Policies and operations : World bank, IDA and IFC

The World Bank Group consists of three international financial institutions, the World Bank itself (formally the International Bank for Reconstruction and Development), and two affiliates, the International Development Association (IDA) and the International Finance Corporation (IFC). Each of the three institutions of the Group was established to fulfil a distinct function, but all are devoted to the same general objective the provision of financial and other assistance for economic development.)

It is now 25 years since the World Bank first opened its doors for business. Its Articles of Agreement, drawn up at the United Nations Monetary and Financial Conference at Bretton Woods, New Hampshire, U.S.A., in July 1944, were accepted by a majority of the nations participating in the Conference by December 27, 1945. Six months later, on June 25, 1946, the Bank began operations.

As its formal title indicates, the Bank was designed as an international financial institution which would lend (or guarantee loans made by others) for postwar reconstruction and economic development in its member states. Only governments could join the Bank, and then only those which had already joined its Bretton Woods sister institution, the International Monetary Fund.

The Bank's Articles of Agreement laid down the basic principles by which it was to be guided in its operations. It was to give priority to urgently needed, productive projects; it should abstain from lending where funds were available on reasonable terms from other sources; its loans were to be for specific projects except in special circumstances; loans would normally cover only the foreign exchange costs of projects (although provision was made for the financing of local currency costs under exceptional circumstances); it should pay due regard, when considering a loan, to the prospects for repayment, and once a loan had been agreed upon, it should ensure that funds were disbursed only for the purposes for which the loan had been provided, and only to meet project costs as they were incurred. The Bank was further required by its Articles not to "tie" its loans to purchases from any particular member country, and not to take political or other non-economic questions into account in its lending operations. Loans were to be made to, or with the guarantee of, a member government (members' central banks or comparable agencies were also allowed to guarantee loans, but in practice the Bank has always obtained government guarantees). The Bank was authorized to borrow funds to finance its lending operations; any risk on the obligations incurred by the Bank through its borrowing operations or through guarantees made by it was to be shared by all member governments up to the amounts of their subscriptions.