World Bank began its operations in 1948 and was initially concerned with the reconstruction of war devastated countries. Now it is primarily concerned with the development of less developed countries.

It provides loans mostly for financing development projects. Major­ity of these loans are for specific projects in the areas of agriculture, energy, water supply, hous­ing, transport, etc.

Now, more ‘generalised programme’ and ‘structural adjustment’ loans are also extended to less developed nations. World Bank has also been providing loans for financial sector reforms and other policy changes.

It provides the necessary forum for co-financing arrange­ments and serves as a major source of overseas development assistance.

ADVERTISEMENTS:

The Bank encourages commercial banks to co-finance projects and provides guarantees for commercial loans raised to finance long gestation infrastructure projects.

The Bank provides ‘buyer’s credits’ in conjunction with export-credit guarantee insurance.

The Bank has increased direct lending to basic industries such as mining, steel, fertilizers, paper, etc. More attention is being paid to finance labour inten­sive small scale industries and those having potential for exports.

India and the World Bank

ADVERTISEMENTS:

The World Bank has been taking keen interest in the economic development of India. It has been lending to both public and private sector concerns.

Railways power generation, telecommunication, agriculture, multipurpose projects, ports, airlines, coal and steel have been the main beneficiaries of assistance from the Bank.

For several years India has been the number one borrower of the Bank. In 1997 India received US$ 626.5 million from the Bank.

Under the auspices of the Bank and IDA there is a consortium of ten developed nations which provides assistance for implementing five year plans of India.

ADVERTISEMENTS:

International Development Association (IDA)

The World Bank could not meet all financial needs of developing countries particularly in areas such as sanitation, slum clearance, urban development, bridges, etc. IDA was set up as an affiliate of the World Bank in 1960 for providing soft loans.

Resources

IDA collects funds through donations from rich members of the World Bank. USA being the largest donor. It is replenished by an agreement among donors every three years.

ADVERTISEMENTS:

IDA has two types of members. Part I members consisting of 22 developed countries contribute 95 per cent of its funds. Part II members consisting of 112 developing countries subscribe to the balance 5 per cent funds.

Management

IDA is a separate legal entity but is managed by the staff of the World Bank. It has a Board of Governors, Executive Directors and a President. All of them are employed in the World Bank and hold ex-official positions in the IDA.

Financing Criteria

ADVERTISEMENTS:

Assistance by IDA is characterised by the following features:

(i) The credit is interest free and only a service charge of 0.75 per cent annually on amounts withdrawn and outstanding is charged to meet administrative expenses.

(ii) The assistance is repayable in 50 years.

(iii) The repayment starts after 10 years grace period.

ADVERTISEMENTS:

(iv) The loans are repayable in easy installments.

Progress

DA provides credit to nearly 70 of the poorest countries. It is contributing to the development of infrastructural facilities such as draining system, national highways, tube wells, rural electrification, electric power, fertilizer industry, etc. in poor countries.

It is also helping in tackling the problems as housing, unemployment, urban poverty, etc. India has been among the biggest bonowers, getting US$ 903 million in 1996. Thus, IDA is playing key role for the long- term development of poor countries.

International Finance Corporation (IFC)

The World Bank provides loans to the member countries or on their guarantee. Private sector enterprises in developing countries could not directly contact loans with the Bank.

More­over, the Bank provides only loans and not capital. The IFC was established to help private entrepreneurs directly.

The IFC was established in 1956 as an affiliate of the World Bank especially to assist and promote private enterprises in developing countries.

It is a multinational investment bank to provide risk capital and loans to private sector enterprises in less developed countries.

Membership

Only the members of World Bank can become members of the IFC, IFC has 172 member countries which collectively determine its policies and activities. It raises funds through bonds in the international financial markets.

Management

The Board of Governors and Executive Directors of the World Bank act in the same capacity in IFC also. IFC has its own Chairman who is responsible for conducting its business.

Functions, (i) to assist economic development of less developed countries; (ii) to invest in private productive enterprises without the sponsorship of the Government; and (iii) to encourage both domestic and foreign capital investment

Operations

IFC is the largest multilateral source of loans and enquiry financing for private sector projects in developing countries. It invests in partnership with domestic and foreign inves­tors.

It is also trying to liberalize economies and to foster a dynamic private sector investment in financial institutions. It has provided funds of more than US$215 million to Indian projects.

International Monetary Fund (IMF)

IMF was formed at the Bretton Woods conference held in July 1994. It was established in 1945 with the object of promoting economic stability in the world. Its headquarter is situated in Washington D.C. (U.S.A.).

It is an autonomous organisation affiliated to the UNO. The manage­ment is in the hands of a Board of Directors consisting of 7 permanent directors and 14 elected directors. IMF has 180 countries as its members.