The functions performed by the World Bank follow from the objectives set out in its articles when it was formed. They can be summed up as follows.
(a) It grants loans for long and medium terms: Loans may be divided in two types: Reconstruction Loans and Development Loans. The first is given to countries” damaged by the last war, the second to all countries who require such loans for development purposes.
(b) The bank gives loans to governments and also to private borrowers (to industrial concerns for particular projects). In the later case the bank demands a guarantee from the government, the central bank and similar organizations of the region in which the project is to be undertaken. The bank generally does not provide the entire cost of a private project. The organizers are expected to bear at least a part of the cost.
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(c) Loans are granted after preliminary discussions with the parties and a critical examination of the project. The bank’s help is given only after it is satisfied that the project is a sound one.
(d) The bank gives technical advice to the borrowers and for this purpose engages experts.
(e) The bank promotes foreign investments by guaranteeing loans made by other organizations. The bank’s duty is to supplement and not to supersede the flow of private risk capital.
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(f) The World Bank’s capital is too small to provide for the development need of the entire world. It has therefore set up a number of subsidiary organizations for further finance.
(g) The bank has certain miscellaneous functions. It can buy an sell security issued or guaranteed by it or in which it has invested. But it must obtain the approval of the member in whose territories the purchase or sale will take place.
It can guarantee securities in which it has invested. It can buy and sell other securities if approved by three fourth of the directors’ voting power. It can borrow the currency of any member with the approval of that member. The bank or its officials must not interfere in political matters.
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The articles of the bank require that except in special circumstances, Bank loans must be for specific projects of reconstruction or development. The projects selected should be those, which are must useful and urgent for, increasing the productive powers of the borrowing country. Except in special circumstances, bank financing should be intended to meet foreign exchange rather than domestic currency outlays.