The World Bank Group

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The World Bank Group comprises five organizations: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID).



As early as February 1943, United States Undersecretary of State Sumner B. Welles urged preparatory consultation aimed at the establishment of agencies to finance reconstruction and development of the world economy after WWII. The United States and the United Kingdom took leading roles in the negotiations that were to result in the formation of the IBRD and the IMF. The IBRD is the main lending organization of the World Bank Group and, like its sister institution, the International Monetary Fund (IMF), was born of the Allies' realization during World War II that tremendous difficulties in reconstruction and development would face them in the postwar transition period, necessitating international economic and financial cooperation on a vast scale. The IBRD, frequently called the "World Bank," was conceived in July 1944 at the United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire, United States.


Although one of the Bank's early functions was to assist in bringing about a smooth transition from wartime to peaceful economies, economic development soon became the Bank's main object. Today, the goal of the World Bank is to promote economic development that benefits poor people in developing countries. Loans are provided to developing countries to help reduce poverty and to finance investments that contribute to economic growth. Investments include roads, power plants, schools, and irrigation networks, as well as activities like agricultural extension services, training for teachers, and nutrition-improvement programs for children and pregnant women. Some World Bank loans finance changes in the structure of countries' economies to make them more stable, efficient, and market oriented. The World Bank also provides technical assistance to help governments make specific sectors of their economies more efficient and more relevant to national development goals.


The Bank's founders envisioned a global institution, the membership of which would eventually comprise all nations. Membership in the IBRD rose gradually from 41 governments in 1946 to 184 as of May 2006.

A government may withdraw from membership at any time by giving notice of withdrawal. Membership also ceases for a member suspended by a majority of the governors for failure to fulfill an obligation, if that member has not been restored to good standing by a similar majority within a year after the suspension. Only a few countries have withdrawn their membership from the Bank, and all but Cuba (withdrew in 1960) have rejoined.

Although the Soviet Union took part in the 1944 Bretton Woods Conference, and signed the final act establishing the IMF and the IBRD, it never ratified the Articles of Agreement or paid in the 20% of its subscribed capital that was due within 60 days after the Bank began operations. Had it joined, the Soviet Union would have been the Bank's third largest shareholder, after the United States and the United Kingdom. Over the next four decades, as the Bank grew in size and scope, it couldn't fulfill its founders' intentions of being a truly global institution due to the absence of the Soviet Union. Then, at the beginning of the 1990s, as political and economic change swept through the 15 republics of the USSR, the Soviet government indicated its interest in participating in the international financial system and sought membership in the IMF and World Bank. On 15 July 1991, Soviet President Mikhail Gorbachev formally applied for membership for the USSR in the IBRD and its three affiliates (IFC, IDA and MIGA). However, by December 1991, the USSR had ceased to exist. During 1992, the Russian Federation and 15 former Soviet republics (including the Baltic states) applied for membership and were accepted. Eleven of them also applied to IDA, 14 to IFC and 15 to MIGA. To accommodate these countries, the total authorized capital of the bank was increased.

A "graduating" country is one where lending is being phased out. As of 2002 there were 27 countries that had "graduated" from the IBRD. These include (with the fiscal year of their final loan): France (1947), Luxembourg (1948), Netherlands (1957), Belgium (1958), Australia (1962), Austria (1962), Denmark (1964), Malta (1964), Norway (1964), Italy (1965), Japan (1967), New Zealand (1972), Iraq (1973), Iceland (1974), Finland (1975), Israel (1975), Singapore (1975), Ireland (1976), Spain (1977), Greece (1979), Oman (1987), Bahamas (1989), Portugal (1989), Cyprus (1992), Barbados (1993), the Republic of Korea (1995), and China (1999).


Board of Governors

All powers of the Bank are vested in its Board of Governors, composed of one governor and one alternate from each member state. Ministers of Finance, central bank presidents, or persons of comparable status usually represent member states on the Bank's Board of Governors. The board meets annually.

The Bank is organized somewhat like a corporation. According to an agreed-upon formula, member countries subscribe to shares of the Bank's capital stock. Each governor is entitled to cast 250 votes plus 1 vote for each share of capital stock subscribed by his country.

Executive Directors

The Bank's Board of Governors has delegated most of its authority to 24 executive directors. According to the Articles of Agreement, each of the five largest shareholdersthe United States, Japan, Germany, France and the United Kingdomappoints one executive director. The other countries are grouped in 19 constituencies, each represented by an executive director who is elected by a group of countries. The number of countries each of these 19 directors represents varies widely. For example, the executive directors for China, the Russian Federation, and Saudi Arabia represent one country each, while one director speaks for 24 Francophone African countries and another director represents 22 mainly English-speaking African countries.

President and Staff

The president of the Bank, elected by the executive directors, is also their chairman, although he is not entitled to a vote, except in case of an equal division. Subject to their general direction, the president is responsible for the conduct of the ordinary business of the Bank. Action on Bank loans is initiated by the president and the staff of the Bank. The amount, terms, and conditions of a loan are recommended by the president to the executive directors, and the loan is made if his recommendation is approved by them.

According to an informal agreement, the president of the Bank is a US national, and the managing director of the IMF is a European. The president's initial term is for five years; a second term can be five years or less. Past presidents of the Bank include Robert S. McNamara (196881), A. W. Clausen (198186), Barber B. Conable (198691), Lewis T. Preston (199195), James D. Wolfensohn (1995-2005), and Paul Wolfowitz (2005-). Wolfowitz heads a staff of approximately 10,000 persons from around the world.

The IBRD's headquarters are at 1818 H Street, N.W., Washington, D.C. 20433.


A total administrative budget of us$1,320 million was approved for fiscal year 2005.



Authorized capital.

