The World Bank business

Michael Pollak mpollak at
Mon Mar 20 01:57:38 PST 2000

I have a couple of naive questions. There is a small article in the Weekend FT about World Bank lending to China that contains the following passage:


China graduated from lending under the World Bank's International Development Association (IDA), the bank's soft loan window, because the country's per capita income rose above $800 per year, the cut-off point for IDA financing.

The lack of soft loan facilities has presented a significant challenge to the bank as it tries to maintain lending to China, one of its biggest and best customers.


But, the article, continued, the World Bank is up to the challenge and will find way to continue lending at the same level.

It's that last sentence that struck me. The FT doesn't seem to mean it as a metaphor. They seem to be saying that the World Bank gets something analogous to profit from providing loans; that it would take a hit if it didn't get it; and that it is as naturally fond of its "biggest and best" customers as any profit making firm.

So my naive questions are:

(1) what is this thing that is analogous to profit? I thought the soft-loan window was concessional. Naively, I thought that meant it was subsidized, that it was at below market rates. Can it be that the World Bank makes a profit on soft loans? And if so, why don't private banks take that business away? Perhaps the WB makes a little less than private banks for its loans, but only because it is uniquely able to be less at risk making them, and can raise funds more cheaply, and so comes off in the end thinking just like any other bank? Kind of like WestglobalLandesbank?

(2) Is this basically what drives the World Bank -- the drive to make the largest profits in its peculiar niche business? And is this why the bulk of its lending goes to China, Mexico, Argentina and Brazil? Because they are it's "biggest and best customers" and provide it with the biggest profits? (Or whatever profits are called in a non-profit world.)


__________________________________________________________________________ Michael Pollak................New York City..............mpollak at

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