What is the World Bank and what do they do? We have the plain English version on who they are right here.
Money & Finances: Banking
The World Bank was founded not long after the Second World War in the hopes of providing help to rebuild the war ravished countries of Europe. Now, they function to help eliminate poverty in various economies by offering financial aid in the form of loans, along with advice for the public and private sectors of the country it is helping. It is an international organisation that works across the globe that has other institutions under the World Bank Group that offers assistance in achieving its various goals.
Who Controls It?It is made up of members from countries throughout the world, with 184 members to date. Each membership is based on the country’s economy, with more developed nations having larger shares. These countries often donate funds to the World Bank, which in turn is lent out to developing or struggling economies.
Shareholders have an influence over decision making and policies of the World Bank depending on the size of their shares, which is dictated by the strength of their economy and the amount of funds donated or lent to the World Bank. An executive board of directors are headed by a president voted in by the board.
How Does It Work?Loans are given to borrower countries, most of which is from funds given or loaned by the wealthier donor countries. These lower economies tend to have less infrastructure and fewer jobs, but by providing loans they can hope to stimulate growth by improving these aspects of their economy, which in turn should grow as a result.
These types of loans are rarely available to a country from a standard bank. Like a standard bank though, the World Bank will charge interest on each loan, however these rates will be far lower than a traditional bank. The World Bank will make money from each loan, hoping that in the process a country can strengthen its economy making it a win-win situation for all involved.
Why Do We Need It?Having so much influence and control over massive loans can directly affect an entire country. Should a developing nation require a loan to help improve roads, healthcare, education and employment, the only place they can receive this from would be the World Bank.
Not only do they offer loans, but economical and financial advice that can help a country strengthen its economy and stimulate growth. Projects that are vital for the growth of an economy are decided and implemented by the World Bank, so any country that hopes to develop itself further requires help from this organisation, making them vitally important.
Do They Have Too Much Power?It could be argued that certain countries belonging to the World Bank could have too much power. As voting power is based on shares and the strength of a countries economy, more countries have control than others which could be viewed as having too much power.
Although revisions were made five years ago to allow more developed nations more influence and voting power to balance things out and provide more of a voice for these nations. This has seen the likes of China, Brazil and India all gain more power within the organisation.
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