At its establishment, the IBRD had an authorized capital of us$10 billion. Countries subscribing shares were required to pay in only one-fift h of their subscription on joining, the remainder being available on call but only to meet the IBRD's liabilities if it got into difficulties. Moreover, not even the one-fift h had to be paid in hard cash at that time. The sole cash requirement was the payment in gold or US dollars of 2% of each country's subscription. A further 18% of the subscription was payable in the currency of the member country concerned, and although this sum was technically paid in, in the form of notes bearing no interest, it could not be used without the member's permission. In 1959, each member was given an opportunity to double its subscription without any payment. Thus, for countries joining the IBRD after the 1959 capital increase and for those subscribing to additional capital stock, the statutory provisions affecting the 2% and 18% portions have been applied to only one-half of their total subscriptions, so that 1% of each subscription that is freely usable in the IBRD's operations has been payable in gold or US dollars, and 9% that is usable only with the consent of the member is in the member's currency. The remaining 90% is not paid in but is subject to call by the IBRD.

Financial Resources for Lending Purposes.

The subscriptions of the IBRD's members constitute the basic element in the financial resources of the IBRD. Subscribed capital for fiscal year 2005 was about us$ 189.7 billion. The Bank also draws money from borrowings in the market and from earnings. In 2005, the Bank's outstanding borrowings were us$ 101.3 billion, raised in the capital markets of the world. The IBRD is able to raise large sums at interest rates little or no higher than are paid by governments because of confidence in the Bank engendered by its record of stability since 1947 and the investors' knowledge that if the IBRD should ever be in difficulty, it can call in unpaid portions of member countries' subscriptions. In connection with its borrowing operations, the Bank also undertakes a substantial volume of currency and interest rate swap transactions. These swaps have enabled the IBRD to lower its fund-raising costs and to expand its direct borrowing transactions to markets and currencies in which it otherwise would not have borrowed.


The IBRD lends to member governments, or, with government guarantee, to political subdivisions, or to public or private enterprises.

The IBRD's first loan, us$ 250 million for postwar reconstruction, was made in the latter part of 1947. Altogether, it lent us$ 497 million for postwar reconstruction, all to European countries. The IBRD's first development loans were made in the first half of 1948. As of 30 June 2005, the cumulative total of loans made by the Bank was over us$ 407 billion. The Bank's lending commitments in FY 2005 were $13.6 billion, reflecting an increase of $2.6 billion over FY 2004 ($11.0 billion).

Loan Terms and Interest Rates.

The IBRD normally makes long-term loans, with repayment commencing after a certain period. The length of the loan is generally related to the estimated useful life of the equipment or plant being financed. Since July 1982, IBRD loans have been made at variable rates. The lending rate on all loans made under the variable-rate system is adjusted semiannually, on 1 January and 1 July, by adding a spread of 0.5% to the IBRD's weighted average cost during the prior six months of a "pool" of borrowings drawn down after 30 June 1982. Since July 1989, only borrowings allocated to lending have been included in the cost of borrowings with respect to new loans and existing variable rate loans that are amended to apply the new cost basis. Before July 1982, loans were made at fixed rates, and, accordingly, the semiannual interest-rate adjustments do not apply to payments made on these older loans.


The main purpose of the Bank's operations is to lend to developing member countries for productive projects in such sectors as agriculture, energy, industry, and transportation and to help improve basic services considered essential for development. The main criterion for assistance is that it should be provided where it can be most effective in the context of the country's specific lending programs developed by the Bank in consultation with its borrowers. In the late 1980s, the World Bank came under criticism that its policies, intended to encourage developing countries to restructure their economies in order to render them more efficient, were actually imposing too heavy a burden on the world's poorest peoples. This, and charges by environmentalists that World Bank lending had underwritten projects that were severely detrimental to the environment of developing countries, led to a re-thinking of the Bank's policies in the 1990s.

Implementing the Bank's Poverty Reduction Strategy.

The fundamental objective of the World Bank is sustainable poverty reduction. Underpinning this objective is a two-part strategy for reducing poverty that was proposed in the World Development Report 1990. The first element is to promote broad-based economic growth that makes efficient use of the poor's most abundant asset, labor. The second element involves ensuring widespread access to basic social services to improve the well being of the poor and to enable them to participate fully in the growth of the economy. Progress in implementing the poverty-reduction strategy is clearly visible in Bank-wide statistics on new lending. At the September 1999 annual meetings of the World Bank Group and IMF, ministers agreed to link debt relief to the establishment of a poverty reduction strategy for all countries receiving World Bank/IMF concessional assistance.

Sector and Structural Adjustment Lending.

Bank lending for sector adjustment and structural adjustment increasingly supports the establishment of social safety nets and the protection of public spending for basic social services.

In its assistance to countries that are preparing adjustment programs, the Bank works with them to (a) design the phasing of programs to accommodate the needs of the poor, (b) give priority to relative price changes in favor of the poor early in the reform process, (c) secure adequate resources for the provision of basic social services aimed at the poor, and (d) design social safety nets into economic-reform programs. These efforts better position of the poor to be major beneficiaries of the economic growth and associated employment opportunities that are facilitated by the implementation of adjustment programs.

Human Resource Development.

Bank lending for human resource development has largely been committed for education, and its focus has been towards development of basic education. Lending for education increased from an average us$ 700 million during the 1980s to an average us$ 1,907 million during the first four years of the 1990s. In 2005 the amount climbed to us$ 1,951.1 million.

Bank lending for population, health, and nutrition has expanded even more rapidly. Average yearly lending to this sector during the 1980s was us$ 207 million, while lending during fiscal 2005 was us$ 2,216.4 million.

The Environment.

