WORLD BANK
What is the World Bank?
The World Bank is a global development institution that gives long-term loans, grants,
and advice to developing countries to help them:
• Reduce poverty
• Build infrastructure (like roads, schools, electricity, water supply)
• Promote economic development
Unlike the International Monetary Fund (IMF) which gives emergency financial help,
the World Bank gives money for long-term development projects.
Where is it located?
• Headquarters: Washington, D.C., United States
• Created in 1944, at the Bretton Woods Conference (along with the IMF)
• Began operations in 1946
Official Name
The World Bank is not a single bank, but a group of five institutions.
Together, they are called the World Bank Group (WBG).
Five Institutions of the World Bank Group
Institution Full Name Purpose
International Bank for Gives loans to middle-income and
1. IBRD
Reconstruction and Development creditworthy poor countries
International Development Gives interest-free loans and grants to
2. IDA
Association the poorest countries
Helps the private sector in developing
3. IFC International Finance Corporation
countries
Multilateral Investment Guarantee Provides insurance to investors against
4. MIGA
Agency political risks
International Centre for Settlement Settles investment disputes between
5. ICSID
of Investment Disputes governments and foreign companies
Out of these, the IBRD and IDA are together called the "World Bank" in the narrow sense.
HISTORY OF THE WORLD BANK
Before the World Bank: The Need for Global Financial Help
• During the 1930s, the Great Depression caused huge global economic damage.
• Then came World War II (1939–1945), which destroyed economies and
infrastructure (like roads, bridges, railways, factories) in Europe, Asia, and
elsewhere.
• The world realized it needed a new financial system and institutions to:
o Rebuild war-torn countries
o Reduce poverty
o Ensure long-term peace through economic stability
1944 – The Bretton Woods Conference
• In July 1944, 44 countries met in Bretton Woods, a town in New Hampshire, USA.
• They agreed to create two major institutions:
1. International Monetary Fund (IMF) – for short-term financial help
2. International Bank for Reconstruction and Development (IBRD) – for
long-term reconstruction and development
→ This IBRD became the first part of what we now call the World Bank.
India was one of the founding members of both institutions (in 1944, while still under
British rule).
1946 – The World Bank Starts Operating
• The World Bank began its official work in June 1946.
• Its first job: help rebuild Europe after World War II.
First Loan:
• Given to France in 1947:
$250 million USD to rebuild transport, infrastructure, and economy.
1950s–1960s: Focus on Infrastructure in Developing Countries
• Once Europe began to recover (especially with help from the Marshall Plan), the
World Bank turned its focus to developing countries (Asia, Africa, Latin America).
• It began funding:
o Dams
o Power plants
o Highways
o Irrigation systems
o Schools and hospitals
It supported the idea that infrastructure leads to development.
1960 – Creation of IDA (International Development Association)
• Poor countries could not afford interest-based loans.
• So, in 1960, the World Bank created IDA to give:
o Interest-free loans
o Grants
o With longer repayment periods
This allowed low-income countries to benefit from development finance.
1980s – Structural Adjustment Loans and Controversy
• In the 1980s, many countries (especially in Latin America and Africa) were in debt
crisis.
• The World Bank started giving Structural Adjustment Loans.
o These loans came with conditions like:
▪ Cutting subsidies
▪ Privatizing government services
▪ Opening up markets to trade
• These reforms were controversial because:
o They often caused social hardship (unemployment, price rise)
o Critics said they were too focused on free markets, not on people’s needs
1990s – Environmental and Social Focus
• The World Bank was criticized for funding large projects (like dams and mines) that
caused environmental harm and displaced people.
• In response, it started:
o Including environmental and social safeguards
o Funding education, health, and poverty reduction
o Creating consultation systems with local communities
2000s – Millennium Development Goals (MDGs)
• The World Bank became a major supporter of the MDGs (Millennium Development
Goals) set by the United Nations (UN).
• It focused on:
o Ending poverty
o Universal primary education
o Health care for women and children
o Clean water and sanitation
It also promoted public-private partnerships and technology-driven development.
2010s – Crisis Response and Global Leadership
• The World Bank responded to major global events:
o Global Financial Crisis (2008) – helped countries manage the downturn
o Climate Change – began funding green energy, forests, disaster preparedness
o Ebola and Zika outbreaks – supported health systems
o Refugee crises – helped refugee-hosting countries with economic aid
It also worked on inclusive growth, women’s empowerment, and digitization in poor
countries.
2020s – COVID-19 Pandemic and Beyond
• During the COVID-19 crisis, the World Bank:
o Gave emergency loans to over 100 countries
o Helped countries buy vaccines, strengthen hospitals, and support poor
families
o Focused on green recovery, resilient economies, and digital access
In 2023, Ajay Banga (of Indian origin) became the President of the World Bank.
He emphasized:
• Global partnerships
• Tackling climate change
• Support for debt-ridden and poor countries
• Inclusive digital growth
Key Functions of the World Bank
1. Funding Projects
• Funds infrastructure projects like roads, dams, electricity, water, healthcare,
schools, etc.
• Focuses on long-term growth and poverty reduction
2. Capacity Building
• Helps governments improve administration, tax collection, budgeting, and
governance
3. Policy Advice
• Gives expert guidance on economic policies, laws, and reforms
4. Technical Assistance
• Provides training, technology, and expert staff to developing countries
Who Owns the World Bank?
• Owned by its 189 member countries (as of 2025)
• Every country contributes money called capital subscriptions
• Each country has voting power based on how much money it contributes
Top shareholders:
1. United States
2. Japan
3. China
4. Germany
5. United Kingdom
6. India (also an important member with a high voting share)
World Bank Leadership
• President of the World Bank is traditionally from the United States
• Elected by the Board of Executive Directors
• Current President (as of 2025): Ajay Banga (former Mastercard CEO, Indian-
origin)
How Does the World Bank Work?
➤ For IBRD (International Bank for Reconstruction and Development):
• Raises money by issuing bonds in global markets
• Lends money to middle-income and stable low-income countries at low interest
rates
➤ For IDA (International Development Association):
• Funded by donations from rich countries
• Gives zero-interest loans or grants to the poorest countries
World Bank vs IMF – Key Differences
Feature World Bank IMF
Purpose Long-term development Financial stability and crisis help
Focus Poverty reduction, infrastructure Balance of payments, currency stability
Helps Developing countries All members, mainly in crisis
Type of support Loans for projects Emergency loans
Created in 1944 (Bretton Woods) 1944 (Bretton Woods)
HQ Washington, D.C. Washington, D.C.
India's Relationship with the World Bank
• India is a founding member (1944)
• One of the largest borrowers historically - $39.3bn to the WB at the end of 2023
• Major projects supported:
o Rural roads (Pradhan Mantri Gram Sadak Yojana)
o Swachh Bharat Mission
o Electricity reforms
o Water supply projects
o COVID-19 response loans
India has also contributed to IDA and plays a key role in policy shaping.
Criticisms of the World Bank
1. Too much control by rich countries (especially the USA)
2. Environmental damage from some large projects
3. Debt burden on poor countries
4. Sometimes funds don’t reach poor people properly
Key Facts for Quick Revision
Item Details
Founded 1944 (Bretton Woods Conference)
Started Work 1946
HQ Washington, D.C., USA
Total Members 189
President (2025) Ajay Banga
Main Institutions IBRD and IDA
Focus Long-term development, poverty reduction
Key Partner of India Yes, since 1944
