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International Bank of Reconstruction and Development (IBRD)

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About IBRD (International Bank of Reconstruction and Development):

The International Bank of Reconstruction and Development (IBRD) also referred to as the lending arm of the world bank group was founded in 1944 after the end of the second world war. World Bank Group is composed of five organizations, and IBRD is one of them. The headquarter of IBRD is located in Washington D.C, United States. The primary motive of IBRD at the initial stages was to provide financial aid for the reconstruction and development of the European counties that were devastated by World War II. As the staff and leadership of the International Development Association (IDA) and the IBRD are the same they are collectively referred to as World Bank.

World Bank Group

Apart from the reconstruction and development of counties destroyed by wars this bank also lends loans to financially weaker countries to eradicate poverty and promote economic development. The IBRD also provides commercial loans to some sovereign states to improve some important sectors like infrastructure, health care, sanitation, education, etc. At present 189 counties are members of the IBRD and these countries act as a governing body and the owner of the IBRD. The member countries of IBRD are its shareholders and thus reserve the right to vote in its internal matters.

IBRD and its Priority:

After the redevelopment of European counties, IBRD shifted its focus to underdeveloped middle-income nations (MICs). The world’s Middle-Income Countries (MICs) are a diverse group by size, population, and income level. They are defined as lower-middle-income economies – those with a Gross National Income (GNI) per capita between $1,036 and $4,045; and upper-middle-income economies – those with a GNI per capita between $4,046 and $12,535 (2021).

IBRD provides financial support to these countries. India is among the nations that attract some of the highest Foreign Direct Investment every year but due to its large population, the benefit of these investments doesn’t seem to reach every person. Thus IBRD lends its services to such countries on a priority such that it doesn’t come under huge economic collapses. 

Among the priority of IBRD people, peace and prosperity are equally important, and thus these three priorities help IBRD eradicate poverty, promote sustainable development, and help people in building resilience. IBRD aims to end extreme poverty via investment in nutrition, health care, and quality education.

Who finances the IBRD?

The member countries of the IBRD are its major financiers the IBRD raises money from the holding of its shareholders. Also, it issues world bank bonds and borrows money from the international capital markets. In the Financial year 2019, the IBRD raised more than USD 54 Billion in around 27 different currencies. The return on equity and margins on loans are also major sources of income for IBRD. As the IBRD does not aims to earn any profit thus all the income generated from these different sources is diverted to IDA (International Development Association).

The Objective of IBRD:

IBRD’s main objective is to provide financial assistance to middle-income countries, however, it also provides information services and strategic coordination to its borrowing member countries. IBRD only finances government-backed projects or directly finances sovereign governments. The loans offered by this bank have a long-term maturity period say 30 years, with a nominal or zero interest rate. Also, IBRD offers the loan in the local currency of a particular nation to avoid conversion charges. With the collaboration of the International Finance Corporation and IBRD, the bank offers loans with or without sovereign guarantees. 

How did IBRD help underdeveloped countries?

Just after the formation of IBRD in 1944 till the date, this bank has financed more than 12,000 projects globally, via its small interest, zero interest, and traditional loans. IBRD has financed numerous projects in various middle-income countries across the globe and some of them are listed below.

  • Promotion of a sustainable approach in farming to reduce the use of harmful chemicals, in Africa in March 2022.
  • In January 2022 IBRD launched a project in Cambodia to improve the quality of education and make sure every child has access to education.
  • In December 2021 IBRD financed a power sector project in Pakistan to make sure of proper power distribution via selected companies.
  • In February 2022 IBRD launched a project in Africa to help people overcome the socio-economic effect of COVID-19. 
  • In December 2021 IBRD financed a project in India to ensure the proper delivery of clean and safe piped water across the state of Karnataka.

How has IBRD contributed to the Socio-Economic Development of India?

The IBRD has financially helped many middle-income countries to grow their economy, similarly, IBRD has a significant contribution to the socio-economic development of India, as discussed below.

  • India has received a loan of USD 39,576,852,00 by 2020 from the IBRD. This loan amount is issued by the IBRD to India, to improve some of its key sectors like agriculture, health care, education, infrastructure, skill information, sanitation, etc.
  • The Indian Development forum or previously known as the Aid-India Consortium was formed in 1958 by the world bank as an international scheme. The main aim of this scheme was to provide financial assistance to India in its development projects. The countries like the USA, Japan, Germany, and the UK are member countries of this forum.
  • In January 2022, the world bank raised a fund of USD 125 million to uplift the economically backward sector and provide social protection to people living in vulnerable districts of West Bengal.
  • In December 2021, IBRD launched a program that supported the Central Board of Secondary Education (CBSE) to develop vocational skills among students across India.

IBRD and the world bank have always been a helping hand for all countries, but still, there are many poor and middle-income countries that need the help of IBRD. For example, recently the Srilankan economy collapsed and now there is a huge shortage of basic necessities thus in such conditions a small help from IBRD can turn into great relief. 

Last Updated : 31 May, 2022
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