The Bank has continued to support environmental protection efforts with loans totaling us$ 2,493.8 million in fiscal year 2005, compared to us$ 404 million in fiscal 1990. But the full story cannot be told by stand-alone environmental projects. As of the late 1990s, half of all World Bank projects now have an environmental component of some kind.

In fiscal 1993 the World Bank undertook structural changes to respond to growing borrower demand for Bank assistance in environmental issues, and to the need for internal strengthening of monitoring and implementation. A Vice Presidency for Environmentally and Socially Sustainable Development was established. Three departments were placed under this vice presidencythe Environment Department, the Agriculture and Natural Resources Department, and the Transport and Urban Development Department.

The Global Environment Facility is a cooperative venture between the World Bank, the United Nations Development Programme, the United Nations Environment Programme, and national governments. The Facility provides grants to help developing countries deal with environmental problems that transcend boundaries, such as airborne pollution produced by smokestacks or hazardous waste dumped into rivers. The GEF gives priority to four objectives: limiting emissions of greenhouse gases; preserving biodiversity; protecting international waters; and protecting the ozone layer.

Private Sector Development.

The promotion of private sector growth in developing member countries has always been central to the Bank's overall mission of fostering sustainable growth and reducing poverty. In December 1999, the Bank Group announced a restructuring to better align and expand its work related to the private sector. The reforms took effect 1 January 2000. The reorganization tightened the link between the Bank's public sector work and its private sector transactions in the developing world, which are made through the IFC. The World Bank helps governments to formulate policy frameworks that encourage a positive environment for business to function as the primary engine of growth while the IFC, the private sector arm of the Bank Group, provides advice and makes loans and equity investments in companies in developing countries. According to an IFC official the changes were in response to "one of the biggest challenges facing [the Bank's] client countries: How to create a favorable business environment and help finance small and medium enterprises." In addition to creating a new combined unit to coordinate Bank Group activities, help capitalize local financial institutions, and teach them the business of financing small and medium enterprises, the restructuring also involved the creation of joint World Bank-IFC departments, or product groups, for industries where there is a strong interface between public policy and private sector transactions. Three new industry groups, telecommunications/informatics, oil/gas/petrochemicals, and mining, include both policy and transaction capacity. Beyond the new industry groups, the principal advisory services focused on the private sector in both the World Bank and IFC are coordinated under single management.


Technical Assistance.

The Bank provides its members with a wide variety of technical assistance, much of it financed under its lending program. The volume of technical assistance in which the Bank is involved as lender, provider, or administrator rose sharply during the 1990s. In addition to loans and guarantees to developing countries, the World Bank carries out its mission by providing advice and assistance with telecommunications sector reform and national information infrastructure strategies. Special programs in this category include InfoDev and TechNet. The Information for Development Program (InfoDev) began in September 1995 with the objective of addressing the obstacles facing developing countries in an increasingly information-driven world economy. It is a global grant program managed by the World Bank to promote innovative projects on the use of information and communication technologies (ICTs) for economic and social development, with a special emphasis on the needs of the poor in developing countries. In recognition of the critical role that science and technology play in promoting economic growth and social progress, in July 1999 TechNet was created as a cross-cutting thematic group to promote knowledge and education in the areas of science and technology and informatics. TechNet acts as a clearing-house and network for professionals inside and outside the Bank.

Interagency Cooperation.

The Bank's overarching purpose is helping to reduce global poverty. To this end, the institution encourages the involvement of other development agencies in preparing poverty assessments and works closely with other UN agencies in preparing proposals to improve the quality of povertyrelated data. At the country level, the Bank is broadening its efforts to coordinate work with UNDP, UNICEF, and the International

East Asia and Pacific2,883.3
South Asia4,993.3
Europe and Central Asia4,093.5
Latin America and the Caribbean5,165.7
Middle East and North Africa1,283.6
Agriculture, Fishing, and Forestry$1,933.6
Law and Justice and Public Administration5,569.3
Information and Communication190.9
Health and Other Social Services2,216.4
Industry and Trade1,629.4
Energy and Mining1,822.7
Water, Sanitation, and Flood Protection2,180.2

Fund for Agricultural Development in specific countries on preparing or following up poverty assessments and planned human development assessments.

Coordination between the Bank and the UN system on poverty at the project level is extensive, particularly in the design of social funds and social action programs. Together with other UN agencies, the World Bank has taken the lead in mobilizing groups of donors, both multilateral and bilateral, to tackle specific areas of concernfor example, the Consultative Group on International Agricultural Research (CGIAR), which is cosponsored by the FAO, UNDP, and the World Bank. The Bank is an active partner in interagency activities which include the follow-up to the World Conference on Education for All and the World Summit for Children; the Safe Motherhood Inter-Agency Group; the Onchocerciasis (riverblindness) Control Programme; the Global Programme for AIDS; and the Task Force for Child Survival. The Bank also has links with the United Nations at the political and policy making level in the work of the General Assembly and its related committees, and the Economic and Social Council.

The Economic Development Institute was the Bank's department responsible for such dissemination. Through seminars, workshops and courses, EDI enabled policy-makers to assess and use the lessons of development to benefit their own policies. On 10 March 1999, the World Bank unveiled the successor to the EDI, the World Bank Institute (WBI). The new learning entity also absorbed the World Bank's Learning and Leadership Center. The WBI drives the Bank's learning agenda, working in three main areas: training, policy services, and knowledge networks. WBI is located at World Bank headquarters in Washington, D.C.. Many of its activities are held in member countries in cooperation with regional and national development agencies and education and training institutions. The Institute's distance education unit conducts interactive courses via satellite links worldwide. While most of WBI's work is conducted in English, it also operates in Arabic, Chinese, French, Portuguese, Russian and Spanish.

Economic Research and Studies.

