Binary options lexicon: The World Bank
Creation of the World Bank: The institution was created on December 27, 1945, under the name International Bank for Reconstruction and Development after the Bretton Woods accords were signed on July 22, 1944. The World Bank’s first loan was provided to France for $250 million on May 9, 1947. The World Bank’s goal was to assist in the reconstruction of Europe and Japan after WWII, however the decolonization in the 1960s provided the World Bank with additional missions; notably to encourage economic growth in developing nations.
In the beginning, the World Bank financed primarily large infrastructure projects such as roadways, airports and electrical stations. The recovery efforts in Japan and Europe resulted in the World Bank’s interest in developing nations, followed by the former communist countries in the 1990s.
Why was the World Bank Created ? The World Bank’s purpose has evolved over time. Nowadays the institution focuses on the battle against poverty, with less emphasis on economic growth. The World Bank also focuses on underdeveloped nations, working on agriculture, education, industry and health.
How does the World Bank function ? The World Bank provides loans with preferential rates to member countries experiencing difficulties. In return, the institution requires measures called “structural adjustment policies” to be implemented, such as the battle against corruption to ensure budgetary equilibrium, or to encourage democracy.
The World Bank also finances Non-Government Organizations (NGOs) and conducts research on each country’s development. The institution conducts and calculates the Human Development Index (HDI) in different countries and geographic zones. It also conducts studies, in partnership with Unicef, relating to sanitation and drinking water quality.
The institution has 10,000 employees and distributes funds as grants up to 20%, with the balance provided as a zero-interest loan with a 0.75% commission. Countries providing the most financing to the World Bank are the US, UK, Japan, Germany and France. The funds enable financing of new infrastructure like roadways, electricity networks, schools and microcredit operations.
Loan granting policies: Loans provided by the World Bank are given to nations in which the GDP/capita is lower than $1085. For this reason, the first five borrowers were India, Pakistan, Nigeria, Vietnam and Ethiopia during IDA Cycle 14, in 2008. There were 45 donor countries while 80 nations had the chance to borrow from the International Development Association.