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How Does the World Bank Work

How Does the World Bank Work

If you are interested in the happenings in the financial world, then you must have heard about the World Bank. This article tries to understand how the World Bank works.
Charlie S
The World Bank is a global financial institution that engages in providing loans to the developing nations of the world to undertake and execute various development programs. With poverty reduction being its main objective, the World Bank has achieved remarkable success in the upliftment of the economically backward nations.

Facts about the World Bank
  • Robert B. Zoellick is the President of the World Bank which has 187 countries as its members.
  • The bank's headquarters in Washington DC in the United States of America.
  • The World Bank was created at the Bretton Woods Conference in 1944.
  • It consists of International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).
  • In the earlier years, after its establishment, the World Bank's approach was a bit conservative as it had to establish itself on the global front and finance the needy nations. So, loan applications from nations used to be thoroughly reviewed by panels of financial experts before sanctioning any loan.
  • France was the first country to receive financial aid of $250 million from the World Bank.
  • In the period from the late 60's up to early 80's, the loan portfolio of the World Bank expanded and it started lending aggressively to many needy nations for a variety of purposes, ranging from social service to building quality infrastructure facilities.
  • The United States, Japan, China, United Kingdom, Germany and France have maximum voting power in the World Bank.
How the World Bank Functions

Securing Funds
The scale of operations of the World Bank are very wide and right from its establishment the bank has catered to increasing number of nations across the world. To meet the rising needs from nations, the World Bank needs to have sufficient funds. So, fundraising is its topmost priority and is the most important part of its functioning. It primarily receives its funding from advanced nations in the world and from bonds which are sold in the market.

Granting Loans to Nations
As said above, the main aim of the World Bank is to help economically backward nations improve their financial condition through a planned growth. Following are the areas of focus of the bank:

Electric Power and Transportation Funding
Electric power and transportation funding for weaker nations was on the top of the World Bank's agenda in its initial years. This kind of funding enables nations to build world-class infrastructure which is absolutely necessary for a planned and systematic growth.

Agricultural and Rural Development
In many nations, agriculture is the main source of income for people in the rural areas. So, development in the practices of agriculture is a must, and realizing this need, World Bank through proper funding, has helped many nations change their ways of agriculture. This naturally helps in lifting the standard of living of the people and raises per capita income.

Health Care and Nutrition
Lack of health care and good nutrition is the main reason why deaths due to malnutrition took place in the world. World Bank believes that people of all nations have a right to good food and health facilities and hence, it has been generously donating to governments across the world.

World Bank's contribution in the field of education is remarkable. It has financed government institutions to help nations increase their literacy rate. The result of these planned efforts was that most countries have managed to increase number of literates considerably, and create more employment.

More Areas of Financing
Here are some more sectors/areas on which World Bank concentrates:
  • Oil and gas
  • Alternative sources of energy
  • Social services
  • Small scale industries
  • Waste disposal
  • Water facilities
Prevention of Corruption
The World Bank considers corruption as a major threat for the growth of the economies of developing countries. Hence, to curb this problem, it has taken sincere efforts by having collaborations and discussion with governments and invented methods to avoid corruption in banking system.

Monitoring Use of Loan Money
The last yet most vital point is the monitoring of the money loaned to countries by it. The bank takes keen efforts to make sure that the money is being used for the discussed proposals and development works only. The bank executives prepare reports on the same to keep malpractices under check.

The history of the World Bank is glorious and this makes it one of the most respected institutions in the financial world. In the coming years, help from World Bank will surely help nations accelerate their economic growth and make great progress.