The Bank's economic and social research program, inaugurated in 1972, is undertaken by the Bank's own research staffand is funded out of its administrative budget. The research program is shaped by the Bank's own needs, as a lending institution and as a source of policy advice to member governments, and by the needs of member countries. Its main purposes are to gain new insights into the development process and the policies affecting it; to introduce new techniques or methodologies into country, sectoral, and project analyses; to provide the analytical bases for major Bank documents, such as the World Development Report; and to help strengthen indigenous research capacity in developing countries.


Developing countries depend heavily on foreign private capital to finance development. Such capital flows are sensitive to legal and political conditions in developing countries. The International Centre for Settlement of Investment Disputes is an autonomous institution founded in 1966 to promote increased flows of international investment by providing facilities for the conciliation and arbitration of disputes between governments and foreign investors. ICSID also provides advice, carries out research, and produces publications in the area of foreign investment law. Its publications include a semiannual law journal, ICSD Review-Foreign Investment Law Journal, and multivolume collections of Investment Laws of the World and Investment Treaties. As of May 2006, ICSID had 143 member countries, and as of December 2002 it had tried 104 cases; 104 other cases were pending. Disputes have dealt with investments in agriculture, banking, construction, energy, health, industry, mining, and tourism.


MIGA was established in 1988. Its main purpose is to promote the flow of foreign direct investment among member countries by insuring investments against non-commercial (political) risk, and by providing promotional and advisory services to help member countries create an attractive investment climate. MIGA offers four basic types of coverage:

Currency Inconvertibility.

Protects against losses arising from an inability to convert local currency investment returns into foreign exchange for transfer outside the host country;


Protects against loss from acts by the host government that may reduce or eliminate ownership of, or control over, rights to the insured investment;

War and Civil Disturbance.

Protects against losses arising from military action or civil disturbance that destroys or damages tangible assets of the project enterprise or interferes with its operations; and

Breach of Contract.

Protects against losses from the investor's inability to obtain and/or enforce a decision or award against a host country that has repudiated or breached an investment contract.

Since its inception, MIGA by 2006 had issued nearly 800 guarantees for projects worth more than us$ 14.7 billion in 91 developing countries. As of 10 May 2006, 167 countries had completed membership requirements with an additional 4 countries in the process of becoming members.



The world's poorer countries have gone heavily into debt to finance their development. The total outstanding debt of 90 such countries rose from us$51 billion in 1970 to an estimated us$485 billion in 1985. Annual interest and amortization charges on this debt had, by 1985, reached over us$100 billion. Many countries have long since arrived at the point where they can no longer afford to raise all the development capital that they are in a position to use at ordinary rates of interest and in the time span of conventional loans, IBRD loans included.

The International Development Association (IDA), an affiliate of the World Bank, was established in 1960 to promote economic development in the world's poorest countriesthose that cannot afford to borrow from the IBRD. It is the largest single multilateral source of concessional lending to low-income countries. The following criteria are used to determine which countries are eligible to borrow IDA resources: relative poverty, defined as GNP per capita below an established threshold (as of 2004, us$ 965); lack of creditworthiness to borrow on market terms and therefore a need for concessional resources to finance the country's development program; good policy performance, defined as the implementation of economic and social policies that promote growth and poverty reduction. As of May 2006, 81 countries were eligible to borrow from the IDA. At the time, these countries were home to 2.5 billion people, comprising half of the total population of the developing nations, and 1.5 billion of these people survived on incomes of us$ 2 or less a day.

The IDA's loans are interest-free and repayable over very long terms, with extended grace periods. As a result, the IDA's resources, unlike the resources of a regular lending institution, must be regularly replenished through contributions if the agency is to continue in business.


The creation of an international agency such as the IDA was discussed in the UN at various times during the 1950s. A report drawn up in 1951 by a group of experts on financing and economic development referred to the need for an "international development authority." Although such proposals were at first opposed by the United States, the IDA as it was finally launched was largely the result of US initiative. In 1958, the US Senate passed a resolution introduced by Senator A. S. ("Mike") Monroney calling for cooperative international action along these lines. On 1 October 1959, the IBRD's Board of Governors approved, without objections, a motion of US Secretary of the Treasury Robert Anderson that a new agency, under the name International Development Association, be established as an affiliate of the Bank.

The debate that preceded the Board's action revealed potential disagreements among members of the Bank on a number of points, such as the terms that the IDA should set for its loans, the permissible restrictions that countries subscribing to the IDA's capital could place on the use of funds supplied in their national currencies, and related matters. Rather than decide these matters itself, the Board of Governors asked the Executive Directors of the IBRD to draw up Articles of Agreement for the IDA, which would then be submitted to the Bank's member governments.

The IDA's Articles of Agreement were accordingly draft ed by the Executive Directors of the IBRD and early in 1960 transmitted to the member governments of the Bank. The next step was for those governments desiring to join the IDA to take whatever legislative or other action might be required to accept membership and to subscribe funds.

The new lending association came into existence on 24 September 1960, when governments whose subscriptions to its capital aggregated us$ 650 million, or 65% of the projected one-billion-dollar goal, had accepted membership. The IDA started operations in November of that year.


In the preamble to the Articles of Agreement, the signatory governments declare their conviction that mutual cooperation for constructive economic purposes, healthy development of the world economy, and balanced growth of international trade foster peace and world prosperity; that higher standards of living and economic and social progress in the less developed countries are desirable not only in the interest of the latter but also for the international community as a whole; and that achievement of these objectives would be facilitated by an increase in the international flow of capital, public and private, to assist in the development of the resources of less developed countries.

