What is the World Bank? Definition and Meaning
The World Bank was established after World War II in 1944. It is headquartered in Washington, D.C. and has over 10,000 employees in around 120 offices across the world.
It is a financial institution run by the United Nations that provides loans to underdeveloped and emerging economies for capital programs.
It is a member of the United Nations Development Group and part of the World Bank Group.
The World Bank was formed along with three other institutions, including the International Monetary Fund (IMF), at the 1944 Bretton Woods Conference.
The World Bank believes we can end extreme poverty and boost shared prosperity by 2030. (Image: World Bank)
Initially aimed at post-war reconstruction
After the Second World War, until the early 1960s, the Bank’s main focus was on the reconstruction of Europe and Japan.
For example, it helped rebuild Japan’s automotive company Toyota, as well as financing the reconstruction of France’s railway system.
According to ft.com/lexicon, the World Bank is an:
“International organisation, created under the Bretton Woods agreement, that focuses on providing financial aid to developing countries, normally targeting public works and other essential capital or social projects.”
In the 1960s its focus changed
When that reconstruction job was over in the 1960s, it went into financing development in the emerging and poorer economies.
Examples of some goals that the World Bank is pursuing include:
– eradicating extreme poverty and hunger globally,
– making sure every child worldwide receives at least a primary education,
– promoting gender equality,
– reducing childhood mortality,
– improving maternal health,
– combating HIV/AIDS, malaria and other diseases,
– ensuring environmental sustainability, and
– developing a global partnership for development.
Jim Yong Kim MD, PhD, a Korean American physician and anthropologist, has served as the 12th President of the World Bank since July 1, 2012.
Two main goals
The World Bank Group has set itself two main targets, which it hopes to achieve by 2030:
Poverty – eradicating extreme poverty by reducing the proportion of people living on less than $1.25 per day to below 3%.
Shared Prosperity – which will be achieved by fostering income growth of the poorest 40% of every nation.
According to the World Bank, global poverty has significantly declined over the past thirty years. In comparison to 1990, the percentage of people living in extreme poverty in 2013 was less than half. Based on this trend, it truly believes the eradication of extreme poverty is within our reach.
The President of the Bank is currently Jim Yong Kim. He chairs the meetings of the Boards of Directors as well as those for the top tier management of the Bank.
The World Bank Group is made up of five international organizations:
– the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which together form the World Bank,
– the International Finance Corporation (IFC),
– the Multilateral Investment Guarantee Agency (MIGA), and
– the International Centre for Settlement of Investment Disputes (ICSID).
The difference between the World Bank and the IMF
If you ask most lay people what the two organizations are, more likely they will say they are the same. Both are Washington based and seem to be present in the same conferences globally.
But the two are quite different:
The IMF – its main function is to protect the world’s financial system, as well as making sure exchange rates are stable. For example, if an economy is in trouble, for example, its currency is collapsing, it will seek help from the IMF, and not the World Bank.
The World Bank – its primary aim is to reduce global poverty. It concentrates on development, improving nations’ health services, schools and infrastructure. For example, if a nation wants to build a huge dam to secure water supplies for agriculture, and produce electricity, but does not have enough money for the project, it will ask the Bank for help.
The World Bank works closely with the Paris Club, also known as the Club de Paris, an informal group of representatives from twenty-two creditor nations that try to find coordinated and sustainable solutions to debtor nations’ repayment problems. It is often present – just as an observer – at Paris Club meetings between debtors and creditors.
Video – What is the World Bank?
In this video, Luxembourgian economist Jean-François Rischard, who was the World Bank’s vice president for Europe from 1998 to 2005, talks about its history.