What Is the World Bank?

The World Bank is an international organization dedicated to providing financing, advice, and research to developing nations to aid their economic advancement. The bank predominantly acts as an organization that attempts to fight poverty by offering developmental assistance to middle- and low-income countries.

Currently, the World Bank has two stated goals that it aims to achieve by 2030. The first is to end extreme poverty by decreasing the number of people living on less than $1.90 a day to below 3% of the world population. The second is to increase overall prosperity by increasing income growth in the bottom 40% of every country in the world.

Understanding the World Bank

The World Bank is a provider of financial and technical assistance to individual countries around the globe. The bank considers itself a unique financial institution that sets up partnerships to reduce poverty and support economic development.

The World Bank supplies qualifying governments with low-interest loans, zero-interest credits, and grants, all for the purpose of supporting the development of individual economies. Debt borrowings and cash infusions help with global education, healthcare, public administration, infrastructure, and private-sector development. The World Bank also shares information with various entities through policy advice, research and analysis, and technical assistance. It offers advice and training for both the public and private sectors.

Key Takeaways

  • The World Bank is an international organization dedicated to providing financing, advice, and research to developing nations to aid their economic advancement.
  • The World Bank and International Monetary Fund were founded simultaneously under the Bretton Woods Agreement with generally the same focus to help serve international governments globally.
  • The World Bank has expanded to become known as the World Bank Group with five cooperative organizations, sometimes known as the World Banks.
  • The World Bank Group offers a multitude of proprietary financial assistance products and solutions for international governments as well as a range of research-based thought leadership for the global economy at large.

History of the World Bank

The World Bank was created in 1944 out of the Bretton Woods Agreement, which was secured under the auspices of the United Nations in the latter days of World War II. The Bretton Woods Agreement included several components: a collective international monetary system, the formation of the World Bank, and the creation of the International Monetary Fund (IMF). Since their foundings both the World Bank and the International Monetary Fund have worked together toward many of the same goals. The original goals of both the World Bank and IMF were to support European and Asian countries needing financing to fund post-war reconstruction efforts.

Both the World Bank and IMF outlasted the collective international monetary system which was central to the Bretton Woods Agreement. President Nixon halted the Bretton Woods international monetary system in the 1970s. However, the World Bank and IMF remained open and continued to thrive on providing worldwide aid.

The World Bank and IMF are headquartered in Washington, D.C. The World Bank currently has more than 10,000 employees in more than 120 offices worldwide. 

Though titled as a bank, the World Bank, is not necessarily a bank in the traditional, chartered meanings of the word. The World Bank and its subsidiary groups operate within their own provisions and develop their own proprietary financial assistance products, all with the same goal of serving countries' capital needs internationally. The World Bank’s counterpart, the IMF, is structured more like a credit fund. The differing in the structuring of the two entities and their product offerings allows them to provide different types of financial lending and financing support. Each entity also has several of its own distinct responsibilities for serving the global economy.

World Banks

Through the years, the World Bank has expanded from a single institution to a group of five unique and cooperative institutional organizations, known as the World Banks or collectively as the World Bank Group. The first organization is the International Bank for Reconstruction and Development (IBRD), an institution that provides debt financing to governments that are considered middle income. The second organization within the World Bank Group is the International Development Association (IDA), a group that gives interest-free loans to the governments of poor countries. The International Finance Corporation (IFC), the third organization, focuses on the private sector and provides developing countries with investment financing and financial advisory services. The fourth part of the World Bank Group is the Multilateral Investment Guarantee Agency (MIGA), an organization that promotes foreign direct investments in developing countries. The fifth organization is the International Centre for Settlement of Investment Disputes (ICSID), an entity that provides arbitration on international investment disputes.