As stated in its Articles of Agreement, the purposes of the IDA are "to promote economic development, increase productivity, and thus raise standards of living in the less-developed areas of the world included within the Association's membership, in particular by providing financing to meet their important developmental requirements on terms which are more flexible and bear less heavily on the balance of payments than those of conventional loans, thereby furthering the developmental objectives of the [IBRD] and supplementing its activities."


As of May 2006, IDA had 165 member countries, of which 81 were eligible to borrow. Between its founding in 1960 and 2006, IDA lent approximately us$161 billion to 108 countries. It lends, on average, about us$68 billion a year (us$68.7 billion in FY 2005) for different types of development projects. When a country's Gross National Product (GNP) exceeds IDA's eligibility threshold and it becomes creditworthy to borrow from IBRD, it is no longer eligible for IDA's interest-free credits. It may then borrow from IBRD at market rates. Some countries, such as India and Indonesia, are eligible for a combination of financing from both IBRD and IDA. Such countries are known as "blend" borrowers. Countries that once borrowed from IDA but became too prosperous to qualify included China, Costa Rica, Chile, Egypt, Morocco, South Korea, Thailand, and Turkey.


The IDA is administered by the same officers and staffwho administer the affairs of the IBRD. The president of the Bank also serves as the president of the IDA, and the governors and the executive directors of the Bank serve in the same capacity in the IDA. As in the IBRD, a member's voting power in the IDA is roughly proportionate to its capital subscription.


Since the IDA relies entirely on the IBRD's staffand facilities for all its activities, it reimburses the Bank through a management fee for administrative expenses incurred on its behalf.


A. Financial Resources

The IDA's funds are obtained from three main sources: members' subscriptions; periodic "replenishments" provided by richer members and certain special contributions; and transfer of income from the IBRD and repayments on IDA credits.

While IBRD raises most of its funds on the world's financial markets, IDA is funded largely by contributions from the governments of the richer member countries. As of 30 June 2005, their cumulative contributions since IDA's beginning totaled us$ 124.35 billion. Donors get together every three years to replenish IDA funds. The 14th replenishment finances projects over the three years beginning 1 July 2005. Funding for the 14th Replenishment will allow IDA to lend about us$ 33 billion, of which donors' contributions will provide a little over half.

The largest pledges to the 14th replenishment were made by the United States, Japan, Germany, France, United Kingdom, Italy and Canada. Some less wealthy nations also contribute to IDA. Turkey and Korea, for example, once borrowers from IDA, became donors. Other contributors to the 14th replenishment were Australia, Austria, Barbados, Belgium, Denmark, Finland, Greece, Iceland, Ireland, Israel, Kuwait, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Saudi Arabia, Singapore, Slovenia, Spain, Sweden, Switzerland, and Venezuela. Brazil, Czech Republic, Hungary, Mexico, Poland, Russia, Slovak Republic, and South Africa, though all then eligible to borrow from IBRD, made contributions to IDA's 14th replenishment.

Aside from their contributions under replenishment agreements, a number of countries have agreed over the years to make voluntary increases and special contributions in excess of their normal shares. Since 1964, the IDA has received regular support from the IBRD through the transfer of some of its net income not needed for the Bank's own purposes. When combined with repayments by IDA borrowers and contributions from the World Bank's net income, the 13th replenishment will finance a total of about us$ 23 billion in development credits.

B. Terms of IDA Lending

IDA provides credits to its borrowers, interest-free with a 20-, 35-, or 40-year final maturity and a 10-year grace period. Although IDA does not charge interest, it does charge a small administrative fee of 0.75% against the outstanding balance of credits to meet administrative expenses. There is also a commitment fee of 0.5% of 50 basis points, but this has been waived since fiscal year 1989. IDA's credits are thus highly concessional with a grant element of about 85%.

C. IDA Operations

While the IDA's financial terms are liberal, its economic and technical criteria for development credits are exactly the same as those applied by the IBRD in lending on conventional terms. Each credit must be justified by the borrowing country's economic position, prospects, and policies. Credits are extended only for high-priority purposes that, in the words of the IDA's Articles of Agreement, will "promote economic development, increase productivity, and thus raise standards of living in the less-developed areas of the world."

Since the IDA's resources have been considerably less than the need of developing countries for additional external finance on easy terms, they must be carefully rationed on the basis of need and prospects for their most effective use. Borrowing countries typically have per capita GNPs below an established threshold. Most eligible countries have incomes below us$ 965 per capita.

D. IDA'S Evolving Role

IDA has taken an active role in helping governments undertaking structural adjustment to protect and expand social and environmental programs. It supports rural development programs and projects which aim to increase agricultural productivity and ensure adequate food supplies. IDA also finances projects that give special attention to improving women's incomes and status in their communities. The Association has markedly increased its support for population, health, and nutrition projects.

Environmental concerns have been integrated into all aspects of IDA's operations. The Association is helping borrowers develop their own Environmental Action Plans to identify the policy changes and investments that are required for environmentally sustainable development.

In fiscal 2005, IDA disbursed us$ 8.7 billion; of this amount, 45% went to countries in sub-Saharan Africa, 33% to South Asia, 12% to East Asia and the Pacific, 6% to Eastern Europe and Central Asia, and the remainder to poor countries in North Africa and in Latin America. New commitments in FY 2005 comprised 160 new operations in 64 countries.

IDA is the largest single source of multilateral concessional funds. Its annual net disbursements of around us$ 8.4 billion are about 30% of net concessional multilateral disbursements, and 12% of Official Development Assistance. The Association also helps mobilize and coordinate aid from other multilateral organizations and donor countries. IDA's involvement is often a catalyst for other bilateral aid donors and regional development banks to participate in providing assistance. On average, for every dollar IDA commits, 50 cents of cofinancing is mobilized.



