Global Governance

The World Bank: How the development bank confronts today's crises

A coming change in leadership at the World Bank has put the development bank back into headlines.

A coming change in leadership at the World Bank has put the development bank back into headlines. Image: REUTERS/Johannes P. Christo

Efrem Garlando
Community Specialist, International Organizations and Humanitarian Agenda, World Economic Forum
Share:
Our Impact
What's the World Economic Forum doing to accelerate action on Global Governance?
The Big Picture
Explore and monitor how Global Governance is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Global Governance

Listen to the article

  • The World Bank was founded in 1944 with the aim to reduce levels of poverty around the world.
  • The institution lends money to its 189 member countries at lower interest rates than commercial banks, or with no interest rate at all for the poorest countries.
  • The bank also provides advice to member countries to help them make their economies more efficient and productive.

A coming change in leadership at the World Bank has put the development bank back into headlines—and has sparked conversation about the institution's efforts to confront 21st century crises.

Such issues include, for example, global pandemics and the climate crisis. Still, the World Bank remains an institution dedicated to reducing poverty. So how exactly does the World Bank operate and how has its mandate changed over the years?

Why was the World Bank founded?

The World Bank was set up in 1944 to help support the rebuilding of Europe and Japan following the World War II. Its official name was the International Bank for Reconstruction and Development.

It emerged as part of the Bretton Woods Agreement, which was negotiated at a United Nations Monetary and Financial Conference with the aim of creating a new system of economic order and international cooperation. Bretton Woods also led to the creation of the International Monetary Fund (IMF).

Over three-quarters of a century after it was established, the Washington DC-based bank’s main aim is to reduce levels of poverty around the world. It does this by lending money to the governments of its poorer members at lower interest rates than commercial banks would charge or, in the case of the poorest developing countries, with no interest rate.

The World Bank lends money to the poorest developing countries with no interest rate attached.
The World Bank lends money to the poorest developing countries with no interest rate attached. Image: World Bank Group.

“Without a place like the World Bank from which to borrow money, the world’s poorest countries would have few, if any, ways to finance much-needed development projects,” the bank’s website says. “The projects are essential to helping people become educated, live healthy lives, get jobs, and contribute as active citizens.”

The World Bank, IMF and regional development banks cover parts of government budgets in many countries, and can help to create a more inclusive and social global economy, the World Economic Forum says in its report Unlocking the Social Economy.

Examples of its work include helping Bangladesh set up an Income Support Program for the Poorest, which has provided cash to 600,000 poor pregnant women and mothers with children under five, to help them improve their children’s nutrition and cognitive development. It has also provided loans to Morocco to support its Integrated Disaster Risk Management and Resilience Program, which is strengthening the country’s climate change adaptation and resilience to natural disasters.

How does the World Bank work?

The bank is run like a cooperative, with its members as shareholders. The number of shares a country has is based on the size of its economy. The US is the largest shareholder, followed by Japan, Germany, the United Kingdom and France.

As shareholders, member countries are represented on a board of governors, usually by their finance ministers. This board has annual meetings alongside the IMF’s governors to decide how it can work best to reduce global poverty and help with international development.

Discover

What is the Forum doing to improve the global banking system?

The policy decisions made at this meeting are then enacted by 24 executive directors, who approve loans, country assistance strategies, and make borrowing and financial decisions. As the five largest shareholders the US, UK, France, Germany and Japan have an executive director each, while the other member countries are represented by 19 executive directors.

The World Bank is headed by a president, who is selected by the executive directors. David Malpass has recently decided to resign from this post before his five-year term ends in April 2024.

Where does the World Bank get its money?

The Bank says its financial reserves come from a variety of sources. These include:

  • Fees paid by member countries.
  • Funds raised in financial markets.
  • Earnings on its investments.
  • Contributions made by members.
  • Interest payments from borrowing countries when they pay back loans.

The bank loans countries only part of the money they need for certain projects, meaning they have to get the rest from other sources or use their own funds.

What else does the World Bank do?

The World Bank doesn’t only provide money. It also provides advice to member countries, and uses the experience and knowledge of its staff in areas such as environmental best-practice or social standards to help ensure projects will be successful.

It also “lends money to hire industry experts to help countries to reshape their economies to make them more efficient and productive”, the Bank’s website says.

Loading...

The World Bank is also a major publisher of reports and working papers, with over 30,000 publications covering areas such as poverty, global debt and food security.

Have you read?
Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Global GovernanceBanking and Capital MarketsAfrica
Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

AI: Will governance catch up with the tech in 2024?

David Elliott

March 1, 2024

About Us

Events

Media

Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum