World Bank Group

World Bank Group (WBG) is one of the most remarkable financial institutions globally. Since the day it is established, it has been playing a crucial role in poverty alleviation and sustainable development across the world. This article aiming to give you the detailed information about the World Bank Group (WBG), its objectives, functions, governance structure, and reforms needed in the same.

About World Bank

• WBG is a product of Bretton Woods Agreement, which come into formal existence on 27 December 1945.
• Headquarter:
  • Washington D.C .
• Chairperson:
  • Ajay Banga
• It provides the financial and technical assistance to the developing economies worldwide.

What is World Bank Group (WBG)?

• It refers to the IBRD and IDA, which share the same leadership and the staff.
• The term “World Bank Group” (WBG) denotes a collection of five distinct but complementary organizations too.
• The organizations which are part of the World Bank Group (WBG) include:
  • International Bank for Reconstruction and Development (IBRD)
  • International Development Association (IDA)
  • International Finance Corporation (IFC)
  • Multilateral Investment Guarantee Agency (MIGA)
  • International Centre for Settlement of Investment Disputes (ICSID)

Each of the institutions has been dealt in details in the sections below.

Goals of World Bank Group (WBG)

Basically WBG has set of two goals for the world to be achieved by the year 2030 which are as follows:

•  Eradicate extreme poverty :
  • By reducing the proportion of people living on less than $1.90 a day to no more than 3%.
• Promote shared prosperity:
  • By encouraging the income growth of the bottom 40% of the population in each country.

India and World Bank

• India was one of the 44 original signatories to the agreements arrived at Bretton Woods that established the International Monetary Fund (IMF) and International Bank for Reconstruction and Development (IBRD).
• India was also a founding member of the International Finance Corporation (IFC) in 1956 and the International Development Association (IDA) in 1960.
• Later, it became a member of the MIGA in January 1994.
• India is not a member of ICSID as it finds the ICSID Convention not fair, and the convention’s rules for arbitration lean towards the developed countries.
• Currently India is classified as a “blend” country, meaning it is transitioning from lower-middle-income to middle-income status, and is eligible for lending from both IDA and IBRD.

Read our detailed article on the International Monetary Fund (IMF)

Important Reports Published by World Bank

Some important reports published by the World Bank Group (WBG) institutions are discussed below:

World Development Report

• World Development Report is an annual report published by the International Bank for Reconstruction and Development (IBRD) since 1978.
• Each WDR provides an in-depth analysis of a specific aspect of economic development.

Ease of Doing Business (EoDB)

• Ease of Doing Business (EoDB) report which was launched in 2003 to evaluate objective measures of business regulations and their enforcement across 190 economies, focusing on ten parameters that impact a business throughout its lifecycle.
• 10 different parameters namely:
  • Starting a Business
  • Dealing with Construction permits
  • Electricity availability
  • Property registration
  • Credit availability
  • Protecting minority Investors
  • Paying Taxes
  • Trading across border
  • Contracts enforcement
  • Resolving Insolvency

Need for Reforms in World Bank

• Structure of Governance:
  • Its organizational structure and voting rights are dominated by the developed countries.
  • Hence, decisions are guided by the whims, interests and policies of the developed countries instead of developing countries.
• US Monopoly:
  • Traditionally, the World Bank President has always been a U.S. citizen nominated by the President of the United States, which is also the largest shareholder in the bank.
  • The voice of developing countries remains unheard at this forum.
• Conditional Lending: 
  • Loans or grants for specific projects are often tied to broader policy changes in the sector or the country’s overall economy.
  • For instance, a loan aimed at enhancing coastal environmental management might be associated with establishing new environmental institutions at both national and local levels and enforcing new regulations to curb pollution.
  • This may interfere with the autonomy of the country.
• Catering to the Agenda of World Capitalism: 
  • Some critics have pointed out that the Bank continues to be dominated by the rich countries and effectively caters to the agenda of World Capitalism in the guise of its Structural Adjustment Programme (SAP).
    • SAP refers to a series of “free market” economic policy reforms mandated by the World Bank for developing countries as a prerequisite for receiving loans
    • Critics argue that SAP policies have widened the gap between rich and poor both locally and globally.
• One Size Fits All Approach:
  •  Bank, has been accused of treating different nations and regions as indistinguishable, and it assumes the “uniform remedy of development”.
  • To attain even small developmental aims, western approaches are adopted and traditional economic structures and values of developing countries are abandoned.

Suggested World Bank Reforms

• Governance Reforms:
  • Very first reform which was demanded by the nation is a change in the governance structures of the Bank.
  • It should shift its focus from the needs of the US and European nations to those of underdeveloped or developing nations by reforming the voting system.
• Leadership Reform:
  • The debate on leadership succession should serve as an opportunity to reflect on the purpose of the multilateral organization, its future role, the importance of enhancing inclusive multilateralism, and the steps required to strengthen the position of emerging economies and developing countries.
  • Developing nations should get greater representation in the Executive Board that is generally dominated by developed nations.
• Voting Reform:
  • Decision-making reform through the introduction of a double majority voting system, where agreement requires majorities of both shareholders and member states.
  • This will give the developing countries a larger role in the decision-making.
• Adapting to the Changing World Order:
  • If the Bank fails to adapt to the evolving global order, emerging economies may pursue alternative paths, as exemplified by China’s creation of the Asia Infrastructure Investment Bank (AIIB).
  • This trend could lead to a multi-polar world without effective multilateralism, resulting in a climate of conflicting interests and values among a diverse range of countries.

World Bank Vs IMF

Attributes	World Bank	International Monetary Fund
Ownership and Governance	By appointees of member nations.	By appointees of member countries.
Main Objective	Broadening and Strengthening the economies of member nations.	Broadening and Strengthening the economies of member nations.
Headquarter	Washington D.C.	Washington D.C.
Functions	Promote economic and social progress in developing and poorer countries by helping to raise productivity and providing loans at a very concessional rate.	Exchange rate stability, provide financial resources to solve the problem of balance of payment, and promote international Monetary cooperation.
Assistance	Both to the government and private sector of the member nation.	Only to the government of the member nations.
Association and Size	The World Bank Group (WBG) consists of five institutes associated with it and therefore has a larger size comparatively than the IMF	IMF has no associated institutes and hence has a smaller staff.
Source of Funding	A kind of Investment fund where it borrows from one and lends to the other. It also borrows money by selling notes and bonds directly to their member nation’s government, their agencies, and central banks which they lend to other poorer and developing countries.	It is more like a credit union wherein members have access to a common pool of resources and these resources come from quota subscriptions and contributions from each member according to the size of its economy.
Recipient of Funding	Only to the developing and poorer nations and at a very minimal interest rate. It lends to even the private sector where it feels that assisting them would help improve the living condition of the people.	Both the wealthy as well as poor nations who experiences a shortage of foreign exchanges or are facing Balance of Payments Crisis.

Conclusion:

World Bank Group (WBG) has a crucial role in global economic development and poverty reduction. As the world faces complex economic challenges, the Bank’s role in promoting growth and stability remains ever more important. Necessary reforms should be made in the institution in order to make the World Bank Group (WBG) more efficient and relevant to the current world economic order.