The International Finance Corporation is the member of the World Bank Group that promotes the growth of the private sector in less developed member countries. The IFC's principal activity is helping finance individual private enterprise projects that contribute to the economic development of the country or region where the project is located. The IFC is the World Bank Group's investment bank for developing countries. It lends directly to private companies and makes equity investments in them, without guarantees from governments, and attracts other sources of funds for private-sector projects. IFC also provides advisory services and technical assistance to governments and businesses.


Within a few years of the founding of the International Bank for Reconstruction and Development (IBRD), it became evident that sufficient provision had not been made for financing the development of the private sector in countries looking to the UN system for aid. The Bank's charter restrained it from making equity (capital stock) investments or from lending money, directly or indirectly, to a private company without a governmental guarantee. Yet "venture capital" was the very thing needed in many developing countries to get a variety of productive enterprises underway, and the amount of venture capital available through private banking and investment channels was inadequate.

The first public suggestion for an international institution to close this gap appeared in a report, "Partners and Progress," which Nelson Rockefeller (then chairman of the advisory board of the Point 4 Program) had submitted to President Harry S. Truman in 1951. The matter was taken up by the staff of the IBRD, and in 1952, the Bank submitted proposals for such an institution to the UN Economic and Social Council. Some members of the Council, including the United Kingdom and the United States, voiced the fear that the proposed institution might deter the flow of private capital to the developing countries. They also objected in principle to an inter-governmental organization's having the right to purchase shares in private companies.

The majority of members of the Economic and Social Council, however, strongly endorsed the idea of an international financial institution to aid private sector development, and by late 1954, a compromise was worked out. The International Finance Corporation, as originally established, could lend money to private enterprises without government guarantees, but it was not empowered to make equity investments, though loans with certain equity features, such as stock options, were allowed. The 31 countries necessary to launch the IFC pledged their consent over the next 18 months, and the IFC formally came into existence on 14 July 1956 as a separate legal entity affiliated with the IBRD.

The IFC's early investments often included such features as stock options and other profit-sharing devices in lieu of direct equity financing, but the terms were complex and difficult to negotiate, and it soon became apparent to all concerned that IFC's effectiveness was severely circumscribed by the restriction on equity investment. Proposals to amend the charter so as to permit the IFC to hold shares were put to the Board of Directors and the Board of Governors and approved in 1961with the support, this time, of both the United Kingdom and the United States. The revision of IFC's charter in 1961 to permit investment in equities made it possible to broaden and diversify operations, as well as to simplify the terms of investment. With the demand for IFC's services steadily expanding, the Board of Directors amended the charter again in 1965 to permit the IFC to borrow from the IBRD up to four times its unimpaired subscribed capital and surplus.


IFC's purpose is to foster economic growth by promoting private sector investment in its developing member countries. It accomplishes this by providing venture capital for productive private enterprises in association with local investors and management, by encouraging the development of local capital markets, and by stimulating the flow of private capital. The Corporation is designed to supplement, rather than replace, private capital. It plays an important catalytic role in mobilizing additional project funding from other investors and lenders, either in the form of cofinancing or through loan syndications, the underwriting of debt and equity securities issues, and guarantees. In addition to project finance and resource mobilization, IFC offers a full array of advisory services and technical assistance in such areas as capital market development, corporate restructuring, risk management, and project preparation and evaluation, and advises governments on creating an environment that encourages the growth of private enterprise and foreign investment.


Membership in the IFC is open to all members of IBRD. As of May 2006, IFC had 178 member states.


The structure of IFC is similar to that of the IBRD. IFC's Board of Governors consists of those governors of the Bank (IBRD) whose countries are also members of IFC. Its Board of Directors is composed of all the Executive Directors of the Bank. The annual meeting of the IFC Board of Governors is held in conjunction with the annual meeting of the Board of Governors of the IBRD. IFC headquarters are at 2121 Pennsylvania Ave. N.W., Washington, D.C., 20433.

The first president of the IFC was Robert L. Garner, formerly vice-president of the IBRD. Since 1961, the president of the Bank also has been the president of the Corporation. The immediate direction of the Corporation is the responsibility of the executive vice-president, Lars H. Thunell, whose term became effective 1 January 2006. IFC has more than 2,400 staff, 55% of whom work in Washington, and 45% of whom are stationed in over 80 IFC field offices.


A. Financial Resources

IFC's investments are funded out of its net worththe total of paid-in capital and retained earnings. Of the funding required for its lending operations, 80% is borrowed in the international financial markets through public bond issues or private placements; the remaining 20% is borrowed from the IBRD.

Earnings and Borrowings.

IFC's operating income for fiscal year 2005 was us$ 1.95 billion; its net income was us$ 2.02 billion. Paid-in capital was us$ 2.4 billion; retained earnings were us$ 7.4 billion; and borrowings amounted to us$ 2 billion. IFC may borrow from the IBRD for use in its lending operations as long as the Corporation's total borrowings do not exceed four times its unimpaired subscribed capital and surplus.


In 2005 IFC approved 236 new projects in 67 countries. The total project cost of commitments was us$ 19.3 billion. Since its founding in 1956 and through 2005, IFC committed more than us$ 49 billion of its own funds and arranged us$ 24 billion in syndications and underwriting for 3,319 companies in 140 developing countries.

B. Investment Policies

Unlike the IBRD, IFC lends to private companies and does not accept guarantees from host-country governments. It also makes equity investments in developing-country businesses, and mobilizes additional loan and equity financing in the international financial markets. Because of the success of IFC's operations, its bond issues in the international markets have earned triple-A ratings from Moody's and Standard and Poor's.

