some evolving trends at the world bank

30
BRIEFING NOTE SOME EVOLVING TRENDS AT THE WORLD BANK: LENDING, FUNDING, STAFFING Kevin Currey Natural Resources and Sustainable Development The Ford Foundation May 2014

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This briefing note explores ongoing macro-level changes at the World Bank. It focuses on four major trends: (1) changes in lending, including amount of lending, type of lending, and recipient countries; (2) changes in income sources; (3) the growth of trust funds; and (4) trends in staffing. The findings presented here are intended to help shape future engagements with the Bank by placing its operations in a broader context. Major findings: (1) Total World Bank lending has declined in real terms in recent years, driven by a significant decline in International Bank for Reconstruction and Development (IBRD) lending. IBRD commitments averaged more than $25 billion per year during the 1980s and 1990s, but commitments have since declined and are expected to average around $15 billion per year in the near term. This decline is the result of a number of factors, including insufficiently large capital infusions and reduced borrower demand stemming from low global interest rates and the growing availability of alternative funding sources. Declining Bank lending coincides with declining profitability. President Kim has recently announced plans to nearly double IBRD lending over the next several years, but it is not clear how this will be achieved. (2) International Development Association (IDA) lending has continued to increase in real terms, but IDA funding is increasingly dependent on donor contributions. Declining IBRD income limits the size of the subsidy IBRD can provide to IDA and increases the importance of individual IDA donors. (3) World Bank Group funding to support the private sector has increased dramatically, both in absolute terms and relative to overall spending. In 2013, the International Finance Corporation (IFC) accounted for 35% of World Bank Group commitments, compared with 18% in 2009 and only 13% in 2000. IFC support for financial intermediaries has also increased rapidly over the last several years. Multilateral Investment Guarantee Agency (MIGA) commitments have doubled in the past five years, albeit from a low base. (4) The Bank has always faced a pressure to lend, stemming from structural factors (administrative costs are covered by profits from loans), institutional factors (the real or perceived importance of ‘moving money’ for staff promotions), and external factors (demands from donors and shareholders). But while lending has declined, the pressure to expedite disbursements remains stronger than ever. This is because of the increasing pressure from both clients and donors to be more efficient and because of the increasing availability of alternative funding sources for national governments. While these changes have the potential to make the Bank more responsive and effective, they also pose a potential risk to policies, like the suite of safeguards, which could be perceived as impediments to speedy disbursement.

TRANSCRIPT

Page 1: Some Evolving Trends at the World Bank

BRIEFING NOTE

SOME EVOLVING TRENDS AT THE WORLD BANK:

LENDING, FUNDING, STAFFING

Kevin Currey

Natural Resources and Sustainable Development

The Ford Foundation

May 2014

Page 2: Some Evolving Trends at the World Bank

2

EXECUTIVE SUMMARY

This briefing note explores ongoing macro-level changes at the World Bank. It focuses on four

major trends: (1) changes in lending, including amount of lending, type of lending, and

recipient countries; (2) changes in income sources; (3) the growth of trust funds; and (4) trends

in staffing. The findings presented here are intended to help shape future engagements with

the Bank by placing its operations in a broader context.

Major findings:

(1) Total World Bank lending has declined in real terms in recent years, driven by a significant

decline in International Bank for Reconstruction and Development (IBRD) lending. IBRD

commitments averaged more than $25 billion per year during the 1980s and 1990s, but

commitments have since declined and are expected to average around $15 billion per year in

the near term. This decline is the result of a number of factors, including insufficiently large

capital infusions and reduced borrower demand stemming from low global interest rates

and the growing availability of alternative funding sources. Declining Bank lending

coincides with declining profitability. President Kim has recently announced plans to

nearly double IBRD lending over the next several years, but it is not clear how this will be

achieved.

(2) International Development Association (IDA) lending has continued to increase in real

terms, but IDA funding is increasingly dependent on donor contributions. Declining IBRD

income limits the size of the subsidy IBRD can provide to IDA and increases the importance

of individual IDA donors.

(3) World Bank Group funding to support the private sector has increased dramatically, both in

absolute terms and relative to overall spending. In 2013, the International Finance

Corporation (IFC) accounted for 35% of World Bank Group commitments, compared with

18% in 2009 and only 13% in 2000. IFC support for financial intermediaries has also

increased rapidly over the last several years. Multilateral Investment Guarantee Agency

(MIGA) commitments have doubled in the past five years, albeit from a low base.

(4) The Bank has always faced a pressure to lend, stemming from structural factors

(administrative costs are covered by profits from loans), institutional factors (the real or

perceived importance of ‘moving money’ for staff promotions), and external factors

(demands from donors and shareholders). But while lending has declined, the pressure to

expedite disbursements remains stronger than ever. This is because of the increasing

pressure from both clients and donors to be more efficient and because of the increasing

availability of alternative funding sources for national governments. While these changes

have the potential to make the Bank more responsive and effective, they also pose a

potential risk to policies, like the suite of safeguards, which could be perceived as

impediments to speedy disbursement.

Page 3: Some Evolving Trends at the World Bank

3

(5) IBRD lending is shifting from investment lending toward development policy lending and

the newly established Program-for Results (P4R). An evolving development context and

changes in client demand are contributing to this shift. Efforts like P4R that seek to reorient

the Bank from a ‘compliance focus’ to a ‘results focus’ offer both opportunities and risks.

(6) The influence of individual donors has increased through the rapid rise of trust funds.

Trust funds have become increasingly central to the Bank’s efforts to address global public

goods problems, but they also present complex management challenges and threaten to

reduce the overall coordination of Bank activities.

(7) Declining income at the Bank has triggered reductions in staff costs. This has been

accomplished in a variety of ways, including an increased reliance on trust funds to cover

some of these costs.

(8) In sum, declining profitability at IBRD places pressure on the Bank to be more competitive

with other lenders. This could have the positive effect of helping the Bank strengthen key

areas of differentiation, but it could also lead to reduced attention to safeguards and other

perceived impediments to efficient lending.

Notes:

Unless otherwise stated, years listed in this report refer to the World Bank Group fiscal year.

The World Bank refers to IBRD and IDA; World Bank Group refers to all five institutions.

This paper represents the views of the author only and does not necessarily represent the views of the Ford

Foundation.

Page 4: Some Evolving Trends at the World Bank

4

Page 5: Some Evolving Trends at the World Bank

5

Five institutions make up the World Bank Group: 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). The first two institutions,

IBRD and IDA, are collectively referred to as the World Bank. Table 1 provides an overview of

these institutions and their roles.

Table 1: The World Bank Group At-A-Glance

Institution

Est.

Members

Cumulative

Commitments

(billion USD)

FY2013

Commitments

(billion USD)

Purpose

International Bank for

Reconstruction and

Development

(IBRD)

1944 188 586.2 15.2 Lends to creditworthy

middle- and low-income

countries; provides

advisory and analytical

services

International

Development

Association

(IDA)

1960 173 268.5 16.3 Offers highly

concessional loans (called

credits) and grants for the

poorest countries

International Finance

Corporation

(IFC)

1956 184 183.4 18.3 Stimulates private-sector

investment in emerging

markets through loans,

risk-management

products, equity finance,

and advisory services

Multilateral Investment

Guarantee Agency

(MIGA)

1988 180 30.0 2.8

Promotes investment in

emerging economies by

offering guarantees to

protect investors and

lenders against losses

from noncommercial risk

International Centre for

Settlement of

Investment Disputes

(ICSID)

1966 150 [282 concluded

cases]

[1 concluded

case]

Promotes investment by

providing facilities to

help countries arbitrate

investment disputes

Source: IBRD (2013); IDA (2013); IFC (2013); MIGA (2013); ICSID (2013).

Page 6: Some Evolving Trends at the World Bank

6

WORLD BANK LENDING

Both the World Bank’s mission and its approach to executing it have evolved considerably over

time. Created in Bretton Woods, New Hampshire, in 1944, IBRD‘s initial tasks were to address

capital deficiency and stabilize a global economy ravaged by World War II (Phillips 2009). The

Bank issued its first loan in 1947, committing $250 million to the French government to support

reconstruction. But not long afterward, it turned its focus away from Europe and began to

address global poverty.

Since then, the history of the Bank has closely tracked broader trends in international

development approaches (trends the Bank itself helped shape). In the 1950s and 1960s,

investments in industry and infrastructure dominated the Bank’s portfolio, although later in the

period the Bank began investing in capacity and institution building as well. In the 1970s,

under the leadership of President Robert McNamera, the Bank veered into more direct

approaches to poverty reduction, pioneering strategies like ‘basic human needs’ and ‘integrated

rural development.’ During the 1980s, the Bank focused on structural adjustment,

macroeconomic policies, debt, and efforts to increase private capital flows. This culminated in

the emergence of the so-called Washington Consensus, favoring privatization, trade

liberalization, deregulation, fiscal and tax policy reforms, and other hallmarks of neoliberal

economic policy. In the 1990s and 2000s, the Bank focused on sustainable development and

continued to strengthen its brand as a ‘knowledge bank’ offering technical expertise on a range

of development issues. Most recently, the Bank expanded its footprint to address global public

goods problems, like climate change. Today, however, the Bank is at a crossroads, and as the

next section explains, it is not yet clear how the current existential crisis will be resolved.

A. Amount of lending

More than six decades after Bretton Woods, the World Bank’s cumulative lending now stands

in excess of $1 trillion. In 2013, the World Bank Group committed $52.6 billion in total loans,

grants, equity investments and guarantees. The World Bank (IBRD and IDA) committed $31.5

billion in loans, credits, grants, and guarantees. This includes $15.2 billion from IBRD, to

support 92 operations in 35 countries, and $16.3 billion from IDA, to support 184 operations in

59 countries (IBRD 2013; IDA 2013). Table 2 shows nominal commitments for the World Bank

Group institutions over the past five years.

Figure 1 shows real (inflation-adjusted) World Bank lending commitments by year since 1970.

As the graph illustrates, with a few exceptions, IBRD lending has declined in real terms since

the late 1980s and early 1990s. This is more clearly demonstrated in table 3. Real IBRD lending

commitments averaged around $26 billion per year between 1980 and 1999, but dropped to

$16.6 billion per year during the next decade. Growth in IDA lending, on the other hand, has

outpaced inflation, but the real rate of growth was higher in the 1970s and 1980s than today.

Page 7: Some Evolving Trends at the World Bank

7

Table 2: Nominal World Bank Group commitments (billion USD), 2009-2013

Institution 2009 2010 2011 2012 2013

World Bank 46.9 58.8 43.0 35.4 31.5

IBRD 32.9 44.2 26.7 20.6 15.2

IDA 14.0 14.6 16.3 14.8 16.3

IFC 10.5 12.7 12.2 15.5 18.3

MIGA 1.4 1.5 2.1 2.7 2.8

WBG Total 58.8 73.0 57.3 53.6 52.6

Source: IBRD (2013); IDA (2013); MIGA (2013); IFC (2013)

Figure 1: Real IBRD, IDA, and total World Bank commitments by year (billion 2013 USD)

Note: Amounts adjusted to 2013 USD using the US CPI-All Urban Consumers index (base 1982-1984)

Source: IBRD (2013); IDA (2013)

Table 3: Nominal/ real average yearly lending commitments by decade (billion 2012 USD)

1970-79 1980-89 1990-99 2000-09

Nominal

IBRD 3.9 12.0 16.7 14.2

IDA 1.4 3.6 6.5 9.1

Real

IBRD 16.1 26.2 25.6 16.6

IDA 6.1 8.0 9.9 10.6

Source: IBRD (2013); IDA (2013)

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

$55

$60

$65

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

Bil

lio

ns

of

2013

US

D

IBRD commitments IDA commitments

Total World Bank commitments

Page 8: Some Evolving Trends at the World Bank

8

The exceptions to this trend are two spikes in lending, in response to the 1997 Asian financial

crisis and the 2008 global financial crisis. For example, in the four years leading up to the global

financial crisis, IBRD commitments averaged about $13.5 billion per year. IBRD dramatically

ramped up lending in response to the crisis, making loan commitments of $32.9 billion in 2009

and $44.2 billion in 2010. But as the most immediate threats to global economic stability

subside, IBRD lending has steadily declined to pre-crisis levels; after reaching a record high in

2010, IBRD lending commitments stood at $26.7 billion in 2011 and $20.6 billion last year. It

declined $5.3 billion in 2013, to $15.2 billion.

Capital adequacy tests and prudent risk management practices place upper limits on IBRD’s

lending, but those limits are far from being exceeded (Moody’s 2012). IBRD’s Articles of

Agreement set a statutory lending limit of a 1:1 gearing ratio, meaning that outstanding loans

may not exceed the sum of subscribed capital, reserves, and surplus (World Bank 2012a).

Outstanding loans and guarantees of $141 billion are currently 57% of the $250 billion lending

limit. IBRD currently targets an equity-to-loan ratio of between 23% and 27%. This ratio has

decreased since 2010, due to an increase in lending and decrease in useable equity, but it

remains at the upper end of the target risk coverage range, at 26.8% (IBRD 2012). The

Executive Directors also set Single Borrower Limits that restrict how much individual countries

may borrow. In FY2013, this limit was set at $17.5 billion for India and $16.5 for other countries,

and this will remain unchanged for FY2014 (IBRD 2013; Moody’s 2012).

There are many interlinked reasons why IBRD lending is declining, including the failure to

secure additional capital increases. But a significant factor may be reduced demand for IBRD

loans stemming increased competition from other funding sources and low global interest rates.

