 The World Bank came into formal existence in

1945.

 World Bank concentrating on long-term economic

development and reduction of poverty by
providing:

1. Loans

2. Grants

3. Technical assistance
The World Bank Group is actually
comprised of five separate arms
IBRD,IDA,MIGA,IFC,ICSID.
Two of those arms –

 The International Bank for Reconstruction

and Development (IBRD) and the
International Development Association
(IDA) work primarily with state governments
and together are commonly known as "the
World Bank".
Two other branches :
 The International Finance Corporation
(IFC) and Multilateral Investment Guarantee
Agency (MIGA) - directly support private
businesses investing in developing countries.

 The fifth arm is the International Center for

Settlement of Investment Disputes (ICSID),
which arbitrates disagreements between
foreign investors and governments
 The World Bank and the IMF have adopted a
weighted system of voting.
 Membership in the Bank is open to all members of
the IMF.
 A country applying for membership in the Fund is
required to supply data on its economy.
 A quota is then assigned, equivalent to the country's
subscription to the Fund, and this determines its
voting power in the Fund.
 Established in 1944 at the Bretton
Wood Conference.

 It has 187 member countries.

 Its purpose was to provide financial
assistance for postwar reconstruction
and for development
 It Provides loan to the government of developing
countries for infrastructural development.
 The IBRD finances its lending operations primarily
from borrowings in the world capital markets at attractive
rates of interest because of its Triple A- credit rating
backed by the capital commitments of its 187 shareholder
governments.

 The recipient country must be member of the IMF.

 The loans are made for specific projects, usually
when private capital is unavailable except high cost.
 Term of the loan varies from 15 to 30 Years.
International Bank for Reconstruction and Develo
pment
(IBRD) cont ….

The basic rules governing the World Bank operations are:

 It must lend only for productive purposes and must

stimulate economic growth in the developing countries
where it lends.

 Each loan is made to a government or must be guaranteed

by the government concerned.

 The rate of interest is somewhat lower but related to

market rates.
2. International Development Associat-
ion (IDA):
 It has membership of 170 countries.
IDA was established in 1960 to provide credit to
the poorest countries ( per capita income less than
US $ 250) in the world on more liberal terms than
IBRD .

Some countries, such as India and Pakistan, are

IDA-eligible based on per capita income levels,
but are also creditworthy for some IBRD
borrowing. They are referred to as “blend”
countries.
 IDA Provide interest-free credit , and grants
to poorest countries for education, health,
infrastructure, communications and many
other purposes.

 IDA credits have no interest charge and

repayments are stretched over 35 to 40 years,
including a 10-year grace period.

 Since its inception, IDA credits and grants

have totaled US$222 billion, averaging US$13
billion a year in recent years and directing the
largest share, about 50 percent, to Africa.
The World Bank Cont ….
3. International Finance Corporation (IFC):
 IFC was established in 1956 to foster private
sector investment in developing nations.
 It is the private sector arm of the World Bank
Group.
 It has membership of 182 countries. Member
should Be a member of the World Bank (IBRD).
 IFC Funds project finance, corporate finance,
and trade finance in broad three areas:
 Financial Product: IFC provides loans, equity and
finances to build the private sector in developing
countries.
 Recourse Mobilization : IFC mobilizes finances
from international institution through
structured finances and investment funds

 Technical Assistance: IFC provide advice and

technical expertise, such as advice on
privatization, business related policy and
industry-specific issues.

 The term of loan is usually 7 to 12 years.

International Finance Corporation (IFC)…

IFC finances projects in all types of industries, from

agro business to mining, from manufacturing to
tourism.

 Consideration is given to the economic priority of the

project. IFC charges market rates for its product.

 India, along with Mexico, Brazil and Argentina have

been the four major beneficiaries of the IFC.
 35 per cent of the total commitment had gone to these
four countries.

 IFC committed financing for 284 investment

projects in 66 countries.

 It can finance companies that are wholly owned as

well as joint venture between foreign and local
shareholders.
 4. Multilateral Investment Guarantee
Agency (MIGA):

 It is also an affiliates of the World Bank Group,

was established in 1988 with following objective :

To promote foreign direct investment (FDI) into

developing countries to support economic growth,
reduce poverty, and improve people's lives.

 MIGA has membership of 175 countries

 MIGA addresses the concern about investment
environment in developing countries by providing
following services:


Technical assistance
 MIGA provides technical assistance (TA) to
investment promotion intermediaries (IPIs) in
developing member countries to enhance their
capacity to provide investors with information and
advice, with the goal of reducing the transaction
costs associated with site selection, as well as
helping new ventures.
 The ICSID Convention is a multilateral treaty
formulated by the Executive Directors of the
International Bank for Reconstruction and
Development (the World Bank).
 It came into existence in 1966.
 The primary purpose of ICSID is to provide

facilities for conciliation and arbitration of

international investment disputes.
 It has membership 144 members.
 The World Bank, through its lending arms IBRD and
IDA, committed USD 9.3 billion in financial
assistance to India in the 2009-10 fiscal.

