International Development Association

International Development Association
Association internationale de développement  (French)[1]
International Development Association Logo.jpg
IDA logo
Formation1960
TypeDevelopment finance institution
Legal statusTreaty
PurposeDevelopment assistance, Poverty reduction
HeadquartersWashington, D.C., U.S.
Membership
173 countries
Kristalina Georgieva
Parent organization
worldbank.org/ida

The International Development Association (IDA) (French: Association internationale de développement) is an international financial institution which offers concessional loans and grants to the world's poorest developing countries. The IDA is a member of the World Bank Group and is headquartered in Washington, D.C. in the United States. It was established in 1960 to complement the existing International Bank for Reconstruction and Development by lending to developing countries which suffer from the lowest gross national income, from troubled creditworthiness, or from the lowest per capita income. Together, the International Development Association and International Bank for Reconstruction and Development are collectively generally known as the World Bank, as they follow the same executive leadership and operate with the same staff.[2][3][4][5]

The association shares the World Bank's mission of reducing poverty and aims to provide affordable development financing to countries whose credit risk is so prohibitive that they cannot afford to borrow commercially or from the Bank's other programs.[6] The IDA's stated aim is to assist the poorest nations in growing more quickly, equitably, and sustainably to reduce poverty.[7] The IDA is the single largest provider of funds to economic and human development projects in the world's poorest nations.[8] From 2000 to 2010, it financed projects which recruited and trained 3 million teachers, immunized 310 million children, funded $792 million in loans to 120,000 small and medium enterprises, built or restored 118,000 kilometers of paved roads, built or restored 1,600 bridges, and expanded access to improved water to 113 million people and improved sanitation facilities to 5.8 million people.[9] The IDA has issued a total $238 billion USD in loans and grants since its launch in 1960. Thirty-six of the association's borrowing countries have graduated from their eligibility for its concessional lending. However, nine of these countries have relapsed and have not re-graduated.[2]

History

During the 1940s and 1950s, low-income developing countries began to realize that they could no longer afford to borrow capital and needed more-favorable lending terms than offered by the International Bank for Reconstruction and Development (IBRD).[10] At the onset of his inaugural term in 1949, then-President of the United States Harry S. Truman assembled an advisory group to suggest ways to accomplish his Point Four Program, of which a significant component was an effort to strengthen developing countries, especially those nearest to the Eastern Bloc, to dissuade them from aligning with other communist states. The advisory group recommended an international mechanism that would function somewhere in between providing strictly-loaned and strictly-granted funds.[11] The UN and United States government published reports expressing support for the creation of a multilateral, concessional lending program for the poorest developing countries.[10] However, the United States was largely unresponsive and ultimately distracted by its involvement in the Korean War and unconvinced that development needed greater financial stimulation.[11]

Developing countries grew increasingly frustrated with not being able to afford IBRD lending and perceived the Marshall Plan as a comparatively generous gift to European nations. In the late 1940s and early 1950s, developing countries began calling for the United Nations (UN) to create a development agency that would offer technical support and concessional financing, with a particular desire that the agency adhere to other UN bodies' convention of each country having one vote as opposed to a weighted vote. However, the United States ultimately opposed proposals of that nature. As the United States grew more concerned over the growth of the Cold War, it made a concession in 1954 at the behest of its Department of State by backing the conception of the International Finance Corporation (IFC). Despite the launch of the IFC in 1956, developing countries persisted in demanding the creation of a new concessional financing mechanism and the idea gained traction within the IBRD.[11] Then-President of the IBRD Eugene R. Black, Sr. began circulating the notion of an International Development Association, as opposed to an idea of a concessional named the Special United Nations Fund for Economic Development (SUNFED) governed by the United Nations.[12] Paul Hoffman, the Marshall Plan's former Administrator, proposed the idea of a soft-loan facility within the World Bank, where the US would have a preponderant voice in the allocation of such loans. Democratic Senator Mike Monroney of Oklahoma supported this idea.[12] As Chairman of the Senate Subcommittee on International Finance, Monroney proposed a resolution recommending a study of the potential establishment of an International Development Association to be affiliated with the IBRD.[10] Monroney's proposal was more preferred received within the United States than the SUNFED.[11] The resolution passed the senate in 1958, and then-U.S. Treasury Secretary Robert B. Anderson encouraged other countries to conduct similar studies. In 1959, the World Bank's Board of Governors approved a U.S.-born resolution calling for the drafting of the articles of agreement.[10] SUNFED later became the Special Fund and merged with the Expanded Programme of Technical Assistance to form the United Nations Development Programme.

By the end of January 1960, fifteen countries signed the articles of agreement which established the International Development Association. The association launched in September of that same year with an initial budget of $913 million ($7.1 billion in 2012 dollars[13]).[14][15] Over the next eight months following its launch, the IDA grew to 51 member states and loaned $101 million ($784.2 million in 2012 dollars[13]) to four developing countries.[10]