Lending by the World Bank
March 01, 1994
by Teresa Acklin
The World Bank is an important source of financial and technical assistance to stimulate growth and development in developing countries. Bank funds are used to develop projects, purchase project services from consultants and purchase goods and services.
About 20% of Bank lending for fiscal 1992, or almost U.S.$4 billion, was for agriculture and rural development. In addition, the Bank lends for large infrastructure projects and educational, environmental, financial, legal and privatization projects.
The Bank finances only that portion of a project involving foreign exchange, allowing for considerable leveraging of Bank loans. For example, the Bank's 1992 lending commitments of U.S.$21.7 billion will generate $50 billion to $60 billion in total investments.
Only governments can propose projects for financial assistance, but identification of projects can come from various sources, including the Bank's own studies. When the borrowing country and the Bank have agreed on objectives, the process of preparing a project can begin. At this stage, all aspects technical, economic, financial, social and institutional must be considered.
The borrowing country has primary responsibility for preparing the project, but consultants often are brought in to assist. The Bank may arrange financing for consulting services.
When this stage is completed, the Bank begins its project appraisal. At this point, determination is made on what goods and services will be required.
If the Bank's appraisal is favorable, loan negotiations begin. Detailed schedules for implementing the project are part of the loan documents, and faithful adherence to the schedules by the borrower is essential to the continuation of financing. Procurement arrangements also are included in the loan documents.
After loan approval, the borrower begins project implementation. Procurement of goods and services is the borrower's responsibility, including advertising for and evaluating bids and awarding contracts.
The Bank assures the process is fair and in accordance with loan documents. The Bank is not a party to the contracts, but carefully monitors them to assure Bank guidelines are met.
Those interested in obtaining a Bank contract should a) learn how the Bank operates; b) track Bank projects to determine what goods or services are needed; c) make contacts in borrowing countries; d) choose projects for which they might have an advantage because of contacts or experience; e) follow the selected projects through each development stage; f) identify and contact the agencies responsible for the projects; and g) travel to the country to make direct contact with the responsible parties.
By John M. Reams, a partner in the Kansas City, Missouri, U.S., office of an international law firm, Bryan Cave. Mr. Reems is a specialist in international trade in commodities.