World Bank Groups and Its Function

World Bank Groups and Its Function – Part 2

Functions of World Banks:

The World Bank Group consists of five Global Organizations which provide loan to the less developed and developing countries.
The World Bank is the biggest Development Banking Organization of the world.
It also acts as the observer at United Nations Development Group (UNDG).
The World Bank provides loan according to three lending procedures i.e. loan from the own fund, loans from the borrowed capital and loans the Bank’s Guarantee.
India borrows from World Bank through the IDA and IBRD for several development initiatives in areas like infrastructure, poverty reduction, rural development etc.
Generally IDA provides fund for the projects in social sector in India.
IBRD provides loan for the infrastructure projects in India.
The World Bank has 30 founder members including India.
The IBRD (International Bank for Reconstruction and Development) and the 4 associates [International Development Association (IDA), International Finance Organization (IFO), Multilateral Investment Guarantee Agency (MIGA) and International Center for the Settlement of Invest Disputes (ICSID)] of the organization together are known as World Bank Group.
India is a member of IBRD, IDA, MIGA and IFO but not a member of ICSID.

IBRD-

It stands for International Bank for Reconstruction and Development.
It is the oldest of all the associates of World Bank Group and was established in the 1945.
It provides loan to the less developed and developing countries at low interest rate.
The loans are provided focusing various areas like irrigation, agriculture, healthcare, family welfare, urban development, dairy development etc.

IDA-

It stands for International Development Agency.
It is called the “Soft Window” of World Bank.
It was established in the year of 1960.
The IDA provides infrastructural assistance to its member countries.
The interest-free loans, which are known as Credits, are given by the IDA to develop the economic services in the poorest countries.
It offers a grace-period of 10 years and hold the maturity from 35 years to 40 years.
IBRD and IDA together are known as World Bank while all the organizations refer to the World Bank Group.

MIGA-

It stands for the Multilateral Investment Guarantee Agency.
It was established in the year of 1988.
It encourages direct foreign investment in a nation by giving security against investment in case of any loss caused by the political disturbances.
This security is given as the Political Risk Insurance.

IFC-

It stands for International Finance Corporation.
It is the “Private Arm” of World Bank.
The IFC was established in the year of 1956.
It provides loan to the Private Sector Organizations of the member countries with comparatively low commercial interest.
It provides advice for various private-public projects in a partnership with the Private Investors.
It invests only in case of special contribution to compliment the role as the FFI (Foreign Financial Investor) of the market investors.
It works to promote the private investment by both of the local and foreign investors.
It helps the Government to privatize weak public enterprises as Capital Market Investor.

ICSID-

It stands for International Center for Settlement of Investment Disputes.
In is functional body which solves the Investment disputes.
It solves the disputes related to the investment between the host countries ( where the investment is made) and foreign companies.
The decisions of the ICSID are bound on the involved parties.
It was established in 1966 under the “Convention on Settlement of Investment Disputes” between the States and the National of the other States.

Read : World bank groups & its functions - Part 1