Bank Financing

The World Bank offers an array of instruments including loans and grants to finance poverty-reduction and economic development efforts around the world. The Bank has two types of lending instruments:

Investment Loans finance goods, works, and services in support of economic and social development projects in a broad range of sectors. They typically run for five to 10 years. Originally concentrated on financing hardware, engineering services, and bricks and mortar, investment lending has come to focus more on institution building, social development, and developing the public policy infrastructure needed to facilitate private sector activity. Projects range from urban poverty reduction (involving private contractors in new housing construction, for example) to rural development (formalizing land tenure to increase the security of small farmers); water and sanitation (improving the efficiency of water utilities); natural resource management (providing training in sustainable forestry and farming); post-conflict reconstruction (reintegrating soldiers into communities); education (promoting the education of girls); and health (establishing rural clinics and training health care workers).

Development Policy Loans provide quick-disbursing external financing to support policy and institutional reforms. They typically run for one to three years. Originally designed to provide support for macroeconomic policy reforms, including trade policy and agriculture, development policy loans have evolved to focus more on structural, financial sector, and social policy reform, and on improving public sector resource management. Development policy operations now generally aim to promote competitive market structures (for example, legal and regulatory reform), correct distortions in incentive regimes (taxation and trade reform), establish appropriate monitoring and safeguards (financial sector reform), create an environment conducive to private sector investment (judicial reform, adoption of a modern investment code), encourage private sector activity (privatization and public-private partnerships), promote good governance (civil service reform), and mitigate short-term adverse effects of adjustment (establishment of social protection funds).

A limited number of grants are also available through the Bank, either funded directly or managed through partnerships. Most are designed to encourage innovation, collaboration with other organizations, and participation by stakeholders at national and local levels. Donors entrust the Bank to operate some 850 active trust funds, which are accounted separately from the Bank's own resources. These financial and administrative arrangements with external donors lead to grant funding of high-priority development needs, including technical assistance and advisory services, debt relief, and post-conflict transition.

Finally, the Bank offers several types of guarantees and risk-management tools to protect commercial lenders from risks associated with investing in developing countries.

Additional Information:

* World Bank Adjustment Lending Retrospective
* The Concessional Finance & Global Partnerships is the core unit responsible for mobilizing and managing concessional and grant finance in the Bank. A list of trust fund programs can be found here.
* The Project Finance and Guarantee Group runs Bank guarantee programs.
* The Institutional Development Fund (IDF) is a World Bank grant facility designed to finance quick, action-oriented, discrete, generally innovative, upstream capacity-building activities that are identified during the Bank's policy dialogue and economic and sector work.