The World Bank
I. Presentation of institutions of the World Bank Group
The International Bank for Reconstruction and Development (IBRD) was created at the same time as the IMF by the Bretton Woods Agreements (July 1944). It now has 186 member countries. The total assets of the IBRD in 2008 stood at $233 599m and its equity at $41 548m, for operating profit of $2 271m and a loan balance of $99 050m. Most of its resources come from borrowings from financial markets, and the balance comes from subscriptions (quotas) from its members.
The bank borrows (due to its capital base and the quality of its rating) at a low cost and passes on the privileged terms that it enjoys to borrowing countries, i.e. its clients: the Bank grants loans to middle-income countries, or low-income countries which have a good credit rating. It also provides guarantees as well as risk management products and advice.
The cumulative amount of its loans at the end of budget year 2008 (ended on 30 June 2008, starting from the year 2005 and including guarantees) was $446bn, of which $13.5bn of loans for the year 2008 (99 new transactions in 34 countries).
Given that its objective is not to make profit or to pay dividend to its shareholders, the IBRD each year redistributes its profit, in particular to the poorest countries, namely through financing of the initiative for Heavily Indebted Poor Countries (HIPC). The IBRD also contributes to the financing of the IDA through transfers of net income.
The International Development Association (IDA), created in 1960, has 167 member states. It targets mainly poor countries which do not have the means to borrow at market conditions, by providing them with interest-free long-term loans (called credits) and donations for the 79 poorest countries. Its cumulative commitments since 2005 amount to $193bn (including guarantees) and for the year 2008 to $11.2bn (7.8bn of credits and 3.4bn of donations which have financed 199 new transactions in 72 countries). The balance of development credit of the IDA in 2008 amounted to $113 542m. IDA balances are financed through refunds of past credits, amounts deducted from the IBRD’s net income, donations from the International Finance Corporation (see below) and contributions from donor countries, in the form of contributions to the tri-annual replenishment of resources. The last replenishment of resources, IDA-15 (signed in December 2007 for the period covering up to 30 June 2011), led to commitments from donors for an unprecedented amount of $41.7bn in total, i.e. $9.5bn more than under the previous replenishment.
The IBRD and the IDA together form the World Bank, the President of which is, since 1 June 2007, Mr.Robert B. Zoellick (United States). More broadly, along with the 3 institutions below, they form the World Bank Group:
The International Finance Corporation (IFC), created in 1956, has 179 member countries. The IFC offers various products to private undertakings in its member countries, i.e. developing or transition countries: long term loans, equity investment, structured finance, securitization transactions, advisory and risk mitigation services. The IFC operates without public guarantees and provides its services to undertakings in countries or regions which do not have access to capital or for markets that investors would consider to be too risky if the IFC did not participate. The IFC’s operating profit in 2008 stood at $1 438m (against $2 589m in 2007), for a liquidity portfolio (excluding derivatives) of $14 622m. Its portfolio of commitments stand at $32.2bn (and $7.5bn of syndicated loans), of which $11.4bn committed for the year 2008 and $4.8bn mobilized for 372 projects in 85 countries.
The International Centre for Settlement of Investment Disputes (ICSID) created in 1966, has 144 member countries and has recorded a total number of 268 cases, of which 32 during the year 2008. It offers services for the international settlement of investment-related disputes, through conciliation and arbitration . Its arbitration mechanisms are a reference for laws and treaties relating to investments. The ICSID is also a reference in the field of research on these subjects.
The Multilateral Investment Guarantee Agency (MIGA) founded in 1988, has 172 member countries. It offers insurance services against political risks in order to encourage Foreign Direct Investment (FDI) in developing countries. It also offers technical assistance and advice in order to help countries design and implement investment promotion strategies and provides investors with information on business opportunities and the business climate. It can also assist in the settlement of disputes between countries and investors. The cumulative amount of guarantees issued by MIGA stands at $19.5bn, of which $2.1bn of guarantees issued during the year 2008. Its net commitments in 2008 reached $3 578bn, of which $1 477bn in IDA countries.
Member countries of institutions of the World Bank Group are shareholders and hold shares of the institutions’ capital. The number of shares held determines the voting rights in respect of decisions taken by the Board of Directors. The Board of Directors determines the overall policies of the Bank and its members, which also participate in standing committees of the Board (audit, effectiveness of development, budget, personnel, and administrative questions).
Each country is represented at the World Bank Group by a Governor, generally its Minister of Finance or its Minister of Development. The Group meets once a year during the Annual Meetings of the World Bank. These Governors delegate their powers to Executive Directors, directly appointed in the case of the five largest shareholders (France, Germany, Japan, United Kingdom and United States), or to a representative, for the nineteen other Executive Directors (the Board has 24 Executive Directors), with one constituency grouping several countries (the appointment is then done through elections, every two years). The IBRD, IDA and IFC have the same Board of Directors and Chairman.
Members of the Board of Directors of MIGA are elected through a separate procedure.
II. Mandate and objectives of the World Bank (IBRD and IDA)
The fight against poverty is the core mandate of the World Bank, broken down into 3 objectives, as per the terms of Article 1 of its Articles of Agreement:
to assist in the reconstruction and development of Member States;
to promote private foreign investment by means of guarantees or participations in loans and other investments made by private investors;
to promote the long-range balanced growth of international trade and the maintenance of equilibrium in balances of payments by encouraging international investment.
Over time, this mandate has been extended to include the promotion of governance and the fight against corruption, the promotion of sustainable development, the fight against climate change in particular.
Moreover, the Bank is also actively involved in the Millennium Development Goals:
III. Relationships with France
France, a member of the IBRD since 27 December 1945 (France is also the first beneficiary of a loan from the institution), is the 4th largest shareholder of the World Bank, at par with the United Kingdom.
As at 31 December 2008, its subscription to the IBRD, in number of shares, was 4.41% and in voting rights 4.30%. It has contributed $520.4m to the capital of the IBRD.
At the IDA (of which it is a member since 30 December 1960), it had as at 31 December 2008 6.5% of shares (subscription to IDA-15), and 4.09% of voting rights.
It has a Standing Director, representing the Governor who is the Minister for the Economy, Industry and Employment, as well as a Deputy. A unique feature of the Board: the French Director is also the IMF Director (but he then has a different Deputy).
Updated on 16.11.10