BUS613: Advanced International Business

IBRD, established in 1944, is the original institution of the World Bank Group and the source of the loans for which the Bank Group is best known. IBRD remains what many people mean when they refer to the World Bank. It has the largest country membership, the broadest mission, and the greatest number of staff in the Bank Group, both at headquarters and in offices around the world (box 1.2).

When IBRD was established, its first task was to help Europe recover from World War II. Today IBRD plays an important role in poverty reduction by providing the countries it now serves – middle-income and creditworthy poorer countries – with loans, guarantees, and analytical and advisory services. It provides these client countries with access to capital on favorable terms in larger volumes, with longer maturities, and in a more sustainable manner than the market provides. Specifically, IBRD

• supports long-term human and social development needs that private creditors do not finance;
• preserves borrowers' financial strength by providing support during crisis periods, which is when poor people are most adversely affected;
• uses the leverage of financing to promote key policy and institutional reforms (such as safety net or anticorruption reforms);
• creates a favorable investment climate to catalyze the provision of private capital; and
• provides financial support (in the form of grants made available from IBRD's net income) in areas that are critical to the well-being of poor people in all countries.
  

Box 1.2 IBRD Basic Facts

Year established:  1944 Number of member countries: 185 Cumulative lending: $420.2 billiona Fiscal 2006 lending: $14.1 billion for 112 new operations in 33 countries Web: http;//www.worldbank.org a. As of June 30, 2006. Includes guarantees from fiscal 2005.

IBRD raises most of its funds on the world's financial markets. It is an AAA-rated financial institution, but one with some unusual characteristics: its shareholders are sovereign governments and its member borrowers have a voice in setting its policies. IBRD provides loans, guarantees, risk management products, and analytic and advisory services. These services may be packaged together or offered as stand-alone services. Also, unlike commercial banks, IBRD is driven by development impact rather than by profit maximization. IBRD borrowers are typically middle-income countries that have some access to private capital markets. Some countries that are eligible for IDA lending because of low per capita incomes are also eligible for some IBRD borrowing because of their creditworthiness. These countries are known as "blend" borrowers. Hundreds of millions of the developing world's poor, defined as those who live on less than $2 a day, live not in the world's very poorest countries, but in middle-income countries, which are defined as those with an annual gross national income per capita between $876 and $10,725.

Countries are considered to have graduated from IBRD borrowing when their per capita income exceeds the level that the Bank classifies as middle income. For more information, including a list of IBRD graduates.