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The World Bank Group and the development banks

International economic organisations · Part 2 / 3 · Fact-checked on 26 October 2026 · how we check

Written with AI from the sources listed at the bottom of this page, then fact-checked by a separate AI.

The five institutions of the World Bank Group and what 'World Bank' strictly means, how the IMF and the Bank divide their work, the IBRD's market-funded lending and IDA's concessional window, India's move from IDA to IBRD loans, the IFC and the masala bond, MIGA and ICSID (which India has not joined), World Bank reports from the World Development Report to B-READY, and the Asian Development Bank, the AIIB, the BRICS New Development Bank and the Contingent Reserve Arrangement, with India's place in each.

Part 1 showed the IMF as a lender for short-term payment troubles. This part turns to the institutions that lend for the long haul: roads, power, irrigation, schools and the private firms that create jobs. The oldest and largest is the World Bank, the IMF's Bretton Woods twin, which has grown into a group of five institutions. Beside it stand regional and newer development banks, among them the Asian Development Bank (1966) and two banks founded in the 2010s with strong Indian participation: the Asian Infrastructure Investment Bank and the BRICS New Development Bank. For each, the part asks what it does, where its money comes from, who controls it and what India's place in it is.

The World Bank Group has five members: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). Strictly, the name 'World Bank' covers only the first two, which lend to governments; the other three deal with private investment. The Group is headquartered in Washington, D.C., and a country must first join the IMF to join the IBRD. Votes follow shareholding, so the United States has the largest say, and by convention the President has always been an American. The IMF and the Bank divide the work: the Fund deals with short-term balance of payments stability and lends only to member governments, while the Bank finances specific long-term projects and programmes for development and poverty reduction.

The IBRD, set up at Bretton Woods in 1944, first financed the rebuilding of war-damaged Europe and then turned to developing countries. It lends to governments of middle-income countries and of creditworthy lower-income ones, and to public bodies with a government guarantee, for terms much longer than commercial banks offer. Its money comes mainly from selling bonds on world capital markets. Because its paid-in and callable capital stands behind it, the IBRD borrows cheaply and passes the low rate on, adding a small margin. This is the basic business model of every multilateral development bank: many governments pool capital, the bank borrows against it at good rates, and it lends for projects that private lenders would find too long or too risky. In India, IBRD loans have backed projects in areas such as rural roads, power, water supply and health.

The poorest countries cannot afford even IBRD rates, so in 1960 the International Development Association was created as the Bank's soft-loan window. IDA gives grants and concessional loan credits at zero or very low interest, with long grace periods and repayment spread over decades. A country qualifies if its income per head is below a threshold and it lacks the creditworthiness to borrow on market terms. Because IDA earns little, it depends on contributions from richer member governments, renewed in 'replenishments' every three years, along with transfers from the IBRD and, since 2018, its own bond issues. India was for decades IDA's largest borrower. As its income rose it moved off IDA after 2014 and now borrows from the IBRD, a path known as graduation, which shows how a country's relationship with the Bank changes as it develops.

Governments are only part of development; private companies build factories, banks and power plants too. The International Finance Corporation, founded in 1956, is the Group's arm for the private sector. It lends to and takes equity stakes in private firms in developing countries without asking for a government guarantee, and it encourages other investors to put money in alongside it. The IFC also raises funds through bonds, some of them in the currencies of developing countries; in 2014 it issued an offshore bond in Indian rupees in London, which it named a 'masala bond', a label later used for rupee bonds sold abroad by Indian companies. For India, the IFC has invested in sectors such as renewable energy, financial services and manufacturing, complementing the IBRD's lending to the government.

Foreign investors fear risks that have nothing to do with business: a government seizing their assets, war or civil unrest, a ban on taking profits out of the country, or a state breaking a contract. The Multilateral Investment Guarantee Agency, set up in 1988, sells insurance against such political risks to investors putting money into developing countries. When disputes do arise between a foreign investor and a host state, the International Centre for Settlement of Investment Disputes, established in 1966 under the ICSID Convention, offers conciliation and arbitration. India is a member of the IBRD, IDA, IFC and MIGA, but it has not joined the ICSID Convention, so investment disputes involving India are taken to other forums, such as arbitration under bilateral investment treaties. Of the Group's five institutions, ICSID is therefore the one India stays outside.

The World Bank is also a major publisher, and Prelims often asks which report belongs to whom. Its World Development Report, issued every year since 1978, takes up one theme in depth. Global Economic Prospects, released in January and June, carries growth forecasts and is the Bank's counterpart to the IMF's World Economic Outlook. The Human Capital Index, launched in 2018, estimates how much health and schooling will add to the productivity of a child born today, and the Logistics Performance Index rates countries on trade logistics. The Bank's best-known ranking, Doing Business, was discontinued in September 2021 after a review found irregularities in the data of some editions. Its successor, Business Ready (B-READY), published its first report in October 2024 and assesses the business environment through regulations, public services and how firms experience them.

Regional development banks bring the same model closer to home. The Asian Development Bank was established in 1966 with its headquarters in Manila, the Philippines. Its members include countries from outside Asia, and Japan and the United States are its largest shareholders; by tradition its President has been Japanese. India is a founding member, one of its largest shareholders and a major borrower, using ADB loans for projects in areas such as urban transport, power and roads. Like the World Bank, the ADB has an ordinary window for creditworthy borrowers and a concessional fund for the poorest members, and it publishes a flagship forecast, the Asian Development Outlook. Its Japanese leadership and Western weight in voting are part of why Asian economies later backed newer banks in which they have more say.

