Unlike any bank you’ve ever been to, the World Bank does more than just borrow and loan out money. This UN agency provides development assistance, with eight goals focused on improving health and reducing poverty and inequalities around the world.
What Is the World Bank?
When you think of a bank, what comes to mind? Probably deposits, ATMs, tellers behind the counter, loan officers, and things like that. Basically, it’s the place where you borrow money, put money into accounts, and maybe even keep things secure in a safe deposit box.
You may then think that the World Bank is a place for countries around the world to do the same things you do at your bank, just on a global scale. But in reality, the World Bank is a specialized agency of the United Nations. Composed of the International Bank for Reconstruction and Development (or IBRD) and the International Development Association (or IDA), it is the world’s largest source of development assistance. It has over 180 member countries around the world that determine where its money comes from and how it spends its money, whether that’s on low-interest loans, free-interest credit to developing countries, and so on.
The World Bank is different from the World Bank Group, which consists of a total of 5 international organizations dedicated to financially assisting developing countries. The World Bank Group includes the two components of the World Bank, but also the International Finance Corporation, the Multilateral Investment Guarantee Agency, and the International Centre for Settlement of Investment Disputes. But that’s another lesson for another day!
History of the World Bank
The World Bank was created in 1944 during World War II when it was expected that Germany and Japan would soon be defeated. During July of that year, The Bretton Woods Conference was held in Bretton Woods, New Hampshire, with the goal of setting up financial arrangements for the world after the war ended. The conference proceeded over several weeks and created not only the World Bank, but also the International Monetary Fund. In these early years, it had only 38 member countries. Today, it is made up of almost all the countries in the world!
Since it began all those years ago, the World Bank has gone through some changes. Initially, it focused on providing aid to European countries, but in the late ’60s shifted its focus to non-European countries instead and especially developing nations. Then, in the late ’80s, the World Bank began offering loans and financial assistance to not just countries, but also non-governmental and environmental organizations in an effort to improve world health and reduce poverty and disease.
World Bank Goals
The goals of the World Bank are really what sets it apart from what you might consider a ‘traditional’ bank. Instead of just borrowing and loaning out money, the World Bank is deeply committed to human welfare in a much larger sense than just finances.
In fact, the World Bank has outlined eight specific goals they call their Millennium Development Goals, which are multi-faceted, international development goals developed during the UN Millennium Summit in 2000. These goals are very specific and also quite challenging tasks to take on. The eight goals are: to eradicate extreme poverty and hunger; achieve universal primary education; promote gender equality and empower women; reduce child mortality; improve maternal health; combat HIV/AIDS, malaria, and other deadly diseases; ensure environmental stability; and develop a global partnership for development.
At the time these goals were developed, there were 189 UN member states and all of them, along with dozens of other international organizations, committed to helping these goals reach realization by 2015. But these are pretty lofty goals to accomplish in only 15 years. And while there has been some progress, it has not happened evenly among either the countries or the different goals. However, because these are goals that benefit all humankind, not just individuals in developing countries, work will still be made once 2015 has come and gone.
While the World Bank does borrow and loan out money internationally, it’s not a bank in the traditional sense. Rather, it’s a specialized agency of the United Nations that focuses on social issues in developing countries.
Part of the World Bank Group, the World Bank consists of the International Bank for Reconstruction and Development (or IBRD) and the International Development Association (or IDA). It has over 180 member countries around the world, almost all the countries on Earth!
The World Bank has come a long way since its inception in 1944 at the Bretton Woods Conference, which was focused on the goal of setting up financial arrangements for the world after World War II ended. Today, the modern World Bank has eight multi-faceted international development goals called the Millennium Development Goals. These goals include things like ending world hunger and gender equality in developing nations.
Can you see that while we call it a ‘bank,’ it’s really not one, at least in the traditional sense? I’m guessing your local bank doesn’t have goals like this!
Following this lesson, you’ll have the ability to:
- Identify the structure and functions of the World Bank
- Recall what the World Bank Group is
- Summarize the World Bank’s history
- Describe the Millennium Development Goals