Five Institutions, One Group
The World Bank Group consists of five organizations:
- The International Bank for Reconstruction and Development (IBRD)
The International Bank for Reconstruction and Development (IBRD) lends to governments of middle-income and creditworthy low-income countries.
- The International Development Association
The International Development Association (IDA) provides interest-free loans — called credits — and grants to governments of the poorest countries.
- Together, IBRD and IDA make up the World Bank.
- The International Finance Corporation (IFC)
The International Finance Corporation (IFC) is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments.
- The Multilateral Investment Guarantee Agency
The Multilateral Investment Guarantee Agency (MIGA) was created in 1988 to promote foreign direct investment into developing countries to support economic growth, reduce poverty, and improve people’s lives. MIGA fulfills this mandate by offering political risk insurance (guarantees) to investors and lenders.
- International Centre for Settlement of Investment Disputes
The International Centre for Settlement of Investment Disputes (ICSID) provides international facilities for conciliation and arbitration of investment disputes.
The World Bank primarily provides loans to developing countries for capital programmes and aims to reduce poverty. However, despite with the objectives with which World bank was established along with IMF (collectively called as Bretton Wood Twins), the bank has been marred by several challenges
ISSUES THAT WORLD BANK CURRENTLY FACES
LOW REPRESENTATION OF GLOBAL SOUTH: One of the strongest criticisms of the institution has been about the way they are governed. World Bank represent 186 countries, each is run by just a small number of economically powerful countries. These countries choose the leadership and senior management, and so their interests dominate, despite the fact that the main borrowers from the World Bank are developing countries.
- Further another criticism of the World Bank relates to the political power imbalances in their governance structures where, as a result of voting shares being based principally on the size and ‘openness’ of countries’ economies, poorer countries (the major loan takers) are Structurally Underrepresented in decision-making processes.
UNDERMINING DEMOCRATIC OWNERSHIP: The issue of political power imbalances is exacerbated by another long-standing critique of the Bank i.e. that the economic policy conditions it promotes – often attached or ‘recommended’ as part of loans, projects, technical assistance, or financial surveillance – undermine the sovereignty of borrower nations, limiting their ability to make policy decisions and eroding their ownership of national development strategies.
WEAK ABILITY TO LEARN FROM PAST MISTAKES: The World Bank, the Independent Evaluation Group (IEG) was created in 2006, integrating several individual accountability mechanisms, and is charged with evaluating the activities of the entire World Bank Group and determining what works, what doesn’t and why. However, the Bank has been criticised for failing to implement the recommendations of the IEG.
HUMAN RIGHTS: Another stream of longstanding critiques has focused on the content of the policies, programmes and projects that the bank promote and enforce and how they have undermined a broad spectrum of human rights, with the Bank even being labelled a “human rights-free zone”. Most typically, these are fiscal consolidation measures (or austerity), and include reducing the public wage bill, introducing or increasing VAT and other indirect regressive taxes in particular, labour flexibilization, rationalising (cutting) and privatising social services, and targeting social protections and subsidies, while maintaining low levels of inflation, corporate taxation rates and trade tariffs.
- World Bank was also silent when its developing-country clients’ access to life-saving medications was being restricted. Developing countries were forced to sign the onerous Trade-Related Aspects of Intellectual Property Rights agreement at the World Trade Organization. For example AIDS crisis was ravaging Sub-Saharan Africa and also under patent regime sanctions were imposed on several developing countries, from Chile to India, accused of failing to strengthen patent protections sufficiently
ENVIRONMENT: The approach to development and economic policy, as well as their financing decisions, have generated long- standing and ever-more pressing criticisms related to the protection of the environment and staving off climate change.
- The growth-based approach to poverty reduction that the World Bank promote has immense environmental consequences, as is evidenced by the deepening climate crisis.
- Further another major concern is the planned mega corridor in developing regions are predicated on building a new generation of carbon-intensive infrastructure.
Following are the Reforms needed to ensure effectiveness of the World bank:
Address the uptick in extreme poverty due to COVID and conflict: The World Bank should devote as much as possible of its lending and advisory might to social protection and tackling the immediate shortfalls in food, energy, and raw materials that are driving higher inflation and exacerbating poverty. At the same time, it should work to support longer-term recovery and resilience, including through data, infrastructure, governance, and economic reform.
Turning the tide on climate-related and other thematic issues: The reform should also make the institution fit to respond to global climate emergency, both on facing the impacts of climate change and on decarbonising the global economy.
Fostering coordination within and outside the Bank: The Bank puts forward its ambition to
“Strengthen the One WB approach”, while developing “new regional approaches”, and also “broadening its country-based model”. These suggestions interestingly point to the need for the Bank to look for more coherence in its own institutional set up while also strengthening its impact at regional and country level.
- Use independent organisations to help governments in a more flexible way: Many governments need help to define and structure the kind of support they need and to engage and negotiate with the international community. This is often better done by independent organisations who have the experience and the flexibility to play this role.
Harness strengths from different specialist areas: The Bank needs to demonstrate it can connect and harness different professional groups in addressing problems, identifying bottlenecks and advancing innovative solutions. Its vertical professional strength now needs to be enhanced with horizontal engagement.
Embrace Unpredictability: As the fragility in the world is unpredictable ex. Covid or War, therefore the Bank needs to ensure that its contracts generate this flexibility and responsiveness, and that its monitoring, reporting and evaluation frameworks support – and do not penalise – adaptive working.
