In July 1944, the Bretton Woods Conference marked a new era in global finance and economics. Suffice it to say that 2 prominent international financial institutions, i.e., the International Monetary Fund (IMF) and the World Bank were established thereat. Fast forward to today, the World Bank’s top stakeholders are Japan, Germany, the United States, France, and the United Kingdom. Their shareholdings mirror the jurisdictions’ economic strength and geopolitical influence. The above organizations play a crucial role in providing member countries with financial assistance and development support, At the same time, they promote international financial stability and alleviation of poverty. Not only do their continuous efforts shape the global economic landscape but also strengthen inter-country cooperation for mutual growth and prosperity.
In 2023, the World Bank comprises 189 member nations, each of which is eligible to receive both guidance and financial aid from the above international financial institution. Nonetheless, several countries do not hold membership in the World Bank for a multitude of reasons.
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What World Bank Group is all about
Composed of several financial organizations under the authority of the International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD), the aforementioned World Bank Group is a critical element of the global financial infrastructure. The Group’s position in the global financial landscape is hard to underestimate, for it provides advisory services, resolves financial issues, and renders technical assistance to governments in developing countries.
With 5 prominent international entities that operate under its umbrella, the World Bank Group has a major impact on ensuring financial stability and fostering economic growth on a global scale:
- International Development Association (IDA) offers a range of financial services such as low-interest loans and interest-free credits to help these countries achieve their economic goals and focuses on providing support to developing nations.
- IBRD, which stands for the International Bank for Reconstruction and Development, plays a vital role in supporting the World Bank Group’s efforts by loans, credits, and grants that it extends to fiscally solvent low-income and middle-income nations for their development projects.
- Multilateral Investment Guarantee Agency (MIGA) is a unique organization that offers protection against the risks arising from political instability, including breach of contract, war, and expropriation to investors and creditors.
- International Finance Corporation (IFC) is a renowned investment institution that offers advisory services, asset management, and investment solutions to governments and companies worldwide.
- International Centre for Settlement of Investment Disputes (ICSID) acts as a forum for settling investment disputes between foreign investors and countries. By providing a neutral and transparent platform, ICSID promotes fair and efficient settlement of disputes while upholding the rule of law.
The World Bank Group collaborates with governments of various countries, private companies, investors, civil society organizations, regional development banks, research centers, and other international institutions. The issues addressed by the group are diverse. They encompass political, financial, climate change, education, food security, and agriculture topics.
The main goal of the Bank Group is to reduce poverty by 2039 and improve the overall well-being of the poor population in all countries. With a focus on sustainable development, the Bank Group seeks to promote economic growth, increase access to essential services, and facilitate private sector investments to support poverty reduction efforts.
FYI: To gain membership in the World Bank, a country must first join the International Monetary Fund (IMF), a crucial step towards integrating into the global financial system. However, the road to membership in the International Bank for Reconstruction and Development (IBRD) is more intricate. It only comes with participation in affiliated organizations, such as the International Finance Corporation (IFC), the International Development Association (IDA), and the Multilateral Investment Guarantee Agency (MIGA).
Exploring the list of non-member states in the World Bank
As of today, the World Bank has 189 member countries, including some of the world’s major economies such as the United Kingdom, the United States, France, Germany, and Japan. However, certain states have not joined the World Bank for various reasons.
The absence of these countries in the World Bank does not imply that they are inferior or have lower standards of living and financial indicators. Hong Kong and Taiwan, for instance, have economies that are as developed as those in Europe, and the number of people wanting to move to these countries increases annually. For further information on other jurisdictions that are not members of the World Bank, please refer to the article below.
For an extended period, North Korea upheld a policy of isolation, declining to engage in global initiatives and refraining from membership in international bodies. Based on its Communist philosophy, the nation’s objective is to attain self-reliance without the support of external entities. The prospect of becoming a member of the World Bank and other related international institutions is deemed as an intrusion into the way of living and political principles of North Korea.
A nation with a tiny land area of merely 18 square miles and a population of approximately 77,000 inhabitants is not a member of the World Bank, for a possible reason that Andorra falls under the jurisdictions of both France and Spain, both of which are World Bank members.
Like North Korea, Cuba was under communist rule for a prolonged period, leading to its isolation from international affairs and organizations. However, the presidential-parliamentary socialist republic in Latin America is now making significant strides toward the development of its economy. The country has managed to attract foreign investors to its trade sector since 2022, thus promoting its economic growth.
Monaco, a microstate and an enclave of France, has struggled for its sovereignty for a long time and is still not a member of the World Bank. Despite being recognized as an independent jurisdiction since 1993, the country’s economy remains intertwined with that of France. This close association with France could be a contributing factor to why the country has not yet cooperated with the World Bank.
The Principality of Liechtenstein boasts one of the highest GDP per capita rates globally, owing it in part to the small population of approximately 36,000. Rather than seeking assistance from the World Bank, Liechtenstein relies on support from Switzerland through customs and currency unions. As a result, Liechtenstein has refrained from collaborating with international organizations.
Beyond the World Bank – other nations that lack access to global financial resources
Apart from Taiwan and Hong Kong, several other countries do not have membership in the World Bank:
- Palestine. The jurisdiction is an observer state in the United Nations and has been striving to achieve statehood recognition by the international community.
- Vatican. The latter is a sovereign city-state that does not have its own economy and relies heavily on the contributions of the Catholic Church for its financial needs.
- Kosovo. A young country that is still grappling with economic and political turbulence, Kosovo has only recently joined the IMF as a member. However, it is not a member of the World Bank.
Where do the funds come from for the World Bank?
The World Bank accumulates financial means from a variety of sources, including contributions from member nations, returns on investments, deposits made by participating countries, interest payments on loans and credits, and many more.
How does the World Bank operate and what are its management principles?
The World Bank is a shareholder-based institution that operates on a democratic decision-making system, with member countries as shareholders. The number of shares held by each country is proportional to its economic strength, ensuring that all members have an equal say in the Bank’s governance. Currently, as of 2023, the largest shareholders of the World Bank are the United States, Japan, Germany, the United Kingdom, and France, with a significant share of the Bank’s voting power.
Member countries are represented on the Board of Governors, which is typically led by the finance ministers of each country. The Board convenes annually with the leadership of the IMF to tackle global issues related to poverty and economic development. The Board’s decisions are executed by 24 Executive Directors, who oversee the Bank’s day-to-day operations and implement policies. The President of the World Bank is elected by the Executive Directors from among the member countries, ensuring that the leadership of the Bank reflects the diversity of perspectives and needs of its stakeholders.
What services does the World Bank provide to its member states?
The World Bank is focused on providing financial support to countries in need through low-interest loans. Moreover, the organization also renders advisory services, offers investment solutions, insurance coverage, political risk protection, and many other services. The range of tools and instruments available to the World Bank is wider than those of typical financial institutions, and its clients are entire countries rather than private individuals.