The Bank’s lending has never accounted for more than 5% of total international financial flows

(Phillips 2009), but as these flows have rapidly increased, the Bank’s lending had failed to keep

pace. Table 4 shows lending commitments from regional development banks as well as the

China Development Bank and BNDES, the Brazilian Development Bank. (Capital flows from

ODA, remittances, and FDI are included for reference). Lending from the four regional

development banks has been increasing significantly, especially in the aftermath of the financial

crisis.

At the same time, middle income countries are increasingly financing their own development.

Disbursements at BNDES have grown six-fold since 2000, and net profit has increased more

than tenfold. Its lending in 2012 was almost four times more than IBRD lending. The China

Development Bank had about $886 billion in loans outstanding in 2011, compared to only $136

billion in outstanding IBRD loans in FY2012. To put this number further in perspective,

China has only $13 billion in loans outstanding from IBRD and has received cumulative loans of

only slightly more than $50 billion from the World Bank.

Moreover, China is now a major donor for other developing countries. China does not publish

data on its overseas loans, but during the financial crisis, Chinese lending surpassed World

Bank lending: the China Development Bank and the China Export-Import Bank committed

Page 9: Some Evolving Trends at the World Bank

9

more than $110 billion to developing countries from 2008 to 2010, while IBRD and IFC together

committed only $100 billion (Dyer et al. 2011).

Finally, private capital flows are becoming increasingly important for development. Remittance

flows to developing countries in 2012 were 13 times higher than World Bank lending and three

times higher than total ODA; FDI inflows to developing countries were 22 times higher than

World Bank lending and almost four times higher than total ODA. These forms of private

capital are not perfect substitutes for Bank lending, of course, but they do represent an

increased form of at least indirect competition.

Table 4: Loan commitments by development banks

Development Bank

Commitment

(billion USD)

Year

World Bank Group 52.6 2013

World Bank (IBRD+IDA) 31.6 2013

IBRD 15.3 2013

IDA 16.3 2013

China Development Bank 163+ 2011

BNDES 79.7 2012

Asian Development Bank (ADB) 10.2 2013

European Bank for Reconstruction and Development (EBRD) 12.3 2012

Inter-American Development Bank (IDB) 10.7 2012

African Development Bank (AfDB) 8.5 2011

FDI inflows to developing countries 684 2012

Remittances to developing countries 406 2012

DAC ODA 134.8 2013

Source: IBRD (2012); EBRD (2012), ADB (2012); AfDB (2013); IDB (2011); World Bank (2012d); UNCTAD

(2012); OECD (2013)

All of these changes have pushed governments, both borrowers and other shareholders, to

pressure the Bank to remove perceived impediments to faster disbursements. And the Bank

needs to better ‘compete’ with other international financial institutions for other reasons as well,

including the fact that its operating budget is derived from the margin it receives on its lending.

The implications of reduced lending, discussed later in this brief, include a reduced subsidy

from IBRD to IDA, a push for results-based lending, and pressure to focus on fewer, larger

projects with better economies of scale.

Lending, of course, it not the only measure of the Bank’s influence. The Bank also continues to

plays a key role as a development policy expert, and other international financial institutions

often benchmark their policies and practices against the Bank’s. But declining lending volumes

may jeopardize this form of influence as well. As Phillips (2009:11) argues, “the “split between

money and knowledge is in fact quite complex, since…money leverages knowledge by

Page 10: Some Evolving Trends at the World Bank

10

providing it with a transition vehicle and a high profile in the eyes of the governments that

approve projects.”

To counter these trends, President Kim announced recently that the maximum loan book IBRD

can support will increase by $100 billion, reaching $300 billion in a decade (World Bank 2014).

This will allow IBRD leading to nearly double, from current levels of around $15 to $26 or $28

billion per year. This increase will not be financed by a capital increase but changes to

minimum equity-to-loan ration, allowing the World Bank to take on more loans relative to its

total capital. IBRD also plans to increase the single borrower limit by $2.5 billion for Brazil,

China, Indonesia, India, and Mexico, while making slight changes to loan terms. In total, World

Bank Group lending could increase to $70 billion over the next decade. This increased lending

will finance efforts to advance the twin goals advanced in the World Bank’s new corporate

strategy: ending extreme poverty and building shared prosperity, and will likely require more

rapid disbursement of loans and increased sale of advisory services. President Kim plans to do

this while cutting $400 million in costs over three years (about 8% of total spending).

B. Type of Lending

Eligible World Bank members may receive support from IBRD, IDA, or both. Currently, 79

countries are eligible for IBRD lending, 64 countries are eligible for IDA financing, and 17

countries are eligible for a blend of IBRD and IDA financing (IBRD 2013; IDA 2013).

IBRD offers several loan products, but the most common is the IFI Flexible Loan. These loans

have maturities of up to 30 years, a lending rate set at 6-month LIBOR plus either a fixed or

variable spread, and a front-end fee of 25 basis points. Countries are eligible for concessional

IDA financing (credits) or outright IDA grants on the basis of lack of creditworthiness and

relative poverty. The current operational cutoff for IDA eligibility is a per capita 2011 GNI of

$1,195 (with an exception for small island states). That said, there is no automatic graduation

rule linked to per-capita income—the operational cutoff is only a trigger for initiating broader

discussions about continuing IDA eligibility.

Table 5 describes the kinds of financing available from IDA. On average, over the last five

years, about 20% of IDA’s lending commitments have been in the form of outright grants.

Table 5: IDA loan terms

Loan Terms Interest Service Charge

IDA only 40 yrs including 10 yr grace period 0 75 basis points

Blend 25 yrs including 5 yr grace period 1.25% 75 basis points

Blend (hard terms) 25 yrs including 5 yr grace period 1.5% 75 basis points

Source: IDA (2013)

World Bank lending can be differentiated into three categories: investment lending,

development policy lending, and results-based lending. Investment lending focuses on

Page 11: Some Evolving Trends at the World Bank

11

providing the goods and services needed for development over the longer term. Physical

infrastructure was the initial focus of this kind of lending, but investment lending now supports

social infrastructure and institutional capacity building as well. Development policy lending or

development policy operations (once called adjustment lending), on the other hand, supports

reforms to government policy. Initially focused on macroeconomic policy (“structural

adjustment”), adjustment lending now supports sectorial, structural, and social reforms.

Adjustment lending is a small part of IDA’s portfolio, typically accounting for less than 20% of

its lending and accounting for only $1.9 billion, or 12% of its lending in 2013 (IDA 2013).

Adjustment lending has played an increasingly important role at IBRD, however. In 1980, less

than 4% of the IBRD portfolio was adjustment lending, a figure that had increased to 11% by

1985. By the early- to mid-1990s, adjustment lending reached 20-25% of total IBRD lending

(World Bank 2001). Since then, adjustment lending has continued to increase.

