The international financial organizations is a single for all the major global banks or lending institutions around the world. This includes world bank, Asian bank, brick bank, international bank for reconstruction and development (IBRD), and many others. These organizations are also a part of the world bank.
IFO – International Financial Organizations
World bank located in Washington DC is based out of a group of five IFO that provides the loans to underdeveloped and developing economies.
Also, it is an observer for the United Nations development group also known as UNDG. Furthermore, it is one of the largest development banks globally. Out of these five groups, India is a member of 4 organizations.
This includes IBRD, international development agency (IDA), multilateral investment guarantee agency (MIGA), and international finance corporation (IFC).
The only organization that India is not a part of is ICSID which stands for an international center for settlement of investment disputes. We will talk about all these organizations in brief.
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Learn more about the International Monetary Fund here in detail
IBRD – International Bank for development and reconstruction
The bank established in 1945 and is one of the oldest banking institutions in the world. Also, it helps the underdeveloped economies by lending them the money at a very low-interest rate.
There are many areas in which this institution works. Some of the main areas include irrigation, agriculture, healthcare, family welfare, urban development, and dairy development.
IFC – International Finance Corporation
This organization is another private arm of the world bank and was established in the year 1956. The different thing under this institution is that it lends money to the private sector in the developing economy to the member nations. The interest rates provided to the companies are commercial but at a very low rate.
Furthermore, it also provides the advice and finances the public-private partnership along with the private investors. So, there is a specific condition under which it lends the money to private institutions. Also, the institution invests the money only when a special contribution is made that matches the complements the role played by the market investors in terms of a foreign financial investor.
IDA – International Development Agency
This institution was established in 1960 and is known as a soft window for the world bank. So, the primary function of this institution is to provide infrastructural support to the member nations. Thus, it provides the long term loans which are interest-free for the development of these economies.
Also, these loans provide are known as credits. When you talk world bank it refers to only IBRD and IDA. While for the world bank group, it represents all the five organizations.
MIGA – Multilateral Investment Guarantee Agency
This body of world bank group was established in 1988. So, the primary objective is to encourage foreign investment in the member countries. Thus, it is done by offering insurance to foreign private investors against the loss due to political risks.
ICSID – International Center for Settlement of Investment Disputes
This organization was established in 1966. It is the body that settles investment disputes. It is done for the parties binding to it. Furthermore, it settles the investment disputes between host countries and foreign companies when the investment is done.
Practice Questions on International Financial Organizations
Q. What is the purpose of an international finance corporation?
A. Developing the government sector
B. Reducing the poverty
C. Private sector development
D. Both b and c
Answer: D. Both b and c
Q. The establishment of IDA was done in
Answer: C. 1960