International Development Association

IBRD loans and IDA credits in 2005

The International Development Association (IDA), is the part of the World Bank that helps the world’s poorest countries. It complements the World Bank's other lending arm — the International Bank for Reconstruction and Development (IBRD) — which serves middle-income countries with capital investment and advisory services.

IDA was created on September 24, 1960 and is responsible for providing long-term, interest-free loans to the world's 78 poorest countries, 39 of which are in Africa. IDA provides grants and credits (subject to general conditions (pdf)), with repayment periods of 35 to 40 years. Since its inception, IDA credits and grants have totaled $161 billion, averaging $7–$9 billion a year in recent years and directing the largest share, about 50%, to Africa. While the IBRD raises most of its funds on the world's financial markets, IDA is funded largely by contributions from the governments of the richer member countries. Additional funds come from IBRD income and repayment of IDA credits.

IDA loans address primary education, basic health services, clean water supply and sanitation, environmental safeguards, business-climate improvements, infrastructure and institutional reforms. These projects are intended to pave the way toward economic growth, job creation, higher incomes and better living conditions.

Mission statement

The International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries reduce poverty by providing no- interest loans and grants for programs aimed at boosting economic growth and improving living conditions. IDA funds help these countries deal with the complex challenges they face in striving to meet the Millennium Development Goals. They must, for example, respond to the competitive pressures as well as the opportunities of globalization; arrest the spread of HIV/AIDS; and prevent conflict or deal with its aftermath.

IDA’s long-term (streched over 35 to 40 years), no-interest loans pay for programs that build the policies, institutions, infrastructure and human capital needed for equitable and environmentally sustainable development. IDA’s goal is to reduce inequalities both across and within countries by allowing more people to participate in the mainstream economy, reducing poverty and promoting more equal access to the opportunities created by economic growth.IDA also provides grants to countries at risk of debt distress.

Membership

International Development Association member states

Members of the IDA are 170 of the UN members and Kosovo.

Non-members are: Andorra, Antigua and Barbuda, Bahrain, Belarus, Brunei, Bulgaria, Cook Islands, Cuba, Jamaica, Liechtenstein, Malta, Monaco, Namibia, Nauru, Niue, North Korea, Qatar, Romania, San Marino, Seychelles, Suriname, Turkmenistan, Uganda, Uruguay, Vatican City and Venezuela. The remaining non-members are states with limited recognition.

Funding

In addition to the funds received by the International Bank for Reconstruction and Development for the IDA's efforts of global aid, its more developed and economically sound member countries provide a substantial amount monetary resources. Approximately half of the IDA's resources come from the 45 donating countries. In its early years of establishment, the IDA received most of its replenishments from the United Kingdom and United States, but because they were not always reliable sources of funding during that time, other developed nations began to step in to fill the economic gaps not met by these two countries. Today, every three years, member nations that provide monetary funds to the IDA gather together to replenish the IDA's resources. These funds primarily come from well developed countries including the United States, Japan, France, Germany, and the United Kingdom; with 58% from the US, 22% from France, and 8% from the UK. Although the IDA's funds are now regularly replenished, this does not happen without some financial and political challenges for the donating countries.

History

The International Bank for Reconstruction and Development (IBRD), better known as the World Bank, was established in 1944 to help Europe recover from the devastation of World War II. The success of that enterprise led the Bank, within a few years, to turn its attention to the developing countries. By the 1950s, it became clear that the poorest developing countries needed softer terms than those that could be offered by the Bank, so they could afford to borrow the capital they needed to grow.

With the United States taking the initiative, a group of the Bank’s member countries decided to set up an agency that could lend to the poorest countries on the most favourable terms possible. They called the agency the "International Development Association." Its founders saw IDA as a way for the "haves" of the world to help the "have-nots." But they also wanted IDA to be run with the discipline of a bank. For this reason, US President Dwight D. Eisenhower proposed, and other countries agreed, that IDA should be part of the World Bank (IBRD).

IDA's Articles of Agreement became effective in 1960. The first IDA loans, known as credits, were approved in 1961 to Chile, Honduras, India and Sudan. Initially, the IDA released $27 billion dollars of funding to 78 countries that accomplished 1,300 projects collectively. Since its establishment, some countries have developed to the point that they no longer require assistance from the IDA; Indonesia, Turkey, and Korea are a few examples.

IBRD and IDA are run on the same lines. They share the same staff and headquarters, report to the same president and evaluate projects with the same rigorous standards. However the IDA and IBRD draw on different resources for their lending, and because IDA’s loans are deeply concessional, IDA’s resources must be periodically replenished (see "Funding" above). A country must be a member of IBRD before it can join IDA; 171 countries are IDA members.

Global Aid

The main purpose of the International Development Association (IDA) is to provide developing countries with interest-free loans that can help elevate their economic status and lessen social strain and thus, raise their standard of living by aiding in their development. Currently, the IDA provides aid to 81 underdeveloped countries with a substantial amount of their funds being sent to countries in Africa, particularly regions in the Sub-Sahara. The amount of aid that is allocated to a given country is determined by two factors: the country's overall per capita level of income (which must be less that $1,135), and how they have utilized previous aid given to them by the IDA. One of the main goals of the IDA is to provide funds to countries so that they can establish social resources aimed at improving the standard of living through institutions and resources such as education, healthcare, sanitation, food, and clean drinking water.

Africa

Because this continent has some of the largest amounts of poverty and underdevelopment and has 39 of the poorest member countries, primarily in the Sub-Sahara, the IDA has committed to improving the area's overall economic and development stance through allocating approximately half of the IDA's resources to the region. As a result of their efforts, the IDA has helped to bring electricity, infrastructure, health services, sanitation, and education to these developing nations. It is hoped that through the efforts of micro-financing and by increasing the availability and access to loans, that the developing countries in Africa would be able to improve their standard of living while also preparing for the future by preventing and alleviating the effects of poverty. Although the positive outcomes of the IDA's efforts in Africa have been slow, because of the large allocation of funding to this region some significant results have transpired, particularly in areas of agriculture and infrastructure development.

Asia

Through the efforts of the IDA, there have been many success stories that have come out of Asian countries including the Philippines, China, Korea, and Thailand - countries who now no longer require financial assistance from the IDA. Currently, out of the borrowing countries of the IDA, there are close to 20 that are in Asia. A focus has been made by the programs established through the efforts of the IDA to improve the education, healthcare, transportation, agriculture, and energy resources of the nations in this region. Because of the rapid growth of population from countries in Asia, pockets of poverty have been created. In an effort to mitigate this, a goal was set by the IDA that included an economic plan of action, establishing organizations to improve education and healthcare, and minimizing poverty across Asian nations in a way that works with, not against the local culture. Although there has been substantial improvements and progress made in this region, much is still left to be accomplished.

External links

• IDA website
• List of IDA borrowing countries at the World Bank website