IFC is the single largest source of direct financing for private sector projects in developing countries. Although IFC invests and lends on market terms, it does not compete with private capital. It finances projects unable to obtain sufficient funding on reasonable terms from other sources. Normally, IFC does not finance more than 25% of total project costs, so as to ensure that most of the project financing comes from private investors and lenders. And while IFC may buy up to 35% of the stock of a company, it is never the largest shareholder and does not take part in a firm's management. But since IFC does not accept government guarantees, it shares all project risks with its partners.

IFC finances the creation of new companies as well as the expansion or modernization of established companies in sectors ranging from agribusiness to manufacturing to energy to mining. A number of IFC projects involve building up the financial sectors of developing countries, for example by financing the creation of institutions such as investment banks and insurance companies.

IFC can provide loans, equity investments, and arrange quasi-equity instrumentsin whatever combination is necessary to ensure that a project is soundly funded from the outset. The Corporation can provide additional financial support through contingent financing or full or partial guarantees of other sources of financing. In the past few years, IFC has made derivative products, such as currency and interest rate swaps, available to companies in developing countries. It has intermediated several such swaps for companies in Bolivia, Egypt, Ghana, and Mexico, helping them gain access to risk-management techniques commonly used by companies in industrialized countries but not normally available to companies in the developing world.

C. IFC Investments

The IFC's history has been marked by growth in the number and size of investments and by a continued search for new ways to assist its member countries. An improved policy environment in many of IFC's developing member countries has helped the Corporation to make a larger contribution to economic development. Helping companies in developing countries achieve a proper balance between debt and equity financing is a key IFC objective.

In addition to approving debt and equity financing for its own account, in 2005 the Corporation approved the mobilization of us$ 5.3 billion in financing from other investors and lenders through loan syndications and the underwriting of securities issues. It also mobilized considerable cofinancing. Thus, for every us$ 1 of financing approved by IFC for its own account, other investors and lenders will provide us$ 4.75.

The efficient provision of services in such sectors as power, water, transportation, and communications is critical to successful private sector development. A growing number of IFC's member countries are opening these sectors, once the preserve of the state, to private investment and management.

The countries of Eastern and Central Europe and the former Soviet republics are a new focus of IFC's work. IFC's role includes financing private-sector projects and advising governments on creating a modern financial sector, selling offstate-owned enterprises, and attracting foreign investment.

IFC advised governments officials in Russia and Ukraine on different techniques for privatizing state enterprises, and developed privatization programs that can be used as models by local authorities in both republics. It helped design and implement the auction of small enterprises in three regions in RussiaNizhny Novgorod, Volgograd, and Tomskand in the city of L'viv, Ukraine, and produced a manual on the privatization of small enterprises.

In many developing countries small-scale entrepreneurs with promising ideas are often unable to get the financing or advice they need to start or expand businesses. IFC has set up project development facilities in Sub-Saharan Africa, Central America and the Caribbean, the South Pacific Islands, and Poland to help entrepreneurs prepare project proposals. Although these facilities do not themselves fund projects, they help entrepreneurs find loans and equity financing on reasonable terms. The Africa Enterprise Fund, established in 1989, is a special program devoted to financing small and medium-sized businesses in Sub-Saharan Africa.

Advisory Services and Technical Assistance.

In the course of conducting project appraisals, IFC may provide considerable technical assistance to companiesfor example, by helping them select a technical partner or a technology, identify markets for their products, and put together the most appropriate financial package. The Corporation also advises companies on financial restructuring, helping them reduce their debt.

IFC advises member governments on an array of issues, such as capital markets development. It helps governments create and put in place the regulatory, legal, and fiscal frameworks necessary for financial institutions to operate efficiently. IFC also provides advice on privatization and on restructuring state enterprises slated for privatization. The Foreign Investment Advisory Service, established by IFC and operated jointly with the Multilateral Investment Guarantee Agency and IBRD, advises governments on attracting direct foreign investment.