Figure 2 shows IBRD’s lending by lending type over the past 15 years. As the graph shows, the

mix of investment and adjustment lending now varies considerably by year, but with no real

discernible pattern. Development Policy Operations have averaged 40% of IBRD lending over

the past 15 years. In 2013, IBRD committed $8.1 billion in investment lending (53%) and $7.1

billion for development policy operations (46%). For the Bank as a whole, development policy

lending accounted for 35% of total commitments in 2012. Table 6 shows the top recipients of

this type of lending at the IBRA and IDA in 2013.

Figure 2: IBRD lending by type, 2000-2013

Source: IBRD (2013)

0

10

20

30

40

50

60

70

80

90

100

Pe

rce

nt

Program-for-Results

Development Policy

Operations

Investment Lending

Page 12: Some Evolving Trends at the World Bank

12

Table 6: Top Recipients of IBRA and IDA Development Policy Lending, 2013

Development Policy Operations: IBRD

Country Number Value (million USD)

Brazil 5 1,650

Poland 1 1,308

Turkey 1 800

Colombia 3 600

Morocco 4 593

Development Policy Operations: IDA

Country Number Value (million USD)

Myanmar 1 440

Vietnam 3 370

Tanzania 2 175

Rwanda 2 100

Nigeria 1 100

Mozambique 2 100

Malawi 2 100

In January 2012, IBRD and IDA announced a new results-based lending instrument, called

Program-for-Results (P4R). The Bank provides funds to governments for programs that

support government projects, but the disbursement of funds is linked to the achievement of

measureable and verifiable development results. The Bank hopes P4R will help build capacity

of partner countries, engender institutional change, reduce fraud and corruption, and enhance

overall development effectiveness. Table 7 shows P4R commitments over time, including

forecasted commitments for 2014.

Table 7: Program for Results Lending (million USD)

Organization 2012 2013 2014

IBRD 300 66 990

IDA 60 710 1,350

Total 630 776 2,350

In response to civil society concerns, the Bank agreed to a two-year pilot program for P4R,

capping disbursements at 5% of total lending and prohibiting the use of P4R for Category A

projects (those with the highest social and environmental risk). P4R programs do no not require

the application of Bank safeguards; instead, they rely on borrowers’ social and environmental

management systems to manage risks. While the Bank makes information about each program

publically available, each borrower decides what information about particular program

activities will be publically available.

Page 13: Some Evolving Trends at the World Bank

13

The Bank is currently undertaking a review of the eight approved P4R projects and the 16 under

preparation, with a draft expected by the end of the fiscal year. But experience with P4R has

been very limited. As of October 2013, only $19 million had been disbursed against achieved

results (World Bank 2013). The Bank hopes P4R will be part of a broader effort to move from

‘compliance’ to ‘results’ and to improve country ownership. It has already proved popular with

countries for reducing transaction costs and promoting greater country ownership. Many

important questions about P4R remain. It is not yet clear how well results can be measured and

verified. The program’s transparency, supervision, and accountability have also been

questioned. The Bank’s suite of safeguard systems do not apply to the program, and the

operational policy governing P4R does not clearly specify how alternatives at the country level

will be applied. Nevertheless, some analysts have suggested P4R could eventually account for

15% to 33% of total lending (BIC 2012).

C. Beneficiaries of Lending

Figure 3 shows the distribution of Bank lending by region. With the exception of smaller flows

to the Middle East and North Africa, bank lending is more or less evenly distributed. Africa,

however, receives almost no money from IBRD, while Europe and Central Asia and Latin

America and the Caribbean receive very little money from IDA.

Figure 4 shows the distribution of Bank projects by region. The picture that emerges is similar,

but shows that IDA tends to have more projects with smaller amounts of money.

Figure 3: World Bank Commitments by Geographic Region, 2013

$42

$4,591 $3,661

$4,769

$1,809

$378

$8,203

$729 $2,586 $435

$249 $4,096

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

Africa East Asia and

Pacific

Europe and

Central Asia

Latin America

and Carribbean

Middle East South Asia

Mil

lio

ns

of

US

D

IBRD IDA

$8,245

$5,320 $6,247

$5,204

$2,058

$4,474

Page 14: Some Evolving Trends at the World Bank

14

Figure 4: World Bank Operations by Geographic Region, 2013

Table 8 shows the top 10 recipients of cumulative IBRD, IDA, and total World Bank lending

between 1945 and 2013. Both IBRD and IDA lending has tended to be heavily concentrated in a

handful of countries; funding for the 10 largest lending recipients accounts for more than 50% of

total cumulative funding.

Table 8: Cumulative Lending, 1945-2013 (millions of USD)

IBRD IDA World Bank

(IBRD+IDA)

Brazil 56,268 India 44,474 India 93,137

Mexico 52,859 Bangladesh 19,656 Brazil 56,268

India 48,663 Pakistan 15,845 Mexico 52,859

Indonesia 45,423 Vietnam 15,122 China 52,392

China 42,445 Ethiopia 11,499 Indonesia 48,299

Turkey 36,277 China 9,947 Turkey 36,455

Argentina 29,277 Tanzania 9,633 Argentina 29,227

Colombia 19,449 Nigeria 9,573 Pakistan 24,207

South Korea 15,472 Ghana 7,611 Bangladesh 19,702

Philippines 15,102 Kenya 7,341 Colombia 19,469

subtotal 361,235 subtotal 150,701 subtotal 432,015

cumulative

lending

586,201 cumulative

lending

268,500 cumulative

lending

854,701

% of total 61.6 % of total 56.1 % of total 50.5

Source: IBRD (2013)

4

25 24 28

9 2

91

22 18 13

7 33

0

10

20

30

40

50

60

70

80

90

100

Africa East Asia and

Pacific

Europe and

Central Asia

Latin America

and Carribbean

Middle East South Asia

Nu

mb

er o

f O

per

atio

ns

IBRD IDA

47 42 41

16

35

95

Page 15: Some Evolving Trends at the World Bank

15

Table 9 shows the top 10 recipients of IBRD and IDA lending in FY2013. A few differences

between table 4 and table 5 are suggestive of broader changes in the recipients of World Bank

financing. Korea, for example, no longer takes new IBRD funding. IBRD has stepped up

funding for eastern European and central Asian countries like Romania, Poland, and

Kazakhstan. In the IDA column, Kenya and Mozambique, two high growth emerging markets

in sub-Saharan Africa, replace China (no longer using IDA financing) and Ghana.

Much has been made about the future of the World Bank’s relationship with middle income

countries, and this is going to be a key question for the Bank to address going forward.

President Jim Yong Kim has expressed strong support for a continued engagement with

middle-income borrowers.

Table 10 shows the top IBRD borrowers by share of loans outstanding over the last four years.

Seven of the top borrowers this year would have made the same list a decade ago. This table is

included to show that the change in composition of principal borrowers is a very slow process.

