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THEWORLD BANK At the Bretton Woods Conference in 1944 it was decided to establish a new monetary order that would expand international trade, promote international capital flows and contribute to monetary stability. The !" and the World Ban# were borne out of this Conference of the end of World War . The World Ban# was established to help the restoration of economies disrupted by War by facilitatin$ the in%estment of capital for producti%e purposes and to promote the lon$&ran$e balanced $rowth of international trade. 'n the other hand, the !" is primarily a super%isory institution for coordinatin$ the efforts of member countries to achie%e $reater cooperation in the formulation of economic policies. t helps to promote exchan$e stability and orderly exchan$e relations amon$ its member countries. The World Ban# $roup is a multinational financial institution established at the end of World War (1944) to help pro%ide lon$&term capital for the reconstruction and de%elopment of member countries. The $roup is important to multinational corporations because it pro%ides much of the plannin$ and financin$ for economic de%elopment pro*ects in%ol%in$ billions of dollars for which pri%ate businesses can act as contractors and suppliers of $oods and en$ineerin$ related ser%ices. THE PURPOSE FOR THE SETTING UP OF THE BANK ARE To a s s i s t i n t h e reconstruction a n d d e % e l o p m e n t o f territories of members by facilitatin$ the in%estment of capital for producti%e purposes, includin$ the restoration ofeconomies destroyed or disrupted by war, the recon%ersion of producti%e facilities to peacetime needs and encoura$ement of the de%elopment or producti%e facilities and resources in less de%eloped countries. To p r o m o t e p r i % a t e f o r e i $ n i n % e s t m e n t by means of $uarantees or participation in loans and other in%estments made by pri%ate in%estors+ and when pri%ate capital is not a%ailable on reasonable terms, to supplement pri%ate in%estment by pro%idin$, on suitable conditions, finance for producti%e purposes out of its own capital, funds raised by it and its other resources. To promote the lon$&ran$e balanced $rowth of international trade and the maintenance of e,uilibrium in balance of payments by encoura$in$ international in%estment for the de%elopment of the producti%e resource of members, thereby assistin$ in raisin$ producti%ity, the standard of li%in$ and condition of labour in their territories. To arran$e the loans made or $uaranteed by it in relation to international loans throu$h other channels so that the more useful and ur$ent pro*ects, lar$e and small ali#e,can be dealt with first. To conduct its operations with due re$ard to the effect of international in%estment on business conditions in the territories of members and, in the immediate post&war years, to assist in brin$in$ about a smooth transition from a wartime to a peacetime economy.
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The World Ban# is the nternational Ban# for -econstruction and .e%elopment ( B-.) and the nternational .e%elopment Association ( .A). The B-. has two affiliates, the nternational "inance Corporation ( "C) and the !ultilateral n%estment /uarantee A$ency (! /A). The Ban#, the "C and the ! /A are sometimes referred to as the 0World Ban# /roup

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International Bank for Reconstr ction an! De"elo#$ent

The B-. was set up in 1941 alon$ with the !" to aid in rebuildin$ the world economy. t was owned by the $o%ernments of 111 countries and its capital is subscribed by those $o%ernments+ it pro%ides funds to borrowers by borrowin$ funds in the world capital mar#ets, from the proceeds of loan repayments as well as retained earnin$s. At its fundin$, the ban#2s ma*or ob*ecti%e was to ser%e as an international financin$ facility to function in reconstruction and de%elopment. With !arshall 3lan pro%idin$ the impetus for 4uropean reconstruction, the Ban# was able to turn its efforts towards the de%elopin$ countries.

