International financial institutions

15.3.2 International Development Association
The IDA was formed in 1960 as a part of the World Bank Group 
to provide financial support to LDCs on a more liberal basis than 
could be offered by the IBRD. The IDA has 137 member countries, 
although all members of the IBRD are free to join the IDA. IDA’s funds 
come from subscriptions from its developed members and from the 
earnings of the IBRD. Credit terms usually are extended to 40 to 50 
years with no interest. Repayment begins after a ten-year grace period 
and can be paid in the local currency, as long as it is convertible. 
Loans are made only to the poorest countries in the world, those with 
an annual per capita gross national product of $480 or less. More 
than 40 countries are eligible for IDA financing.
An example of an IDA project is a $8.3 million loan to Tanzania 
approved in 1989 to implement the first stage in the longer-term 
process of rehabilitating the country’s agricultural research system. 

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Cofinancing is expected from several countries as well as other 
multilateral lending institutions.
Although the IDA’s resources are separate from the IBRD, it has 
no separate staff. Loans are made for similar projects as those carried 
out by IBRD, but at easier and more favourable credit terms.
As mentioned earlier, World Bank/IDA assistance historically 
has been for developing infrastructure. The present emphasis seems 
to be on helping the masses of poor people in the developing countries 
become more productive and take an active part in the development 
process. Greater emphasis is being placed on improving urban living 
conditions and increasing productivity of small industries.
15.3.3 International Finance Corporation
The IFC was established in 1956. There are 133 countries that 
are members of the IFC and it is legally and financially separate from 
the IBRD, although IBRD provides some administrative and other 
services to the IFC. The IFC’s main responsibilities are (i) To provide 
risk capital in the form of equity and long-term loans for productive 
private enterprises in association with private investors and 
management; (ii) To encourage the development of local capital 
markets by carrying out standby and underwriting arrangements; and 
(iii) To stimulate the international flow of capital by providing financial 
and technical assistance to privately controlled finance companies. 
Loans are made to private firms in the developing member countries 
and are usually for a period of seven to twelve years.
The key feature of the IFC is that its loans are made to private 
enterprises and its investments are made in conjunction with private 

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business. In addition to funds contributed by IFC, funds are also 
contributed to the same projects by local and foreign investors.
IFC investments are for the establishment ne1x enterprises as 
well as for the expansion and modernization of existing ones. They 
cover a wide range of projects such as steel, textile production, 
mining, manufacturing, machinery production, food processing, 
tourism and local development finance companies. Some projects are 
locally owned, whereas others are joint ventures between investors in 
developing and developed countries. In a few cases, joint ventures are 
formed between investors of two or more developing countries. The 
IFC has also been instrumental in helping to develop emerging capital 
markets.