Table 9: Top 10 new IBRD and IDA commitments 2013 (USD millions)

IBRD Amount IDA Amount

Brazil 3,076 Vietnam 1,982

Indonesia 1,721 Bangladesh 1,567

China 1,540 Ethiopia 1,115

Poland 1,308 India 948

Turkey 1,301 Pakistan 744

Colombia 600 Kenya 615

Morocco 593 Tanzania 606

Djibouti 585 D.R. Congo 532

Yemen 500 Myanmar 520

Uruguay 408 Mozambique 337

Source: IBRD (2013); IDA (2013)

Table 10: Top IBRD Borrowers by Share of Loans Outstanding

2013 2012 2011 2010

Country $ bn % Country $ bn % Country $ bn % Country $ bn %

Mexico 14.9 10.5 Mexico 13.6 10.1 China 13 9.8 China 12.9 10.7

Turkey 12.9 9.1 China 13.1 9.8 Turkey 12.9 9.8 Brazil 11.3 9.4

China 12.9 9.1 Turkey 12.7 9.5 Mexico 12.2 9.2 India 10.8 9

Indonesia 12.4 8.7 India 11.7 8.7 India 11.4 8.6 Mexico 10.5 8.7

India 11.9 8.4 Brazil 10.1 7.5 Brazil 10.4 7.9 Turkey 10.2 8.5

Brazil 11.6 8.2 Indonesia 9.9 7.4 Indonesia 8.9 6.8 Indonesia 7.6 6.3

Columbia 7.8 5.5 Columbia 7.5 5.6 Colombia 7.5 5.6 Colombia 7.2 6

Poland 6.7 4.7 Poland 5.6 4.2 Poland 5.6 4.2 Argentina 5.3 4.4

Source: IBRD (2013); Moody’s (2012)

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WORLD BANK SOURCES OF FUNDING

The World Bank’s lending, investments, and general operations are funded by equity (paid-in

capital and retained earnings) and borrowing (debt issuance).

Equity

Each World Bank Group institution is owned by member countries—its shareholders.

Ownership and therefore voting rights are proportional to each shareholder’s capital

contributions. Table 11 and Table 12 show the top 15 shareholders of the IBRD and the IDA,

respectively.

The World Bank is governed by a Board of Governors (one from each country) and a Board of

25 Executive Directors. By convention, the Executive Directors of IBRD, IDA, IFC, and MIGA

are the same. This means that although the top shareholders for each institution may vary,

relative voting power based on IBRD contributions tends to determine influence across the

World Bank Group.

Table 11: Top 15 Subscriptions to IBRD Capital Stock as of June 30, 2013

# Member Total Subscription

Amount (million USD)

Paid In

(million USD)

Callable

(million USD)

% of Votes

1 United States 35,814 2,229 33,585 15.19

2 Japan 19,958 1,222 18,736 8.48

3 China 12,859 775 12,084 5.47

4 Germany 10,522 652 9,900 4.50

5 France 9,409 853 8,826 4.01

6 United Kingdom 9,409 602 8,807 4.01

7 Canada 7,040 433 6,607 3.01

8 India 6,845 413 6,432 2.93

9 Italy 5,663 351 5,312 2.43

10 Russia 5,529 334 5,195 2.37

11 Saudi Arabia 5,529 335 5,194 2.37

12 Netherlands 4,781 295 4,486 2.05

13 Brazil 4,104 246 3,859 1.77

14 Belgium 3,910 240 3,670 1.68

15 Spain 3,809 233 3,576 1.64

Source: IBRD (2013)

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17

Table 12: Top 15 IDA Subscriptions and Contributions as of June 30, 2013

# Member Total Subscription

Amount (million USD)

1 United States 46,543

2 Japan 40,890

3 United Kingdom 24,976

4 Germany 24,068

5 France 15,899

6 Canada 10,228

7 Italy 9,552

8 Netherlands 8,201

9 Sweden 7,460

10 Australia 4,077

11 Belgium 4,051

12 Switzerland 3,954

13 Norway 3,642

14 Denmark 3,387

15 Spain 3,161

Source: IDA (2012)

IBRD members purchase shares of the bank, but pay in only 6% of the cost of shares purchased.

The rest of the capital remains “on call.” If the IBRD suffers large losses—for example, if several

large borrowers defaulted on their loans at the same time—the Bank could collect “on call”

capital from its shareholders in order to pay its creditors, although the Bank has never needed

to make a call on capital.

In April 2010, World Bank members agreed to the first capital increase 1988 (Beattie 2010).

Members authorized a General Capital Increase of $58.4 billion ($3.5 billion paid in) and a

Selective Capital Increase of $27.8 billion ($1.6 billion paid in). This will increase the Bank’s

authorized capital to $278.4 billion and increase the Bank’s $11 billion of paid-in capital by $5.1

billion. Members also agreed to reforms that will increase the voting power of developing

countries, from 44.06% to 47.19%. As part of the deal, China has become the third-largest

shareholder, after the United States and Japan. The complements prior reforms enacted in 2008,

when the voting power of developing countries was increased by 1.46% and an additional 25th

seat on the Board of Executive Directors was added for sub-Saharan Africa, bringing the

region’s total number of seats to three.

It is highly unlikely that the Bank will receive another capital infusion in the near future.

President Kim recently told reporters that he sees “no appetite” for another capital increase.

“It’s a tough environment,” he said. “I think it’s not the time for us to have a serious discussion

about a capital increase” (Rastello 2012).

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18

IDA raises funds through “replenishments” that occur every three years. The level of funding it

receives depends on how much its donors commit. The sixteenth IDA replenishment, finalized

in December 2010, netted SDR 32.8 billion ($49.3 billion) for FY2012-2014. The seventeenth IDA

replenishment, recently completed, brought in $52 billion. (SDR, or special drawing rights, are a

kind of foreign exchange asset created by the IMF; at current rates, 1SDR = $1.53; see IMF 2012.)

This amount includes transfers from the IBRD and IFC of $3 billion. Table 13 provides the

history of IDA replenishments.

Table 13: IDA Replenishments

Replenishment Period Amount (million SDR)

Initial 1961-1964 763

IDA1 1965-1968 924

IDA2 1969-1971 1,428

IDA3 1972-1974 2,738

IDA4 1975-1977 4,218

IDA5 1978-1980 6,193

IDA6 1981-1984 9,549

FY84 Account 1984 1318

Special Account 1984 519

IDA7 1985-1987 8,997

Special Facility for Africa 1986-1988 921

IDA8 1988-1990 1,677

IDA9 1991-1993 14,049

IDA10 1994-1996 16,274

Interim Trust Fund 1997 2228

IDA11 1997-1999 12,395

IDA12 2000-2002 15,312

IDA13 2003-2005 17,833

IDA14 2006-2008 22693

Multilateral Debt Relief Initiative 2007-2044 22,737

IDA15 2009-2011 27,300

IDA16 2012-2014 32,800

IDA 17 2015-2018 36,550

Source: IDA (2012); Marshall (2008)

Both IBRD and IFC make transfers to IDA on a yearly basis. Over the IDA 17 period, about $3

billion will be transferred from IBRD and IFC, an amount that is equal in real terms to transfers

in the prior period. As IBRD profitability declines (see “Operating Income” below), its ability to

fund IDA will be constricted. Some of the shortfall could be offset by rising IFC transfers to

IDA, but any significant increase in IDA funding will require increasing donor contributions.