 The World Bank's concessionary lending arm, the

International Development Association (IDA), which
helps the world's poorest countries, committed
17.7 per cent of its total aid, amounting to USD 2.6
billion, to India in 2009-10.
 It
aims to reduce poverty by providing
interest-free credit and grants for
programmes that boost economic
growth, reduce inequalities and
improve people's living conditions.
In 2006-07, the World Bank gave $3.7-billion
assistance, while IFC extended $1 billion as debt and
equity to private sector companies in the country.

TheWorld Bank would focus on agriculture and clean

energy in addition to infrastructure sector projects and
poverty alleviation.
(As per Press Release at the visit of President, World Bank , The
Tribune , 3rd Nov., 2007)
 As per BBC News, the World Bank has approved a USD
600 million loan to India, aimed at “helping millions
of poor farmers across India”.

 The money will go to supplement a government

sponsored program, worth USD 3.32 billion, to
refinance India’s cooperative banks, which would then
offer cheaper loans to farmers. That program was
designed, at least partly, in response to suicides
across the country by farmers that were unable to
repay their debts due to failing crops.
 Dated – 28th June, 2007
 IMF is an international organization of 187 member
Countries.
 Created at an international conference convened in
Bretton Woods, New Hampshire, U.S.A. in July 1944.
 IMF focuses on ensuring the stability of the internati-
onal financial system .

Objectives:
 To promote exchange stability to avoid competitive
devaluation;
 To provide temporary financial assistance for ‘balance of
payment adjustment;
 To foster economic growth and high level of employment.
 Financial Assistance:
 IMF provides financial Assistance to
countries experiencing BOP problem in
following ways:
 To enable countries to rebuild their
international reserves;
 Stabilize their currency;
 To help in making payment for imports.
 Technical Assistance:
 The IMF provides technical assistance to
strengthen their capacity in both human and
institutional resources, and to design approp-
riate macroeconomic, financial, and structural
policies, such as-

◦ Tax policy and revenue administration,

◦ Expenditure management,
◦ Monetary policy,
◦ The exchange rate system,
◦ Financial sector sustainability,
 About 90 percent of IMF technical
assistance goes to low and lower-
middle income countries.

 Post-conflict countries are also major

beneficiaries.
 Quota (subscription fees) generates most of
the IMF’s financial resources.

Quota:
 Each member of country of IMF is assigned a
quota.
 Quota is membership fees which determines :

 Voting
Power;
 Members’ accessibility to IMF financing;
 Determinants of Quota:
 Economic position of member country, relative to
other members, which covers following factors:

◦ GDP, Current Account transaction, Official reserves

 Constitution of Quota:
 Subscription fees is divided into two parts:

 25% of reserve asset in SDRs or US$, Euro, yen

or the pound.

 75% in its local currency.

Quota Cont..

 USA is the largest member of the IMF with a

quota of SDR 37,149.3 million and voting
power is 3,71,743 votes.

 Palau is the smallest member with a Quota of

SDR of 3.1 million and 281 votes.

 India’s quota of IMF is SRD 4,158.2 million and

41,832 votes.
 Regular Facility :
◦ Under this facility member draws up to 25% of its
quota. This process is automatic and fund does not
raise any objection.

 Special Facility:
◦ Under this facility, members get financial assistance
those are experiencing Balance of Payment
adjustment because of disruption in traditional trade.
◦ This facility was established in 1993 with access limit
of 50% of Quota.
 Compensatory and Contingency
Financing Facility (CCFF):
 It provides resources to members to cover
shortfalls in export earnings and services
receipts and excess in cereal import cost.

 Buffer Stock Financing Facility:

 It provides financial help to members for
maintaining buffer stock of primary products.
 Exogenous Shock Facility:
◦ IMF provides policy and financial support to low income
countries facing exogenous shocks such as :
 Commodity Price changes (including oil);
 Conflict and crisis in neighboring countries that disrupt trade.

 Poverty Reduction and Growth Facility (PRGF):

◦ Under this facility IMF provides low interest lending for
low income countries for poverty reduction and growth
in poorest countries.
 Structure Adjustment Facility (SAF):

 Under this facility, IMF provides resources on

concessional terms to support mid-term
macroeconomic adjustment and structural
reforms in low-income countries facing problem
of balance of payment.

 The rate of interest on SAF loan is 0.5% and

repayments are made in 5½ to 10 years.
 IMF Emergency Assistance:
◦ IMF provides emergency assistance to help
member countries to manage balance of payment
crisis arising from sudden and unforeseen natural
calamities, such as, earth quake, floods, drought
and hurricane.
◦ Example:
◦ Countries affected by the Tsunami in Dec. 2004 in
South Asia have been benefited from this initiative.