/enerally, the B-. lends money to a $o%ernment for the purpose of de%elopin$ that country2s economic infrastructure such as roads and power $eneratin$ facilities. "unds are directed towards de%elopin$ countries at more ad%anced sta$es of economic and social $rowth. Also, funds are lent only to members of the !", usually when pri%ate capital is una%ailable at reasonable terms. 5oans $enerally ha%e a $race period of fi%e years and are repayable o%er a period of fifteen or fewer years. The pro*ects recei%in$ B-. assistance usually re,uire importin$ hea%y industrial e,uipment and this pro%ides an export mar#et ror many 67 $oods. /enerally ban# loans are made to co%er only import needs in forei$n con%ertible currencies and must be repaid in those currencies at lon$&term rates. The $o%ernment assisted in formulatin$ and implementin$ an effecti%e and comprehensi%e strate$y for the de%elopment of new industrial free 8ones and the expansion of existin$ ones+ reducin$ unemployment, increasin$ forei$n&exchan$e earnin$s and stren$thenin$ bac#ward lin#a$es with the domestic economy+ alle%iatin$ scarcity in term financin$+ and impro%in$ the capacity of institutions in%ol%ed in financin$, re$ulatin$ and promotin$ free 8ones. The World Ban# lays special operational emphasis on en%ironmental and women2s issues. /i%en that the Ban#2s primary mission is to support the ,uality of life of people in de%elopin$ member countries, it is easy to see why en%ironmental and women2s issues are recei%in$ increasin$ attention. 'n the en%ironmental side, it is the Ban#2s concern that its de%elopment funds are used by the recipientcountries in an en%ironmentally responsible way. nternal concerns,as well as pressure by external $roups, are responsible for si$nificant research and pro*ects relatin$ to the en%ironment,. The women2s issues cate$ory, specifically #nown as Women n .e%elopment (W .) is part of a lar$er emphasis on human resources. The importance of impro%in$ human capital and impro%in$ the welfare of families is percei%ed as a #ey aspect of de%elopment. The W . initiati%e was established in 1999 and it is oriented to increasin$ women2s producti%ity and income. Ban# lendin$ for women2s issues is most pronounced in education, population, health and nutrition and a$riculture
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INTERNATIONAL DE%ELOP&ENT ASSO'IATION The .A was formed in 19:; as a part of the World Ban# /roup to pro%ide financial support to 5.Cs on a more liberal basis than could be offered by the B-.. The .A has 1<= member countries, althou$h all members of the B-. are free to *oin the .A. .A2s funds come from subscriptions from its de%eloped members and from the earnin$s of the B-.. Credit terms usually are extended to 4; to 1; years with no interest. -epayment be$ins after a ten&year $race period and can be paid in the local currency, as lon$ as it is con%ertible. 5oans are made only to the poorest countries in the world, those with an annual per capita $ross national product of >49; or less. !ore than 4; countries are eli$ible for .A financin$. An example of an .A pro*ect is a >9.< million loan to Tan8ania appro%ed in 1999 to implement the first sta$e in the lon$er&term process of rehabilitatin$ the country2s a$ricultural research system.Co financin$ is expected from se%eral countries as well as other multilateral lendin$ institutions. Althou$h the .A2s resources are separate from the B-., it has no separate staff. 5oans are made for similar pro*ects as those carried out by B-., but at easier and more fa%ourable credit terms. As mentioned earlier, World Ban#? .A assistance historically has been for de%elopin$ infrastructure. The present emphasis seems to be on helpin$ the masses of poor people in the de%elopin$ countries become more producti%e and ta#e an acti%e part in the de%elopment process. /reater emphasis is bein$ placed on impro%in$ urban li%in$ conditions and increasin$ producti%ity of small industries. INTERNATIONAL FINAN'E 'ORPORATION

The "C was established in 191:. There are 1<< countries that are members of the "C and it is le$ally and financially separate from the B-., althou$h B-. pro%ides some administrati%e and other ser%ices to the "C. The "C2s main responsibilities are@& (i) (ii) To pro%ide ris# capital in the form of e,uity and lon$&term loans for producti%e pri%ate enterprises in association with pri%ate in%estors and mana$ement. To encoura$e the de%elopment of local capital mar#ets by carryin$ out standby and underwritin$ arran$ements.

(iii) To stimulate the international flow of capital by pro%idin$ financial and technical assistance to pri%ately controlled finance companies. 5oans are made to pri%ate firms in the de%elopin$ member countries and are usually for a period of se%en to twel%e years.