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19

Borrowing

The World Bank raises the majority of its capital by issuing debt to both institutional and retail

investors. Since 1947, the Bank has issued bonds in 54 different currencies, and in FY2012 it

issued bonds in 23 currencies. Funding levels depend on lending activity as well as broader

macroeconomic conditions. Bond maturities generally range from 2 to 10 years, and the issue

size is typically USD$1-3 billion. Moody’s rates the World Bank Aaa, the highest possible

rating. It cites the Bank’s strong capital base, status as a preferred creditor, and sound financial

management.

Operating Income

The World Bank’s operating income depends primarily on the margin it makes on the loans it

issues (net of funding costs), the return on its investments, and its noninterest expenses, of

which the largest is staff costs. Operating income has been positive every year since Moody’s

began evaluating the Bank, and it has averaged around $1.1 billion over the past five years.

Operating income was $876 million in 2013.

Figure 5 shows the Bank’s real loan income has declined over the past decade. Figure 6 shows

that this has translated into a decline in real operating income. As Moody’s notes, “IBRD’s

profitability is low relative to historical averages, but for a development-mandated institution

Moody’s primary consideration of profitability is not the magnitude, but that it does not

contribute to the erosion of the capital base” (Moody’s 2012). Declining operating income is

largely a function of declining real lending.

Figure 5: IBRD Loan Income (millions of 2013 USD)

Note: Amounts adjusted to 2013 USD using the US CPI-All Urban Consumers index (base 1982-1984)

Source: IBRD (2013)

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

Mil

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ns

of

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Page 20: Some Evolving Trends at the World Bank

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Figure 6: IBRD Operating Income (millions of 2013 USD)

Note: Amounts adjusted to 2013USD using the US CPI-All Urban Consumers index (base 1982-1984)

Source: IBRD (2013)

In order to avoid further decreases in operating income given current constraints on lending,

the Bank could increase its loan price (not likely given competition from other lending sources),

reduce transfers (especially to IDA), reduce overheads (including staffing costs and other

administrative expenses), or increase lending volume.

INTERNATIONAL FINANCE CORPORATON

The International Finance Corporation focuses on private sector investment in emerging

markets. Its three main lines of business include investment services, advisory services, and

asset management. Table 14 shows nominal IFC investments by type over the last five years.

In FY2013, IFC committed $18.3 billion of its own funds in loans and equity investments, an

increase of nearly 75% in nominal terms since 2009. President Kim announced recently that IFC

lending could double over the next 10 years (World Bank 2014). IFC commitments include both

loans (typically with maturities of 7 to 12 years) and equity investments (typically a 5% to 20%

stake). IFC also offers guarantees and other forms of structured finance (IFC 2013).

IFC also tracks “core mobilization,” financing from other sources (not IFC money) that becomes

available to IFC clients as a result of IFC’s involvement in a project. This includes a variety of

financial tools, such as parallel loans (arranged by IFC for a fee, but where IFC is not the lender)

and loan participation (IFC acts as the lender of record and administers the entire loan, but the

loan includes funding from non-IFC sources). Core mobilization was $6.5 billion in 2013, a

nearly 65% increase in nominal terms over the past five years

$0

$500

$1,000

$1,500

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2013

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2008

2007

2006

2005

2004

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2002

2001

2000

1999

1998

1997

1996

1995

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Table 13: IFC investments and mobilization by type (millions of USD)

Type 2009 2010 2011 2012 2013

IFC Commitments 10,547 12,664 12,186 15,462 18,349

Loans 5,959 5720 4,991 6,668 8,502

Equity 2,069 2974 1,968 2,282 2,732

Guarantees/other 2,519 3969 5,227 6,512 7,079

Core Mobilization 3,964 5378 6,474 4,896 6,504

Loan Mobilization 2,401 3,157 4,718 3,505 3,578

AMC 8 236 454 437 768

Other Initiatives 1,555 1,985 1,302 954 2,158

Total 14,511 18,042 18,660 20,358 24,853

Source: IFC (2013)

IFC’s Asset Management Company (AMC) mobilizes and manages third-party capital from

institutional investors, like sovereign finds and pension funds. AMC manages seven funds,

with $5.5 billion under management. These are (1) the Equity Capitalization Fund and (2) the

Sub-Debt Capitalization Fund, which both strengthen banks, (3) the ALAC Fund, investing in a

range of sectors across Africa, Latin America, and the Caribbean, (4) the African Capitalization

Fund, investing in commercial banks, (5) the Russian Bank Capitalization Fund, investing in

commercial banks, (6) the Catalyst Funds, investing in emerging market private equity funds

focused on climate change and resource efficiency, and (7) the Global Infrastructure Fund,

making debt and equity investments in emerging market infrastructure.

IFC lending has rapidly increased as a proportion of total World Bank Group lending over the

past decade, indicating a strong belief in the importance of private sector investment for

international development. Figure 7 demonstrates this. In 2000, IFC commitments accounted

for less than 13% of total World Bank Group commitments. This rose to 30% over the next eight

years. While IFC lending continued to increase through the global financial crisis, it did not do

so at the same rate as IBRD lending, so the share of IFC commitments relative to World Bank

Group commitments dropped. But over the last three years, IFC lending has continued to rise

as IBRD lending has fallen, and IFC now accounts for nearly 35% of total World Bank Group

commitments. If MIGA is included in this calculation, around 40% of World Bank Group

investments now support private sector ventures.

A significant portion of IFC’s investments support financial intermediaries (third party financial

institutions like banks or private equity funds, and the percentage of IFC’s total investment

going into financial intermediaries is also increasing. In 2013, more than 60% of IFC’s

commitments supported financial intermediaries. Analysis by the Bretton Woods Project (2014)

shows that $36 billion has been invested by the IFC in financial intermediaries since 2009.

Page 22: Some Evolving Trends at the World Bank

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Figure 7: IFC commitments as percentage of total World Bank Group commitments

Source: IFC (2013)

MULTILATERAL INVESTMENT GUARANTEE AGENCY

The goal of the Multilateral Investment Guarantee Agency (MIGA) is to stimulate foreign direct

investment into developing countries. It does this providing political risk insurance

(guarantees) to protect against expropriation, breach of contract, non-honoring of financial

obligations, currency inconvertibility, terrorism and civil disturbance, and other non-

commercial risks. In 2013, MIGA issued $2.8 billion in guarantees, with an additional $3.5

million issued under MIGA-administered trust funds (MIGA 2013). This is double (in nominal

terms) the $1.4 billion in guarantees issued five years ago, in 2009.

