When the International Bank for Reconstruction and Development (IBRD) was launched at Bretton Woods in 1944, it introduced a model for development finance that has lasted for seven decades. There have only been two major adjustments to this model to form the World Bank Group as we know it today. First was the creation of a dedicated financing arm for private-sector investment with the establishment of the International Finance Corporation (IFC) in 1956. And second was the creation of the International Development Association (IDA) in 1960, which introduced the differentiation of financings terms in sovereign lending according to the borrowing country’s level of income. The World Bank continues to operate according to the core model some 71 years after the founding of IBRD and 55 years after the founding of IDA.
But now as the World Bank approaches its 75th anniversary, it faces a rapidly changing global landscape, with developing countries quickly becoming less reliant on loans. Projections show the number of countries qualifying for concessionary loans through the International Development Association (IDA) arm of the bank will drop from 77 now to 40 in 2019. This and other changes raise the question: can the bank continue to be an accurate reflection of development needs, or will it represent an institutional model that is declining in relevance?
This paper examines courses of action that could help the bank could adapt to shifting development priorities. It investigates how country eligibility standards might evolve and how the bank might start to break away from its traditional “loans to countries” model. It also considers the World Bank’s own financing needs and the role the financing of the institution plays in determining how the bank operates. These illustrative examples of reforms are intended to motivate the bank’s shareholders to think differently about the core model in terms of what is essential and what should be adapted.