What is the point of the World Bank? President Ajay Banga simplifies

The point of the existence of the World Bank is manifold, as explained by President Ajay Banga. He explained how the organisation came to be and how its objectives have changed since. The first iteration was to help Europe and Japan rehabilitate after World War II, but today its aim is to eradicate poverty and assist nations in need. 

In his interview series, ‘People by WTF’, Nikhil Kamath asked Banga how he would explain the point of the World Bank if he had to simplify it to somebody with no context. “Make jobs for young people, create jobs, help to do that. It's very simple. It's to kill poverty,” said Banga.

“That's the idea. Get rid of poverty. And the best way to get rid of poverty, the best way to put a nail in the coffin of poverty is to give somebody a job because then you get not only the earnings that allow them to subsist and have a family and care for them, but you get them hope and optimism,” he said. 

But that was not always the objective of the World Bank.

As explained by Banga, the original iteration was the International Bank of Reconstruction and Development (IBRD). “That’s the Bretton Woods thing you hear about that was created to help rebuild Europe and Japan after the Second World War. They weren't really thinking about the developing world at that time because Europe and Japan had been decimated by the war,” he said. 

He said the World Bank would eventually go on to finance the bullet trains of Japan and the nuclear power plants in France early on. After a period of 15-20 years, in the early 60s, it was evident that Europe and Japan were back in the rebuilding and growth phase and the attention moved to the rest of the emerging world, and more parts of the bank were created.

One of the parts is called the International Development Association (IDA) that caters for the poorest countries in the world. It has 78 countries today, said Banga. 

The third thing that was created was the International Finance Corporation (IFC) that goes to the private sector. “It enables the private sector to invest by de-risking emerging market stuff. India is a classic example of that. Most people don't know but HDFC originally started with an IFC investment, and today is your largest private bank and has got an enormous footprint both in mortgages and helped to create the mortgage market in some ways in India. It also did a great job in the private banking side of financial services,” said Banga. 

The fourth part that got created was MIGA, the Multilateral Insurance Guarantee Agency. It provides political risk insurance to a company or an entrepreneur.

DON'T MISS | Is there a way to end poverty? World Bank President Ajay Banga has some ideas

“So think about the World Bank as having five parts and only the first part started soon after the second world war,” said Banga, adding that through the organisation about $120 billion gets put into the marketplace every year. There's about 25,000-30,000 people working across the world on this, he said. 

“And it runs the full gamut from the poorest countries getting one-third of money as grants all the way to the middle income countries like IBRD, like India. India was an IDA country once upon a time and now it is a donor to IDA. Turkey, China, South Korea were all IDA countries now donors. IBRD is still what India does get but India is pivoting more and more towards the private sector with IFC and MIGA and so you can see the evolution of growth in countries through the manner in which the bank deals with them. It's quite interesting,” said Banga.