What Is The World Bank? How World bank works?
The World Bank borrows money from the developed countries which generally called as donating countries and lend the money to the developing or under-developed countries at minimal interest rates. It has also been criticized by non-government organisations as it lends the money to the government only.
The history and working mechanism of the World Bank are in brief as follows:
Establishment of the World Bank:
The world was established on July 1944 after the Second World War. The mention-able thing is that World Bank and World Bank group are two different things under the same patent name of World Bank group. In the World Bank, there are only two institutions (IBRD and IMF), whereas, in the World Bank group, there are total five main international institutions including those two institutions. It has headquarter in the Washington D.C. having more than 120 offices. Apart from this, it has employed more than 10,000 employees.
Motto and targets of the World Bank:
The main motto of the establishment of the World Bank is to work for a world free of poverty. In this context, it has taken various steps towards the poverty reduction of the countries. Its targets include many financial as well as moral aspects like infrastructure development, building capital capacity, remove the poverty and hunger, environmental sustainability, etc.
Till 2030, it aims to decrease the percentage of people having living standards less than $1.90 in a single day not more than 3%.
Working mechanism of the World Bank:
The IBRD (International Bank Reconstruction and Development) is the primary arm of the World Bank, and all the shareholders of this institution are the shareholders of the World Bank.
The president of the World Bank is elected from the highest shareholding members and currently, U.S. rest with the highest shareholding. In this scenario, U.S., Japan, China, Germany, and U.K. hold top five positions respectively. Mr. Jim Yong Kim is the current president of the World Bank, and all the members are reported as the body of governors. Throughout the year, these powers can be delegated to the lower authorities in a hierarchy. All the members have the power to appoint independent executive directors to work smoothly.
From the shareholder’s perspective, the World Bank’s system is very clear and simple. If any country wants to be the shareholder in the World Bank, it has to join the IMF (international monetary fund) first and that country is bound to hold at least 195 shares of the World Bank shares. In this capital, the subscribing company will have to pay at least 6% as application payment and rest will be called as callable capital. In this application payment, the minimal amount of 0.60% of the total holding will have to be paid in the U.S. dollar and rest in the local currency. Apart from this, the World Bank’s shareholding fluctuates with the size of the country’s economy. There is some amount also to be paid as obligatory subscription fee of the quota of the IMF. Moreover, the country can further subscribe a fixed amount of shares as callable capital and this capital is demanded by the World Bank whenever it feels necessary.
Conclusively, the World Bank is playing a vital role in borrowing and lending money across the countries and working towards the poverty reduction and financial development.