Antigua and Barbuda527700.05Hungary805.08,3000.51
Austria1,106.311,3130.70Iran, Islamic Republic of2,368.623,9361.48
Bolivia178.52,0350.13Korea, Republic of1,581.716,0670.99
Bosnia and Herzegovina54.97990.05Kuwait1,328.013,5300.84
Botswana61.58650.05Kyrgyz Republic110.71,3570.08
Brazil3,328.733,5372.07Lao People's Democratic Republic17.8420.0
Brunei Darussalam237.32,6230.16
Burkina Faso86.81,1180.07Lebanon34.05900.04
Cameroon152.71,7770.11Libyan Arab Jamahiriya784.08,0900.50
Cape Verde50.87580.05Luxembourg165.21,9020.12
Central AfricanRepublic86.1,11Macedonia, Former Yugoslav Rep. of42.76770.04
Congo, Democratic Republic of264.32,8930.18Malta107.41,320.0
Marshall Islands46.97190.04
Costa Rica23.34830.03Mauritania90.01,1500.07
Côte d'Ivoire251.62,7660.17Mauritius124.21,4920.09
Czech Republic630.86,5580.41Moldova136.81,6180.10
Dominican Republic209.22,3420.14Myanmar248.42,7340.17
El Salvador14.13910.02Netherlands3,550.335,7532.21
Equatorial Guinea71.59650.06New Zealand723.67,4860.46
Georgia158.41,8340.11Papua New Guinea129.41,5440.10
Romania401.14,2610.26Syrian Arab Republic220.22,4520.15
Russian Federation4,479.545,0452.78Tajikistan1061,3100.08
St. Kitts And Nevis27.55250.03Thailand634.96,5990.41
St. Lucia55.28020.05Timor-Leste51.77670.05
St. Vincent and the Grenadines27.85280.03Togo110.51,3550.08
Samoa53.17810.05Trinidad And Tobago266.42,9140.18
San Marino59.58450.05Tunisia71.99690.06
São Tomé and Príncipe49.57450.05Turkey832.88,5780.53
Saudi Arabia4,479.545,0452.78Turkmenistan52.67760.05
Serbia and Montenegro284.63,0960.19Ukraine1,090.811,1580.69
Seychelles26.35130.03United Arab Emirates238.52,6350.16
Sierra Leone71.89680.06United Kingdom6,939.769,6474.30
Singapore32.05700.04United States26,496.9265,21916.39
Slovak Republic321.63,4660.21Uruguay281.23,0620.19
Solomon Islands51.37630.05Vanuatu58.68360.05
South Africa1,346.213,7120.85Vietnam96.81,2180.08
Sri Lanka381.74,0670.25Zambia2813,0600.19
Switzerland2,660.626,8561.661Millions of 1994 US Dollars
Antigua and BarbudaXXXCongo, Dem. Rep. of theXXXXX
ArgentinaXXXXXCosta RicaXXXXX
ArmeniaXXXXXCôte d'IvoireXXXXX
AzerbaijanXXXXXCzech RepublicXXXXX
BarbadosXXXXXDominican RepublicXXXX
BelizeXXXXXEl SalvadorXXXXX
BeninXXXXXEquatorial GuineaXXXX
Brunei DarassalamXXFranceXXXXX
Burkina FasoXXXXXGambiaXXXXX
Cape VerdeXXXXXGrenadaXXXXX
Central African RepublicXXXXXGuatemalaXXXXX
GuyanaXXXXXPapua New GuineaXXXXX
Iran, Islamic Republic ofXXXXRomaniaXXXX
IraqXXXRussian FederationXXXX
IsraelXXXXXSt. Kitts and NevisXXXXX
JamaicaXXXXSt. Vincent and the GrenadinesXXXX
KazakhstanXXXXXSan MarinoX
KenyaXXXXXSão Tomé and PríncipeXX
KiribatiXXXSaudi ArabiaXXXXX
Korea, Republic ofXXXXXSenegalXXXXX
KuwaitXXXXXSerbia and MontenegroXXXX
Kyrgyz RepublicXXXXSeychellesXXXX
Lao People's Dem. Rep.XXXXSierra LeoneXXXXX
LebanonXXXXXSlovak RepublicXXXXX
LiberiaXXXXSolomon IslandsXXXXX
Libyan Arab JamahiriyaXXXXSomaliaXXXX
LithuaniaXXXXSouth AfricaXXXX
Macedonia, Former Yugoslav Rep. ofXXXXXSri LankaXXXXX
MaliXXXXXSyrian Arab RepublicXXXXX
Marshall IslandsXXXTanzaniaXXXXX
MoldovaXXXXTrinidad and TobagoXXXXX
NepalXXXXXUnited Arab EmiratesXXXXX
NetherlandsXXXXXUnited KingdomXXXXX
New ZealandXXXXUnited StatesXXXXX
APPOINTEDBiagio Bossone (Italy)56,7053.50
Robert B. HollandUnited States265,21916.39Greece
Yoshio OkuboJapan127,2507.87Italy
Eckhard DeutscherGermany72,6494.49Malta
Pierre DuquesneFrance69,6474.30Portugal
Tom ScholarUnited Kingdom69,6474.30San Marino
ELECTEDJoong-Kyung Choi (Republic of Korea)55,8003.45
Gino Alzetta (Belgium)77,6694.80Australia
BelgiumKorea, Republic of
Czech RepublicMarshall Islands
HungaryMicronesia, Fed. States of
LuxembourgNew Zealand
Slovak RepublicPalau
SloveniaPapua New Guinea
Luis Marti (Spain)72,7864.50Solomon Islands
Costa RicaVanuatu
El SalvadorMathias Sinamenye (Burundi)55,1903.41
VenezuelaGambia, The
Jan Willem van der Kaaij (Netherlands)72,2084.46Kenya
Bosnia And HerzegovinaLiberia
Macedonia, Former Yugoslav Rep. ofSierra Leone
MoldovaSouth Africa
Marcel Masse (Canada)62,2173.85Uganda
Antigua and BarbudaZambia
BarbadosDhanendra Kumar (India)54,9453.40
GrenadaSri Lanka
GuyanaSid Ahmed Dib (Algeria)51,5443.19
St. Kitts And NevisGhana
St. LuciaIran, Islamic Republic of
St. Vincent and the GrenadinesMorocco
Otaviano Canuto (Brazil)58,1243.59Pakistan
ColombiaThorsteinn Ingolfsson (Iceland)54,0393.34
Dominican RepublicDenmark
Trinidad And TobagoNorway
Pietro Veglio (Switzerland)49,1923.04Jaime Quijandria (Peru)37,4992.32
Kyrgyz RepublicBolivia
Serbia and MontenegroParaguay
TurkmenistanPaulo F. Gomes (Guinea-Bissau)32,2521.99
Jiayi Zou (China)45,0492.78Burkina Faso
Yahya Alyahya (Saudi Arabia)45,0452.78Cape Verde
Saudi ArabiaCentral African Republic
Alexey G. Kvasov (Russian Fed.)45,0452.78Chad
Russian FederationComoros
Mahdy Ismail Aljazzaf (Kuwait)47,0422.91Congo
BahrainCongo, Dem. Rep. of
EgyptCôte d'Ivoirwe
JordanEquatorial Guinea
Libyan Arab JamahiriyaGuinea-Bissau
Syrian Arab RepublicMauritius
United Arab EmiratesNiger
Herwidayatmo (Indonesia)41,0962.54São Tomé and Príncipe
Brunei DarussalamSenegal
Lao People's Dem. Rep.NOTE: Somalia (802 votes) did not participate in the 2004 regular elections of executive directors.

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