant voice and has at all times exercised an effective veto. • At the same time, developing countries have relatively little power within the institution, which, through the programs and policies they decide to finance, have tremendous impact throughout local economies and societies.

  21. The US…$ • Development projects undertaken with World Bank financing typically include money to pay for materials and consulting services provided by Northern countries. • U.S. Treasury Department officials calculate that for every U.S.$1 the United States contributes to international development banks, U.S. exporters win more than U.S.$2 in bank-financed procurement contracts.

  22. Contracts, contractors, and $ • Given this self-interest, the Bank tends to finance bigger, more expensive projects • --which almost always require the materials and technical expertise of Northern contractors • --and ignores smaller-scale, locally appropriate alternatives. • The mission of the World Bank to alleviate poverty, not provide business for U.S. contractors.

  23. Protests • Many fear that the World Bank, IMF, and World Trade Organization are instruments of globalization. • Huge protests have been seen in Seattle, the October Rebellion in D.C., and Olso.

  24. Sources • http://en.wikipedia.org/wiki/World_Bank • http://web.worldbank.org/WBSITE/EXTERNAL/EXTSITETOOLS/0,,contentMDK:20147466~menuPK:344189~pagePK:98400~piPK:98424~theSitePK:95474,00.html

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