Over the past five years, MIGA has supported about 27 new projects and 33 total projects per

year, and it supported 30 total projects and 26 new projects in 2013. By financing volume,

nearly three quarters of MIGA guarantees issues in 2013 supported IDA-eligible counties,

including more than 40% to conflict-affected states. Nearly 55% supported projects in Sub-

Saharan Africa. Recently, MIGA support has shifted to infrastructure (46% of new volume in

2013) and oil and gas (23% of new volume), moving away from the financial sector (17% of

volume in 2013 versus 89% following the 2008 financial crisis).

MIGA’s strategy for 2014-2017 calls for work on infrastructure, power generation,

transportation, manufacturing, agriculture, and finance. MIGA will work to expand its product

line and reach a broader client base. It will continue to prioritize work in IDA-eligible countries

and fragile and conflict-affected states.

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TRUST FUNDS

Trusts funds were initially designed to give bilateral donors a mechanism for co-financing

specific projects. For example, the first World Bank trust fund, established in 1960, allowed co-

financing of the Indus Basin Project in Pakistan. In the 1990s, the trust fund model expanded as

the Bank took on new roles, particularly in the environmental arena. But truly explosive

growth in trust funds has happened only over the last half decade. Since 2007 alone, the total

value of World Bank Group trust funds has increased almost 73%, growing from $17.3 billion to

$29.2 billion (World Bank 2012c). Trust funds are especially important part of the Bank’s

strategy for addressing global public goods issues, like immunization or climate change, that

are not easily addressed through the Bank’s traditional lending instruments.

The increasing importance of trust funds at the World Bank mirrors broader changes in global

aid design, particularly the rise of so-called “multi-bilateral aid”—bilateral funding earmarked

for a particular purpose that is funneled through multilateral agencies. Multi-bi aid increased

from $9 billion in 2007 to $16.7 billion in 2010, and it now accounts for around 12% of gross

ODA (excluding debt relief). Multi-donor trust funds constitute about 50% of all Bank trust

funds, compared to 30% just five years ago. About a quarter of all multi-bi aid flows through

the World Bank.

Table 15 provides a snapshot of the World Bank Group’s three major types of trust funds

categories: IBRD/IDA trust finds, financial intermediary funds (FIFs), and the IFC trust funds.

Table 16 shows how the World Bank Group’s trust funds changed between 2008 and 2012, in

absolute terms and as a percentage change from 2008.

Table 15: Overview of World Bank Group Trust Funds, 2012

Source: World Bank (2012c)

Table 16: Change in World Bank Group Trust Funds, 2012 v. 2008

Number Funds Held

(USD billions)

FY12 Contributions

(USD billions)

FY12 Disbursements

(USD billions)

IBRD/IDA TFs -37 (-4.8%) +1.0 (+11.5%) +0.4 (+10.0%) +1 (+30.3%)

FIFs +5 (+10.2%) +7.2 (+67.9%) +2.7 (+60%) +2 (+62.5%)

IFC TFs +47 (+22.0%) +0.5 (+100%) +0.1 (+50%) +0.1 (+50%)

TOTAL +45 (+4.4%) +8.5 (+41%) 3.2 (+36.2%) +3 (+44.7%)

Source: World Bank (2012c)

Number Funds Held

(USD billions)

2012 Contributions

(USD billions)

2012 Disbursements

(USD billions)

IBRD/IDA TFs 720 9.7 4.4 4.3

FIFs 54 17.8 7.2 5.2

IFC TFs 290 1 0.3 0.3

TOTAL 1064 29.2 11.9 9.7

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A. IBRD/IDA Trust Funds

IBRD/IDA trust funds account for 33% of World Bank Group trust funds by value. Since 2008,

funds held in trust in IBRD/IDA trust funds have increased from $8.7 billion to $9.7 billion, cash

contributions have increased from $4.0 billion to $4.4 billion, and disbursements have increased

from $3.3 billion to $4.3 billion (World Bank 2012c; IEG 2011). Ongoing efforts to consolidate

trust funds caused the overall number of IBR/IDA trust funds to decline to 720 in 2012, down

from a peak of 780 in 2010. While 84 new trust funds were established, 122 existing funds were

closed (World Bank 2012c).

The IBRD and IDA use two types of trust funds: Bank-Executed Trust Funds (BETFs) and

Recipient-Executed Trust Funds (RETFs). BETF disbursements directly support Bank programs,

typically in ‘knowledge activities’ like non-lending technical assistance. A significant portion of

BETF disbursements are used to support Bank supervision of RETF-funded projects. BETF

expenditures reached $646 million in 2012, equal to 23% of total World Bank administrative

expenditures.

Funds in RETFs, on the other hand, are passed on to third parties for development activities

that are usually monitored and evaluated by the Bank. RETF disbursements reached $3.6

billion in 2012, up 13% from the year before. They accounted for 10% of the World Bank’s total

project financing (a 9% increase from 2011). Two thirds of RETF disbursements support

activities in IDA countries.

B. FIFs

The World Bank’s role in financial intermediary funds is as a trustee: it receives, holds, invests,

and transfers funds, often to multiple implementing agencies. As a trustee, the World Bank

does not supervise the use of funds, but it may serve as a partner in implementation. The Bank

may also provide additional administrative or financial services or serve as the Secretariat. FIFs

typically support global programs, on topics like health (51% of FIFs) and the environment and

climate change (32% of FIFs) (World Bank 2011c).

FIFs account for 61% of World Bank Group trust funds by value, and they are also the major

source of trust fund growth at the Bank. Over the past six years, funds held in trust in FIFs

have more than doubled, from $8.9 billion in 2007 to $17.8 billion in 2012. Cash contributions

from donors have also more than doubled over the same period, and transfers to implementing

agencies and beneficiaries have increased by more than 50%. Some 96% of contributions are

from governments. The United States is the largest donor, with cumulative contributions of

$6.4 billion over the last five years. Other big contributors are the UK ($3.2 billion), France ($2.9

billion), and Japan ($2.3 billion).

As table 17 illustrates, the four largest FIFs hold 86% of all FIF funds. Still, three new FIFs were

established in 2012: the Eastern and Southern Mediterranean Financial Intermediary Trust Fund

Page 25: Some Evolving Trends at the World Bank

25

(EBSM), the Global Partnership for Education Fund (GPEF), and the Green Climate Fund Trust

Fund.