The Asian Infrastructure Investment Bank (AIIB) was proposed by China in 2013. Its Articles of Agreement were signed in 2015, entered into force that December, and the bank began operations in January 2016, with headquarters in Beijing. As its name says, it concentrates on infrastructure: energy, transport, water, digital links and, increasingly, green projects. Membership is open beyond Asia, and several European countries joined as founders, though the United States and Japan stayed out. China is the largest shareholder and its vote share lets it block decisions that need a supermajority; India, a founding member, is the second-largest shareholder and has been one of the biggest recipients of AIIB financing. For India the AIIB is a useful extra source of long-term money, while its Chinese-led governance is something New Delhi watches closely.

The New Development Bank (NDB) grew out of the BRICS grouping of Brazil, Russia, India, China and South Africa. Its founding agreement was signed at the BRICS summit in Fortaleza, Brazil, in July 2014, and the bank is headquartered in Shanghai. Unlike the World Bank, the five founders hold equal shares of its capital, so no single member can veto decisions. Its first President was K.V. Kamath of India. The NDB lends for infrastructure and sustainable development, including in members' local currencies, and has admitted new members such as Bangladesh, the United Arab Emirates and Egypt. At the same Fortaleza summit the five countries signed a separate treaty for the Contingent Reserve Arrangement (CRA), a USD 100 billion pool of commitments from their central banks to support one another during balance of payments stress. The CRA is a mini-IMF among the BRICS, not a development lender.

Seen together, these banks share one design but differ in who holds power. The World Bank and the ADB, built in the post-war and Cold War decades, give the largest votes to the United States, Japan and Europe; the AIIB and the NDB, built in the 2010s, give more weight to China, India and other emerging economies. India sits in all of them: a founding member of the World Bank and the ADB, the second-largest shareholder of the AIIB, an equal founder of the NDB and a contributor to the CRA. Each multilateral development bank lends for the long term, unlike the IMF of Part 1, and India uses them all for infrastructure. The final part of this chapter turns from money to trade rules and the World Trade Organization.

Exam traps

• 'World Bank' means only the IBRD and IDA; the World Bank Group has five institutions (IBRD, IDA, IFC, MIGA, ICSID).
• India is a member of four World Bank Group institutions but not of ICSID.
• IDA, not the IBRD, is the soft-loan window for the poorest countries; it is funded mainly by donor replenishments every three years.
• The IFC lends to and invests in private firms without a government guarantee; it issued the first 'masala bond' (offshore rupee bond) in 2014.
• Doing Business was discontinued in 2021; its successor is Business Ready (B-READY), first published in 2024. Global Economic Prospects is a World Bank report, not an IMF one.
• The ADB is headquartered in Manila (1966); the AIIB in Beijing; the NDB in Shanghai.
• In the NDB the five founders hold equal shares, so no one has a veto; in the AIIB China is the largest and India the second-largest shareholder.
• The BRICS Contingent Reserve Arrangement (USD 100 billion) is a separate treaty for balance of payments support; it is not part of the NDB's lending.

Recap

• World Bank Group: IBRD (1944), IFC (1956), IDA (1960), ICSID (1966), MIGA (1988); 'World Bank' = IBRD + IDA; Washington, D.C.
• IMF membership is required to join the IBRD; votes follow shares; the President has by convention been American.
• IBRD: market-funded loans to middle-income and creditworthy governments; IDA: grants and concessional credits for the poorest, replenished every three years.
• India: long IDA's largest borrower, moved to IBRD lending after 2014; member of all Group bodies except ICSID.
• IFC: private sector loans and equity; 2014 'masala bond'. MIGA: political risk insurance. ICSID: investor-state arbitration.
• Reports: World Development Report, Global Economic Prospects, Human Capital Index; Doing Business ended 2021, B-READY from 2024.
• ADB: 1966, Manila, Japan and US largest; India founding member and major borrower.
• AIIB: Articles 2015, operations January 2016, Beijing; China largest, India second-largest shareholder.
• NDB: Fortaleza 2014, Shanghai, equal shares, first President K.V. Kamath; CRA: separate USD 100 billion BRICS reserve pool.

Practice questions

Sources

• World Bank Group: Articles of Agreement of the IBRD (1944), IDA (1960), IFC (1956), MIGA Convention (1988), ICSID Convention (1966) and the ICSID list of contracting states; World Bank Annual Report — https://www.worldbank.org/en/about
• World Bank: IDA financing and replenishments, IDA graduates, India country overview — https://ida.worldbank.org
• World Bank and IFC: World Development Report, Global Economic Prospects, Human Capital Index (2018), statement on discontinuing Doing Business (September 2021), Business Ready report (October 2024); IFC rupee-denominated bond issue (2014) — https://www.worldbank.org/en/publication
• Asian Development Bank: Agreement Establishing the ADB (1966), members and shareholding, India fact sheet, Asian Development Outlook — https://www.adb.org/who-we-are/about
• Asian Infrastructure Investment Bank: Articles of Agreement (2015), members and subscriptions, project list — https://www.aiib.org/en/about-aiib/index.html
• Ministry of External Affairs: Fortaleza Declaration of the Sixth BRICS Summit (July 2014), Agreement on the New Development Bank and Treaty for the Establishment of a BRICS Contingent Reserve Arrangement; New Development Bank, members and history — https://www.mea.gov.in