World Bank and Poverty

Executive Summary

This research paper is focused on the role World Bank in Poverty Reduction, as the primary role of the World Bank is to enable development and progress in the backward countries and regions of this world. This paper explains the brief history of the World Bank, and World Bank’s five institutions. It also investigates how the World Bank is continually trying to reduce poverty by lending billions of dollars to poor countries .This paper gives some of the facts of the under-developed countries and the strategies which World Bank has incorporated to reduce the poverty in those countries.

Introduction

The World Bank was incepted with the mission of achieving a world without poverty and to provide bare minimum living standards to every person in this world encompassing the basic necessities like food, shelter and clothing. Since the inception of the bank 50 years ago, there have been drastic and fundamental shifts about how the World Bank would achieve its primary goals. The World Bank, as it is, is highly influenced by the super powers of this world and the political implications of this fact are quite evident in the decisions taken by the bank to achieve its mission. This fact highly complicates the way the bank charters its strategies towards poverty elimination and the targeted regions of this world which would be affected by this charter. The political and academic sects of this world are the primary influencing factors in the World Bank’s role in eliminating poverty and illiteracy in this world and reaching the Millennium Development goals set by the bank members.

History and Organization

To better understand the role of the World Bank in today’s world, it is important to refresh a little bit about the history and inception of the World Bank. The bank was conceived in 1944 to reconstruct war-torn Europe. Since then the bank has been one of the largest sources of assistance for all developing nations around the world. The World Bank is often referred to as �one of the specialized agencies of the United Nations’. It has 184 member countries that are responsible for the financing and expenses of the bank. The World Bank group also referred to as the Bank Group, has since then become the world’s largest sources of funding and knowledge for developing countries. The World Bank is mainly comprised of its five primary Institutions:

• International Bank for Reconstruction and Development (IBRD)

• International Development Association (IDA)

• International Finance Corporation (IFC)

• Multilateral Investment Guarantee Agency (MIGA)

• International Centre for Settlement of Investment Disputes (ICSID)

The term "World Bank" generally refers to the IBRD and IDA, whereas the World Bank Group is used to refer to the institutions collectively. The IBRD and IDA provide low-interest loans, interest free credit and grants to the developing countries. The bank has around 10,000 professionals working in the different offices around the world. The IFC is responsible for promoting private sector investment supporting high-risk sectors and countries. The MIGA is responsible for providing political risk assurance to investors and lenders who wish to invest and lend in the developing nations. The ICSID is primarily responsible for settling investment disputes between foreign investors and the host nations. It is very important to outline some of the major areas in which the World Bank has actively participated and strived to bring progress in:

• Debt and Health Relief for the under-developed nations: The World Bank has time and again invested significant resources to provide debt relief to the poor countries which would enable the countries to divert those repayment dollars to housing, education, health and good welfare of their citizens.

• Corruption and Fraud: The bank has constantly strived to carry out anti-corruption efforts and has implemented strategies to prevent fraud in the projects which are financed by the bank in different countries.

• Variety of other work: The Bank actively involves in diverse range of projects in developing countries which vary from financing small businesses to raising AIDS awareness and supporting education for girls. Healthcare initiatives and rebuilding nations affected by natural disasters are some of the primary areas of focus for the bank.

The Role of the World Bank in Poverty Reduction

The world is place which has both the rich and the poor masses. There are around 2.6 billion people in this world which make less than $1 a day. The repercussions of this extremity cause around 33000 children to die every day from hunger and diseases which could have been easily avoided otherwise. Statistics have shown that on an average at least one woman dies every minute during child birth. Poverty causes around 100 million children to not seek education. This involves a majority of girl children who are forced to drop out from schools since their families can’t afford to send them to school and provide education. Poverty causes a lot of derivatives or side effects in the life of the poor people. Due to lack of inadequate financing these people are left without proper health care, education, jobs and cause them to be vulnerable to corruption, violence and mental pressure leading to high number of suicide rates. The poor governance and waste of public resources due to inadequate management further worsens the situation. Figure1 below depicts the distribution of the percentage of people living under $1 per day. It’s quite evident that the developing regions of the world which mainly includes Latin America, Africa and Asia are the ones which show high density of such population.

Figure 1. World distribution of percentage of people living under $1 per day

Some of the skews which greatly affect the poverty distribution in the world are influenced by the way the economic growth has happened in these regions. The GDP of the 40 most heavily indebted poor countries which account for around 567 million people is less than the wealth of the seven richest people in the world combined. The fact that nearly half of the world lives on less than two dollars a day is quite so not surprising. Almost a billion people entered the 21st century without the ability to