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The #ey feature of the "C is that its loans are made to pri%ate enterprises and its in%estments are made in con*unction with pri%ate business. n addition to funds contributed by "C, funds are also contributed to the same pro*ects by local and forei$n investors. "C in%estments are for the establishment ne1x enterprises as well as for the expansion and moderni8ation of existin$ ones. They co%er a wide ran$e of pro*ects such as steel, textile production, minin$, manufacturin$, machinery production, food processin$, tourism and local de%elopment finance companies. 7ome pro*ects are locally owned, whereas others are *oint %entures between in%estors in de%elopin$ and de%eloped countries. n a few cases, *oint %entures are formed between in%estors of two or more de%elopin$ countries. The "C has also been instrumental in helpin$ to de%elop emer$in$ capital mar#et. THE &ULTILATERAL IN%EST&ENT GUARANTEE AGEN'( )&IGA* The ! /A was established in 1999 to encoura$e e,uity in%estment and other direct in%estment flows to de%elopin$ countries by offerin$ in%estors a %ariety of different ser%ices. t offers $uarantees a$ainst noncommercial ris#s+ ad%ises de%elopin$ member $o%ernments on the desi$n and implementation of policies, pro$rammers and procedures related to forei$n in%estments+ and sponsors a dialo$ue between the international business community and host $o%ernments on in%estment issues. The World Ban# is the world2s lar$est source of de%elopment assistance, pro%idin$ nearly ><; billion in loans, annually, to its clientcountries. The Ban# uses its financial resources, its hi$hly trained staff and its extensi%e #nowled$e base to indi%idually help each de%elopin$ country onto a path of stable, sustainable and e,uitable $rowth. The main focus is on helpin$ the poorest people and the poorest countries hut for all its clients, the Ban# emphasises the need for@ in%estin$ in people, particularly throu$h basic health and education+ protectin$ the en%ironment+ supportin$ and encoura$in$ pri%ate business de%elopment+ stren$thenin$ the ability of the $o%ernments to deli%er ,uality ser%ices efficiently and transparently+ promotin$ reforms to create a stable macroeconomic en%ironment conduci%e to in%estment and lon$&term plannin$+ focusin$ on social de%elopment, inclusion, $o%ernance and institution buildin$ as #ey elements of po%erty reduction. The Ban# is also helpin$ countries to stren$then and sustain the fundamental conditions that help to attract and retain pri%ate in%estment. With Ban# support& both lendin$ and ad%ice& $o%ernments are reformin$ their o%erall economies and stren$thenin$ ban#in$ systems. They are in%estin$ in human resources, infrastructure and en%ironmental protection which enhance the attracti%eness and producti%ity of pri%ate in%estment. Throu$h World Ban# $uarantees, ! CA2s political ris# insurance and in partnership with "C2s e,uity in%estments, in%estors are minimi8in$ their ris#s and findin$ the comfort to in%est in de%elopin$ countries and countries under$oin$ transition to mar#et& based economie FUNDING OF WORLD BANK The World Ban# raises money for its de%elopment pro$rammes by tappin$ the world2s capital mar#ets and in the case of the .A, throu$h contributions from wealthier member $o%ernments. B-., which accounts for about three&fourths of the Ban#2s annual lendin$, raises almost all its money in financial mar#ets. 'ne of the world2s most prudent and conser%ati%ely mana$ed financial institutions, the B-. sells AAA&rated bonds and other debt securities to pension funds, insurance companies, corporations, other ban#s and indi%iduals around the $lobe. B-. char$es interest from its borrowers at rates, which reflect its cost of borrowin$. 5oans must be repaid in 11 to A; years+ there is a three to fi%e year $race period before repayment of principal be$ins.
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.A helps to promote $rowth and reduce po%erty in the same ways as does the B-. but usin$ interest free loans (which are #nown as .A 0creditsB), technical assistance and policy ad%ice. .A credits account for about one&fourth of all Ban# lendin$s. Borrowers pay a fee of less than 1 per cent of the loan to co%er administrati%e costs. -epayment is re,uired in <1 to 4; years with a 1; years $race period. Cearly 4; countries contribute to .A2s fundin$, which is replenished e%ery three years. .A2s fundin$ is mana$ed in the same prudent, conser%ati%e and cautious way as is the B-.2s. 5i#e the B-., there has ne%er been default on an .A credit.

