Overview. The World Bank (originally known as the International Bank for Reconstruction and Development) originated after World War II as a means of funneling reconstruction investment in war-torn Europe. It is a multinational organization of governmental members that targets the eradication of poverty. It uses its financial resources to help developing countries combat the global financial crisis, to mitigate climate change, to support stability in conflict-affected states and to promote gender equality.
Project Finance. Member states contribute capital for lending money to specific projects that generally consist of infrastructure, development services and building of capacity for commercial ventures, with the goal of strengthening the private sector to reduce the need for governmental grants.
Trade Finance. The World Bank engages in the financing (or guarantee of payment) of international trade in goods through its private lending arm, the International Finance Corporation.
Investment Insurance. Through its insurance arm, the Multilateral Investment Guarantee Agency, the World Bank promotes foreign direct investment in developing countries by issuing political risk insurance. Such insurance typically comes in the form of guarantees to investors against transfer restrictions imposed by local governments on the investment, to ensure there is a commercially available exit for the investor, expropriation insurance and coverage for loss due to war or civil disturbance. Such policies are limited in time, such as for five years.
Carbon Finance. The World Bank is working to develop carbon credit financing to reduce climate change.
Purchases. The World Bank purchases over $700 million in goods and services per year. Its procurement policies and procedures a direct impact on private service providers by setting standards for corporate governance, socially responsible business practices and transparency. This role was highlighted in 2009 when one of its IT service providers, Satyam Computer Services Ltd., revealed that it had misrepresented its financial condition by an estimated $2.5 billion and went under an Indian Government-sponsored change of board of directors.
Impact on Global Services. The World Bank’s activities have a limited benefit to the global services industries except for those that are engaged in construction of infrastructure and job-creating manufacturing or service industries in the developing world. Its principal significance is its role in applying its procurement standards to its contractors and subcontractors.
Links:
www.worldbank.org
www.ifc.org