Table 17: The Four Largest FIFs

Fund

Established

Cumulative Funding

(USD billions)

Global Fund to Fight AIDS, Tuberculosis

and Malaria (GFATM)

2002 22.5

Global Environment Facility (GEF) 1991 11.3

Debt Relief Trust Fund (DRTF) 1996 7.7

Climate Investment Funds (CIF) 2008 5.2

Other --- 7.4

Total --- 54.1

Source: World Bank (2012c); World Bank (2011c)

C. IFC TFs

IFC trust funds account for only about 1% of the total value of the World Bank Group’s trust

funds, but they are important because they support 80% of IFC’s advisory services. IFC offers

these services to businesses and governments in four categories: access to finance, investment

climate, public-private partnerships, and sustainable business.

The number of IFC trust funds increased from 213 in 2008 to 290 in 2012, and the total value of

IFC trust funds doubled over that same period, from $0.5 billion to $1 billion. Disbursements

peaked at $1 billion in 2010, but are typically around $0.3 billion per year (World Bank 2012c).

Over the past five years, the United Kingdom has been the largest donor to IFC trust funds,

providing 25% of all contributions. The MasterCard Foundation was the 4th largest donor in

2012, providing $37.5 million for the Partnership for Financial Inclusion in Sub-Saharan Africa.

D. Trust Fund Reform

From the perspectives of the World Bank, development donors, and development recipients,

trust funds have both advantages and disadvantages (see World Bank 2012c; World Bank 2011c;

IEG 2011).

Advantages: Trust funds…

Help fill gaps in existing development efforts by, for example, providing funds to post-

disaster or post-conflict countries that are ineligible for IBRD/IDA support or by

catalyzing investment in global public goods like climate change mitigation

Promote the coordination/harmonization of bilateral aid efforts and support the

formation of new development partnerships

Secure broader support for and complement existing Bank work

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26

Allow doors to use the broader capacities of multilateral institutions

Reduce transaction and administrative costs and provide economies of scale

Disadvantages: Trust funds…

Are often not well-integrated into other Bank efforts and activities or into existing

country programs

Often do not allow recipient countries to participate in their design and use, particularly

for global funds

Reduce the visibility of individual donors and therefore the credit they receive

Reallocate existing ODA but do not increase it

Reduce transparency, especially because data is difficult to compile and sources conflict

Are not (or are not as easily) subjected to World Bank safeguards

In 2010, the Independent Evaluation Group undertook an evaluation of the World Bank’s trust

fund portfolio and proposed a variety of changes, some of which are now being implemented

(IEG 2011). For example, the World Bank is creating Umbrella Facilities in an effort to better

align the interests of trust fund donors with existing Bank priorities. Only a few such facilities

have been established so far.

STAFFING

By the time of the first annual World Bank meeting in Savannah, Georgia in 1946, the World

Bank had 38 member countries and 72 staff members (Phillips 2009). By the 1960s, as Bank

lending began to pick up, so did the growth in the size of its staff. Between 1960 and 1970, the

number of professional staff more than tripled over the decade, growing from 283 to 917

(Mallaby 2004). Staff growth continued in the 1970s as President Robert MacNamara added

new departments and responsibilities: the Rural Development Department in 1973, the Urban

Population Department in 1975, and the Population, Health, and Nutrition Department in 1979.

Jim Wolfensohn also oversaw growth in the Bank’s staff as it expanded to new areas, especially

the environment (in 1985 the Bank had only five environmental staff). Wolfensohn also

oversaw a push to move staff out of the Washington, D.C. headquarters and into the field. In

1995, for example, none of the Bank’s country directors were based outside of Washington. By

2003, 71% of them were. Today, the World Bank employs some 10,000 people, around 40% of

whom work in field offices in 110+ countries.

The Bank does not publish detailed data on its staff, but it is possible to make some

observations based on its financial statements. Staff costs are lower now than they were in the

1990s, but the Bank is increasingly reliant on outside consultants for its work. The average staff

cost over the last four years has been $490 million per year. In the first four years of the 1990s,

by comparison, the average staff cost was more than $660 million per year (or more than $1100

million per year in real terms). Consulting costs in the early 1990s, though, averaged $84

Page 27: Some Evolving Trends at the World Bank

27

million per year (or $130 million per year in real terms). In 2012, the Bank spent more than $250

million on consultants. Of course, it is not clear from existing data to what extent changes in

staff costs correlate with the number of staff or reflect instead cuts to salaries and benefits. It is

also not clear how changes in staff costs have impacted staff quality.

An ongoing reorganization and restructuring process is leading to the creation of 14 global

practices, working on areas like agriculture, environment and natural resources, and

governance. These global practices replace the previous “sector” structure and are designed to

reduce silos that prevented collaboration and exchange of knowledge and learning across

regions and World Bank group institutions. The Bank will also have “cross cutting solution

areas: climate change, gender, jobs, public private partnerships, and fragility, conflict, and

violence (Harding 2014; FT 2014). The reorganization has also brought the departure of several

senior Bank managers.

A recent staff survey illustrates the Bank staff feel uncertainty about the direction in which the

Bank is headed (Gillison 2014). Among the findings are that 60% of staff think the Bank places

more emphasis on the “number and volume of transactions” than on development. Some 58%

do not understand the direction chosen senior management, and 68% do not think senior

management acts as a unified team. Less than 40% of Bank staff thinks that they are rewarded

according to their job performance. It remains to be seen whether President Kim can

successfully shepherd the World Bank through this reorganization process and what sort of

institution will emerge when this is completed.

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28

SOURCES

AfDB. (2012). Annual Report.

http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/AfDB%202012%2

0EN_WEB.pdf

Asian Development Bank. (2013). Annual Report.

http://www.adb.org/sites/default/files/adb-financial-report-2013.pdf

Beattie, Alan (2010). World Bank wins rise in capital. Financial Times.

http://www.ft.com/cms/s/0/c8b8937e-5095-11df-bc86-00144feab49a.html

Bank Information Center. (2012). P4R Update.

http://www.bicusa.org/updates/p4r-update-world-bank-approves-program-for-results-

policy/

BNDES (2012). Performance.

http://www.bndes.gov.br/SiteBNDES/bndes/bndes_en/Institucional/The_BNDES_in_Nu

mbers/

Bretton Woods Project. (2014). Follow the Money: The World Bank Group and the Use of

Financial Intermediaries. http://www.brettonwoodsproject.org/2014/04/follow-the-

money/

China Development Bank (2011). Annual Report 2011 Financial Summary.

http://www.cdb.com.cn/english/NewsInfo.asp?NewsId=4103

Dyer, Geoff et al. (2011). China’s lending hits new heights. The Financial Times.

http://www.ft.com/intl/cms/s/0/488c60f4-2281-11e0-b6a2-00144feab49a.html

European Bank for Reconstruction and Development. (2012). Annual Report.

http://www.ebrd.com/downloads/research/annual/fr12e.pdf

Financial Times. (2014). Editorial: Restructuring Hell at the World Bank. April 9, 2014.

http://www.ft.com/intl/cms/s/0/9244beca-bff5-11e3-b6e8-

00144feabdc0.html#axzz30sr7H8oO

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