&E&BERS OF WORLD BANK The World Ban# is owned by more than 19; member countries whose %iews and interests are represented by a board of $o%ernors and a Washin$ton based board of directors. !ember countries are shareholders who carry ultimate decision ma#in$ power in the World Ban#. 4ach member nation appoints a $o%ernor and an alternate $o%ernor to carry out these responsibilities. The $o%ernors, who are usually officials such as ministers of finance or plannin$, meet at the Ban#2s annual meetin$s each fall. They decide on #ey Ban# policy issues, admit or suspend country members, decide on chan$es in the authorised capital stoc#, determine the distribution of the B-.2s net income and endorse financial statements and bud$ets. INTERNATIONAL &ONETAR( FUND The nternational !onetary "und ( !") came into official existence on .ecember A=, 1941, when A9 countries si$ned its Articles of A$reement (its Charter) a$reed at a conference held in Bretton Woods, Cew Dampshire, 67A, from Euly 1&AA, 1944. The !" commenced financial operations on !arch 1, 194=. ts current membership is 19A countries. ts Total Fuotas are 7.- A1A billion (almost 67><;; billion), followin$ a 41 per cent ,uota increase effecti%e from Eanuary AA,1999. 7taff@ approximately A,=;; from 11; countries Accountin$ 6 n i t @ 7pecial . r a w i n $ - i $ h t ( 7.-) As of Au$ust A<, 1999, 7.- e,ualed 67 >1.<=;A9;. !" is a cooperati%e institution that 19A countries ha%e %oluntarily *oined because they see the ad%anta$e of consultin$ with one another on this forum to maintain a stable system of buyin$ and sellin$ their currencies so that payments in forei$n currency can ta#e place between countries smoothly and without delay. ts policies and acti%ities are $uided by its Charter #nown as the Articles of A$reement. !" lends money to members ha%in$ trouble meetin$ financial obli$ations to other members, but only on the condition that they underta#e economic reforms to eliminate these difficulties for their own $ood and that of the entire membership. Contrary to widespread perception, the !" has no effecti%e authority o%er the domestic economic policies of its members. What authority the !" does possess is confined to re,uirin$ the member to disclose information on its monetary and fiscal policies and to a%oid, as far as possible, puttin$ restrictions on exchan$e of domestic for forei$n currency and on ma#in$ payments to other members. There are se%eral ma*or accomplishments to the credit of the nternational !onetary 7ystem. "or example, it
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7ustained a rapidly increasin$ %olume of trade and in%estment+ .isplayed flexibility commerce in adaptin$ to chan$es in international

3ro%ed to be efficient (e%en when there were decreasin$ percenta$es of reser%es to trade)+ 3ro%ed to be hardy (it sur%i%ed a number of pre&19=1 crises, speculati%e and otherwise, and the down&and&up swin$s of se%eral business cycles)+ Allowed for a $rowin$ de$ree or international cooperation+ 4stablished a capacity to accommodate reforms and impro%ements.

To an extent, the fund ser%ed as an international central ban# to help countries durin$ periods of temporary balance of payments difficulties by protectin$ their rates of exchan$e. Because of that, countries did not need to resort to exchan$e controls and other barriers to restrict world trade. Ori+ins of I&F The need for an or$anisation li#e the !" became e%ident durin$ the $reat depression that ra%a$ed the world economy in the 19<;s. A widespread lac# of confidence in paper money led to a spurt in the demand for $old and se%ere de%aluation in the national currencies. The relation between money and the %alue of $oods became confused as did the relation between the %alue of one national currency and another. n the 194;s, Darry .exter (67) and Eohn !aynard Geynes (6G) put forward proposals for a system that would encoura$e the unrestricted con%ersion of one currency into another, establish a clear and une,ui%ocal %alue for each currency and eliminate restrictions and practices such as competiti%e de%aluations. The system re,uired cooperation on a pre%iously un attempted scale by all nations in establishin$ an. inno%ati%e monetary system and an international institution to monitor it. After much ne$otiations in the difficult war time conditions, the international community accepted the system and an or$anisation was formed to super%ise it. The !" be$an operations in Washin$ton .C in !ay 194:. t then had <9 members. The !"2s membership now is 19A. &e$,ers an! a!$inistration 'n *oinin$ the !", each member country contributes a certain sum of money called a H,uota subscription2, as a sort of credit union deposit. They form a pool of money that the !" can draw from to lend to members in times of financial difficulty. They form the basis of determinin$ the 7pecial .rawin$ -i$hts (7.-).
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They determine the %otin$ power of the member.

Stat tor- # r#oses The purposes of the nternational !onetary "und are@ To promote international monetary cooperation throu$h a permanent institution that pro%ides the machinery for consultation and collaboration on international monetary problems. To facilitate the expansion and balanced $rowth of international trade and to contribute, thereby, to the promotion and maintenance of hi$h le%els of employment and real income and to the de%elopment of the producti%e resources of all members as primary ob*ecti%es of economic policy. To promote exchan$e stability, to maintain orderly exchan$e arran$ements amon$ members and to a%oid competiti%e exchan$e depreciation. To assist in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of forei$n exchan$e restrictions which hamper the $rowth of world trade To $i%e confidence to members by ma#in$ the $eneral resources of the "und temporarily a%ailable to them under ade,uate safe$uards, thus pro%idin$ them with opportunity to correct malad*ustment in their balance of payments without resortin$ to measures destructi%e to national or international prosperity. n accordance with the abo%e, to shorten the duration and lessen the de$ree of dise,uilibrium in the international balances of payments of members.

