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International

FinancialInstitutions

UIAMS,

Panjab

University

Chandigarh



Definition

IFI

refers

to

financial

institutionsthat

have

been

established

by

morethan

one

country

.

The

most

prominent

IFIs

arecreations

of

multiple

nations,although

some

are

bilateral

financialinstitutions

.



Introduction

The

purpose

of

these

internationalfinancial

institutions

is

maintainorderly

international

financialconditions

and

to

provide

capital

andadvice

for

economic

development,particularly

in

those

countries

thatlack

resources

to

do

it

themselves



Which areinternational financial

organizations1) The

world

bank

group

-

internationalbank

for

Reconstruction

andDevelopment

(IBRD)

and

its

three

subsidiaries

–

a) International

Development Association

b) International

Finance

Corporation

c) Multilateral

Investment

Guarantee Agency

(MIGA)

2

)

International

Monetary

Fund

(IMF)



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3) Bank of international Settlements (

BIS)

4) Asian Development Bank

5) African Development Bank

6) European Bank for Reconstruction

and Development

7) Inter

-

American Development Bank



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These

international

organization

obtainfunds

for

the

lending

activities

fromtwo

basic

sources

:

1) The

first

is

contribution

of

capital

thateach

nation

makes

when

it

becomes

amember

2) The

second

source

is

throughborrowings



The World Bank Group

The world Bank began in 1946 with38 members.

Now the number of members has beenincreased to 184

The world bank and InternationalMonetary Fund ( IMF) were conceived

as twin pillars of the post wareconomic order at a conference ofBritain, America and their war-timesallies at Bretton Woods, in July 1944



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The world bank is a publicly ownedfinancial intermediary ( FI)

For most part it borrows on commercial

terms to finance investments incountries in need.

The IMF is not bank, but a club

Member countries pay a subscriptionand agree to abide by a mutuallyadvantageous code of economic conduct



IBRD

The objective is to help raisestandards of living in developingcountries by channeling financialresources from developed countries to

the developing world .

The article of agreement of IBRDrequire it to promote private foreigninvestments by means of guarantee or

participations in loan and otherinvestment made by private investors.



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In the development task, bank‟s mainobjectives are to stimulate, support andprovide from its own resources flow of

capital to worthwhile projects andprogrammes in developing countries. Inaddition the Bank group aims to improvethe quality of project planning and insome case to improve the general

economic policies of recipient countries Bank provides technical assistance

mainly in the form of project evaluation.



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Beginning in 1980, the bank started toshift towards policy based loans whichdiffer from standard project loans.These loans are not targeted building

highway or housing complex but atfostering far-reaching structuralreforms, such as end to importrestrictions or the establishment ofmarket prices of agricultural goods.



Objectives of IBRD

The original objective was to makeloans to develop the war shatteredeconomies of Europe in the SecondWorld War. To promote investment bymeans of guarantee and participationin loans and other investments madeby private investors To provide loans

to big projects To help the poorcountries by providing them loansand information assistance.



Sources of credit

generation of IBRD Quotas:

The membership of the world is the sameas that of IMF .Members make contribution

in relation to their IMF Quota.Bonds:

The World Bank also sells Bonds in thecapital markets to raise funds

Income:

A very small proportion of the IBRD fundscome from the interest on loans advancedby it.



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These loans are of basic two types:

1 Structural Adjustment Loans

2 Sector Adjustment Loans



Human development plays a crucial role inthe Bank‟s overall strategy to reducepoverty. Bank focused on

a) Lending and non-lending services to

support population control, healthnutrition and education

b) Efforts to improve the quality of bankservices by working more closely withclients, collaborating with partners and

establishing a human developmentnetwork to strengthen the bank‟s ability toprovide quality services



International Development Association (IDA)

The money lent under the IBRD label israised through bond sales in the market.Borrowers pay interest rate on the basis

of market rate of interest IDA loans, however, are much more

concessional. These resources are notraised through borrowing, but throughsubscriptions from rich membercountries.

IDA loans are offered only to poorestcountries.



IMF

Establishment:

It was the outcome of Wood Agreementsigned by 44 major countries of the worldin July 1944 in USA .

Organization: It is an autonomous bodyand is affiliated to UNO. Themanagement of Fund is under control oftwo bodies:

a)Board of governor,

b)Board of Executive directors



IMF (International

Monetary Fund) a Board of governor :

it formulates the general policies of theFund

b Board of Executive directors :

it is responsible for the day to dayactivities of the Fund .

Membership:

All those counties which agree to subscribeto Funds Article of Agreement are eligibleto Funds Membership. The membership ofFund has risen from 44 nations to183now



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Quotas:

Each member has to contribute a

quota to fund. The size of the quotadepends upon the national incomeand share in international trade ofthat country. The quota is made up of75% in the country's currency and

25% in gold.



Functions of IMF Maintaining exchange stability among the

members countries

Borrowing: The credit facility has beenraised up to 45% of one‟s quota over a threeyears period.

Correcting Balance of Payment (A balance ofpayments (BOP) sheet is an accountingrecord of all monetary transactions betweena country and the rest of the world. Thesetransactions include payments for thecountry„ s exports and imports of goods,

services) Interest charges : It charges interest on the

credit provided to member countries



Continue.. Technical Assistance it helps the members

by providing the services of specialist andexperts in concerned fields.

Compensatory Finance Scheme : if amember is facing difficulty in receipt of

export credit, the IMF can give loan tomember with few conditions.

The extended Fund Facility : For theassistance of correcting the balance ofpayments of the member countries,introduced in 1974 by IMF8)

The Supplementary Financing Facility:This scheme was introduced in 1979 inorder to give long term loans to lessdeveloped counties



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Increasing international monetary co-operation.

Promoting the growth of trade.

Promoting exchange rate stability.

Establishing a system of multilateralpayments member countries

Building reserve base Funding facilities.



ADB

Established on December4,1966 withan authorized capital of 58 billiondollars. The purpose of its formationwas to lend funds, promote investment

and provide technical assistant to thecountries mainly in Asian region.



Functions

Provide loans to low income countries

Promote investments in private as well

as in public sector. Help the member counties in foreign

trade

It provides technical assistance forpreparation, financing and executionof development projects

It also helps the UNO in variousprojects



IFC

IFC was set up with the objective ofproviding capital for private enterprisesin order to encourage the development of

local capital markets and promote foreignprivate investments in developingcountries.

IFC does not require a governmentguarantee

Its functions are like that of investmentbanks. It can participate in privateventures , providing up to 25 % of thecapital



MIGA ( MultilateralInvestment Guarantee

Agency) MIGA was created in 1988 by 42 world

bank member countries specifically toencourage foreign private investments

MIGA insures investors in developingcountries against losses caused by theoutbreak of war or civil disturbance orby acts of government, such asexpropriation or imposition of

restrictions on transfer of currency ofprofits



THANK U!

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