The World Bank, the IFC, and MIGA

 The World Bank, which consists of the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), has one central purpose: to promote economic and social progress in developing nations by helping raise productivity so that their people may live a better and fuller life. This is also the aim of the International Finance Corporation--which works closely with private investors from around the world and invests in commercial enterprises in developing countries--and the Multilateral Investment Guarantee Agency (MIGA)--which was established to encourage direct foreign investment in developing countries by protecting investors from noncommercial risk. Collectively, the World Bank, the IFC, and MIGA are known as the World Bank Group.
 Of the four institutions, the IBRD, established in 1945, is the oldest and largest. The IBRD is owned by the governments of 180 countries that have subscribed to its capital. Under its Articles of Agreement, only countries that are members of the International Monetary Fund (IMF) can be considered for membership
in the IBRD. Subscriptions by member countries to the capital stock of the IBRD are related to each member's quota in the IMF, which is designed to reflect the country's relative economic strength.
 The IBRD makes loans only to creditworthy borrowers. Assistance is provided only to those projects that promise high real rates of economic return to the country. As a matter of policy, the IBRD does not reschedule payments, and it has suffered no losses on the loans it has made. It has earned a net income every year since 1948.
 The IBRD obtains most of its funds through medium- and long-term borrowings in the capital markets of Europe, Japan, and the United States. It also borrows funds at market-based rates from central banks and other government institutions. The IBRD's solid standing in the markets is based upon the combination of conservative lending policies, strong financial backing by its members, and prudent financial management.
 Apart from borrowings, significant amounts also come from the IBRD's paid-in capital, from its retained earnings, and from the flow of repayments on its loans.
 The International Development Association was established in 1960 to provide assistance to the poorer developing countries on terms that would bear less heavily on their balance of payments than IBRD loans. IDA's assistance is concentrated on the very poor countries--mainly those with an annual per capita gross national product of less than $865 (in 1994 U.S. dollars). By this criterion, about seventy countries are eligible.
 Membership in IDA is open to all members of the IBRD, and 159 have joined. The funds lent by IDA come mostly in the form of contributions from its richer members, although some developing countries contribute to IDA, as well. IDA's resources have also been augmented by frequent transfers from the net earnings of the IBRD.
 IDA credits are made only to governments. They have to be repaid over a period of thirty-five to forty years. They carry no interest, but there is an annual service charge of 0.5 percent on the undisbursed amount of each credit. Although IDA is legally and financially distinct from the IBRD,
it shares the same staff, and the projects it assists have to meet the same criteria as do projects supported by the IBRD.
 The success of the Bank's operations depends upon the trust it has established with borrowers, and this trust is based on the experience and technical skills the Bank has demonstrated over the years in working with its member developing countries.
 Under its Articles of Agreement, the Bank cannot allow itself to be influenced by the political character of a member country: Only economic considerations are relevant. It also seeks to ensure that the developing country gets full value for the money it borrows. Bank assistance, therefore, is untied in that it may be used to purchase goods and services from any member country.
 The IFC was established in 1956. Its function is to assist the economic development of developing countries by promoting growth in the private sector of their economies and helping to mobilize domestic and foreign capital for this purpose. One hundred seventy countries are members of the IFC. Legally and financially, the IFC and the World Bank are separate entities. The IFC has its own operating and legal staff, but draws upon the Bank for administrative and other services.
 In its project-financing role, the IFC provides loans and makes equity investments. Unlike most multilateral institutions, the IFC does not accept government guarantees for its financing. Like a private financial institution, the IFC prices its finance and services, to the extent possible, in line with the market, while taking into account the cost of its funds, and seeks profitable returns. The IFC shares full projects risks with its partners.
 MIGA, the newest member of the World Bank Group, was established in 1988. It has as its principal responsibility the promotion of investment for economic development in member countries through guarantees to foreign investors against losses caused by noncommercial risks and through advisory and consultative services to member countries to assist them in creating a responsive investment climate and information base to guide and encourage the flow of capital.
 MIGA is also an entity separate from the World Bank. Like the IFC, it has its own operating and legal staff but draws upon the Bank for administrative and other services. MIGA currently has 134 members.

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