Financial assistance The !" lends money only to member countries with balance of payments problems. A member country with a payments problem can immediately withdraw from the !" the A1 per cent of its ,uota. A member in $reater difficulty may re,uest for more money from the !3 and can borrow up to three times its ,uota pro%ided the member country underta#es to initiate a series of reforms and uses the borrowed money effecti%ely. The fre,uently used mechanisms by the !" to lend money are 1. 7tandby Arran$ements A. <. 4xtended Arran$ements 7tructural Ad*ustment !echanism (With low interest rates)

Re+ lar I&F facilities

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7tandby Arran$ements(7BA) are desi$ned to pro%ide short&term balance of payments assistance for deficits of a temporary or cyclical nature, such arran$ements are typically for 1A to 19 months. .rawin$s are phased on a ,uarterly basis, with their release made conditional meetin$ performance criteria and the completion of periodic pro$ramme re%iews. -epurchases are made <1?4 to 1 years after each purchase. 4xtended "und "acility (4"") is desi$ned to support medium&term pro$rammes that $enerally run for three years. The 4"" aims at o%ercomin$ balance of payments difficulties stemmin$ from macroeconomic and structural problems. 3erformance criteria are applied, similar to those in standby arran$ements and repurchases are made in 4J to 1; years.

'oncessional I&F facilitI 4nhanced 7tructural Ad*ustment "acility (47A") was established in 199= and enlar$ed and extended in 1994. .esi$ned for low&income member countries with protracted balance of payments problems, 47A" drawin$s are loans and not purchases of other members2 currencies. They are made in support of three year pro$rammes and carry an annual interest rate of ;.1 per cent, with a 11h year $race period and a 1; year maturity. Fuarterly benchmar#s and semi&annual performance criteria apply+ 9; low income countries are currently eli$ible to use the 47A".

SDRs As time passed, it became e%ident that the "und2s resources for pro%idin$ short&term accommodation to countries in monetary difficulties were not sufficient. To resol%e the situation, the "und, after much debate and lon$ deliberations, created new drawin$ ri$hts in19:9. 7pecial .rawin$ -i$hts (7.-s), sometimes called paper $old, are special account entries on the !" boo#s desi$ned to pro%ide additional li,uidity to support $rowin$ world commerce. Althou$h 7.-s are a form of money not con%ertible to $old, their $old %alue is $uaranteed, which helps to ensure their acceptability. nitially, 7.-s worth >9.1 billion were created. 3articipant nations may use 7.-s as a source of currency in a spot transaction, as a loan for clearin$ a financial obli$ation, as a security for a loan, as a 7wap a$ainst currency, or in a forward exchan$e operation. A nation with a balance of payments need may use its 7.-s to obtain usable currency from another nation desi$nated by the fund. A participant also may use 7.-s to ma#e payments to the "und, such as repurchases. The "und itself may transfer 7.-s to a participant for %arious purposes includin$ the transfer of 7.-s instead of currency to a member usin$ the "und2s resources. By pro%idin$ a mechanism for international monetary cooperation, wor#in$ towards reducin$ restrictions to trade and capital flows and helpin$ members with their short& term balance of payments difficulties, the !" ma#es a si$nificant and uni,ue contribution to human welfare and impro%ed li%in$ standards throu$hout the world.

Ser"ices Besides super%isin$ the international monetary system and pro%idin$ financial
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support to member countries, the !" assists its members by@ 3ro%idin$ technical assistance in certain areas of its competence. -unnin$ an education an institute in Washin$ton an offer in$rainin$ courses abroad. ssuin$ wide %ariety of publications containin$ %aluable information and statistics that are useful not only to the member countries but also to ban#s, research institutes, uni%ersity and the media

SU&&AR( 'f all the international financial or$anisations, the most familiar is the World Ban#, formally #nown as the nternational Ban# for -econstruction and .e%elopment ( B-.). The World Ban# has two affiliates that are le$ally and financially distinct entities, the nternational .e%elopment Association ( .A) and the nternational "inance Corporation ( "C). 4xhibit 1 pro%ides a comparison amon$ B-., .A and "C in terms of their ob*ecti%es, member countries, lendin$ terms, lendin$ ,ualifications as well as other details. All three or$anisations ha%e the same central $oals@ to promote economic and social pro$ress in poor or de%elopin$ countries by helpin$ raise standards of li%in$ and producti%ity to the point at which de%elopment becomes self&sustainin$. Toward this common ob*ecti%e, the World Ban#, .A and "C ha%e three interrelated functions and these are to lend funds, to pro%ide ad%ice and to ser%e as a catalyst in order to stimulate in%estment by others.

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