Article 7: International Financial institutions

Article 6: Liberalisation, Privatisation and Globalisation
December 7, 2018
Article 8: Banking – Part I
December 11, 2018

Current Affairs for Engineering Service Exam

Article 7:  International Financial institutions

Video Lectures and Test Series for ESE 2019


  1. World Bank
  2. IMF
  3. ADB
  4. AIIB
  5. NDB
  6. Quiz

A.World Bank

  • World Bank has official goal of reduction of poverty.
  • It provides loans to developing countries for capital programmes.
  • The World Bank aims to eliminate poverty by helping people help themselves.

World Bank comprises-

  1. International Bank for Reconstruction and Development (IBRD)
    • IBRD is the primary arm of the WBG.
    • There are 189 member countries that are shareholders in the IBRD
  2. International Development Association (IDA)
  3. International Finance Corporation (IFC)
  4. Multilateral Investment Guarantee Agency (MIGA)
  5. International Centre for Settlement of Investment Disputes (ICSID)

Functions of World Bank:

  • To assist in the construction and develop­ment of the territories of its members by facilitating investment of capital for productive purposes, including the ‘restoration of economies destroyed or disrupted by war’, and the encouragement of the “development” of productive facilities and resources in less developed countries.
  • To promote private investment and long run balanced growth of international trade and BOP equilibrium by means of guarantees or partici­pation in international loans and investments.
  • To arrange loans made or guaranteed by it so that more useful and urgent projects receive preference.
  • To provide finance to projects from its own capital and by participating with other members.
  • Investing in people, particularly through basic health and education
  • Focusing on social development, gover­nance and institution-building as the major elements of poverty alleviation
  • Strengthening the ability of the govern­ments to deliver quality services with greater efficiency and transparency

B.The International Monetary Fund(IMF)

  • The International Monetary Fund is an organization of 189 member countries.

  • The IMF’s goal is to prevent economic disasters by guiding its members.
  • It stabilizes the global economy in three ways-
  1. It monitors global conditions and identifies risks.
  2. It advises its members on how to improve their economies
  3. It provides technical assistance and short-term loans to prevent financial crises.


  • Special drawing rights (SDR) is a type of monetary reserve currency created by the International Monetary Fund (IMF).
  • It is essentially an artificial currency instrument
  • It is built from a basket of important national currencies.
  • It can be held and used by member countries, and certain designated official entities —but it can not be held by private entities or individuals.
  • Members can exchange SDRs for freely usable currencies among themselves and with prescribed holders. IMF members can also use SDRs in operations and transactions involving the IMF, such as the payment of interest on and repayment of loans.

IMF Quota:

  • The IMF is a quota-based institution. Quotas are the building blocks of the IMF’s financial and governance structure.
  • An individual member country’s quota broadly reflects its relative position in the world economy.
  • Quotas are denominated in Special Drawing Rights (SDRs).
  • Each member pays their specified quota to the IMF.
  • A member’s quota in the IMF determines the amount of its subscription, its voting weight, its access to IMF financing, and its allocation of Special Drawing Rights (SDRs).
  • For example India holds 13,114.4 millions of SDR as quota which is 2.76 % of total quota and has 2.64% of total votes.
  • A member state cannot unilaterally increase its quota—increases must be approved by the Executive Board of IMF and are linked to formulas that include many variables such as the size of a country in the world economy.
  • In IMF, major decisions require an 85 percent supermajority.

C.Asian Development Bank

  • ADB is an international development finance institution whose mission is to help its developing member countries reduce poverty and improve the quality of life of their people.

  • Headquartered in Manila, and established in 1966, ADB is owned and financed by its 67 members, of which 48 are from the region and 19 are from other parts of the globe.
  • ADB’s main partners are governments, the private sector, non government organizations, development agencies, community-based organizations.

Functions of Asian Development Bank (ADB)

  • To make loans and equity investments for economic and social development of its developing members countries.
  • To provide for technical assistance for the preparation and implementation of development projects and advisory services.
  • To respond to the request for assistance in coordinating developmental policies and plans in developing member countries.
  • It provides loans to Asian countries on concessional interest rates.

ADB provides:

  • Loans
  • Technical assistance
  • Grants

D.The Asian Infrastructure Investment Bank(AIIB)

  • The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank with a mission to improve social and economic outcomes in Asia.
  • Founded by China in 2014 and is headquartered in Beijing.
  • Its modus operandi is ”lean, clean and green”: lean – a small efficient management team and highly skilled staff; clean – an ethical organization with zero tolerance for corruption; and green – an institution built on respect for the environment.




  1. AIIB has officially approved 57 nations as prospective founding members.
  2. AIIB founding members include China, India, Malaysia, Indonesia, Singapore, Saudi Arabia, Brunei, Myanmar, the Philippines, Pakistan, Britain, Australia, Brazil, France, Germany and Spain.
  3. Founding members have priority over nations that sign up later because they will have the right to set the rules for the bank.

Voting pattern:

  • The voting shares are based on the size of each member country’s economy (GDP in PPP terms) and not on the basis of contribution to the bank’s authorized capital. China, India and Russia are the three largest shareholders.


  • Make, co-finance or participate in direct loans
  • Invest in the equity capital of an institution or enterprise;
  • Guarantee loans for economic development
  • Deploy Special Funds resources in accordance with the agreements determining their use
  • Provide other types of financing as may be determined by the Board of Governors.

E.New Development Bank

  • The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states (Brazil, Russia, India, China and South Africa)
  • Founded in 2014 and is headquartered in Shanghai.


  • The Agreement on the New Development Bank entered into force in July 2015, with the ratification of all five states that have signed it. The five founding members of the Bank are Brazil, Russia, India, China and South Africa.


  • The bank aims to contribute to development plans established nationally through projects that are socially, environmentally and economically sustainable.
  • Promote infrastructure and sustainable development projects with a significant development impact in member countries
  • Establish an extensive network of global partnerships with other multilateral development institutions and national development banks.
  • Build a balanced project portfolio giving a proper respect to their geographic location, financing requirements and other factors.


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