By Dyuti Khulbe/Public Praxis Forum

When people hear “World Bank,” they usually think of loans, infrastructure projects, poverty reduction, or governments receiving financial assistance.

All of those things are part of what the institution does. But they do not quite answer a more interesting question:

Why was the World Bank created in the first place?

The answer begins in 1944, before the Second World War had even ended. Governments were already thinking about what the international economic system should look like after the war, and how countries could rebuild economies that had been devastated by it. Representatives from 44 countries met at Bretton Woods, New Hampshire, to design a new framework for international economic cooperation.

One of the institutions that emerged from those negotiations was the International Bank for Reconstruction and Development, or IBRD. It was designed with two purposes in mind: reconstruction and economic development. The World Bank would eventually grow far beyond its original post-war role.

That history is important because the World Bank was not created simply because some countries needed money.

It was created because governments were trying to solve a particular institutional problem: how could countries access the capital and expertise needed for reconstruction and long-term investment when international markets alone could not reliably provide them?

That question still sits underneath much of what the World Bank does today.

An institution built around a changing world

The World Bank opened its doors in 1946, but the world it had been designed for was already changing.

European reconstruction increasingly became associated with the Marshall Plan, while many newly independent and developing countries faced a different problem: how to finance infrastructure, industrialisation and longer-term economic transformation. The Bank’s role therefore shifted gradually from its original emphasis on reconstruction towards development finance.

This is one reason the World Bank is better understood as an institution that has evolved with changing ideas about international economic policy, rather than as a bank with one fixed purpose.

Its activities expanded. So did the questions surrounding them.

What should development finance support? Which projects should receive funding? What kinds of expertise should guide policy? How should governments demonstrate that a project is working? And who gets to decide what counts as a successful outcome?

These are not purely technical questions. They involve choices about priorities, institutions and, ultimately, public life.

The World Bank does more than lend money

Calling the World Bank a “bank” can make its role sound narrower than it is.

The World Bank Group today includes several organisations with different functions. The IBRD provides financing and policy advice to middle-income and creditworthy lower-income countries, while the International Development Association (IDA) provides grants and highly concessional financing to the world’s poorest countries. Other parts of the Group focus on private-sector investment and political-risk insurance.

But finance is only one part of the institution’s influence.

The World Bank also produces research, collects and publishes data, provides technical assistance, advises governments and participates in debates about public policy. In other words, it does not only help determine what can be financed. Its knowledge and expertise can also influence how a problem is understood in the first place.

This distinction matters.

An institution can shape public policy without writing a country’s laws or directly running its government. It can do so by influencing which problems receive attention, which solutions appear credible, what evidence is considered persuasive, and what kinds of interventions become financially or politically feasible.

That is one reason the World Bank is more than a lender.

It is also a knowledge-producing institution.

But what exactly is being financed?

This takes us into a question Public Praxis Forum has explored before: what do we actually mean by progress?

A development project might build a road, increase electricity access, improve agricultural productivity or expand a health programme. Those outcomes can be measured. But whether they constitute “progress” depends partly on what we choose to value and how we measure it.

As Amartya Sen has argued, development cannot be understood only through income or economic growth. His capabilities approach places emphasis on the freedoms and opportunities people have to live lives they have reason to value.

That does not mean economic growth or infrastructure are unimportant. It means that the choice of what to measure, and therefore what to prioritise, is itself consequential.

For a development institution, this matters enormously.

The World Bank does not operate in a world where there is one universally accepted definition of development. Different governments, economists, communities and political traditions have understood development differently, and those disagreements have shaped the institution over time.

This is also why critiques of the Bank have not simply been about individual projects. They have often been about the ideas and assumptions behind development policy itself.

Economist Raúl Prebisch and the Latin American structuralist tradition, for example, challenged the idea that poorer countries could simply follow the same economic path as industrialised countries. Their work drew attention to the unequal structure of the international economy and to the different positions countries occupy within it.

From a different angle, Indian economist Pranab Bardhan has emphasised the importance of looking at the political and institutional conditions within which development policies actually operate. His work on India highlights collective action, state capacity, political interests and the difficulty of implementing long-term policies in complex societies.

These perspectives point towards a useful distinction: financing a policy is not the same thing as determining whether that policy will work.

Who has a say inside the World Bank?

There is another institutional question that is easy to overlook.

The World Bank is owned by its member governments. Those governments participate in its governance through Boards of Governors and Executive Directors. But the system is not based on a simple principle of one country, one vote.

For the IBRD, voting power combines basic votes with votes linked to a country’s shareholding in the institution. The current system therefore gives different members different amounts of voting power.

That arrangement reflects something fundamental about the institution: the World Bank is multilateral, but it is not politically weightless.

Its governance structure reflects the financial and political architecture in which it was created. The distribution of voting power has consequently been a recurring subject of debate, particularly around the representation and influence of developing countries.

This does not mean that every World Bank decision can be reduced to the preferences of its largest shareholders. The institution is bureaucratically complex, member governments have their own interests, staff have their own areas of expertise, and borrowing governments negotiate and adapt policies in different ways.

But institutional design matters.

If we want to understand how an institution makes decisions, it is worth looking not only at what its mandate says, but also at who has influence within the structure through which that mandate is interpreted and implemented.

So why do countries still use it?

If the World Bank has attracted decades of criticism, why do governments continue to work with it?

Part of the answer is straightforward: financing still matters.

Large infrastructure, health, education, social protection and environmental programmes can require resources that governments cannot always mobilise domestically or borrow on comparable terms. The Bank can also offer technical expertise, research capacity and experience from projects across different countries.

There is another reason, too.

Governments are not simply passive recipients of World Bank policy. They have their own priorities, political constraints and development strategies. Working with the Bank can involve negotiation, adaptation and disagreement as much as compliance.

This is important because it complicates both extremes of the usual debate.

The World Bank is neither simply a neutral source of money nor an institution that dictates everything to governments.

Its influence is real, but it operates through relationships.

From an international institution to a local project

Eventually, however, every World Bank project has to leave the institution itself.

A loan becomes a government programme. A policy recommendation reaches a ministry. A project moves into procurement. Officials interpret guidelines. Contractors build infrastructure. Local administrations manage services. Communities encounter the results.

And somewhere along this chain, the original policy can change.

This is where the World Bank connects with another question we have explored at Public Praxis Forum: why do policies often look different when they move from paper to practice?

International institutions can provide financing, frameworks and technical expertise. They cannot simply remove the political, administrative and social conditions in which those ideas have to operate.

The same policy can therefore produce different results in different institutional settings.

This is not necessarily a failure of international finance. It is a reminder that institutions do not operate in isolation.

The World Bank is therefore more than a bank

So, why does the World Bank exist?

At its most basic level, it exists because governments created an international institution to help mobilise finance for reconstruction and development, and because that function continued to evolve as the global economy changed.

But that answer is only the beginning.

The more interesting part is what the institution has become.

The World Bank moves money, but it also moves expertise. It produces knowledge, influences policy debates and participates in decisions about what kinds of problems deserve attention and what kinds of solutions appear workable.

That gives the institution influence well beyond the individual loans it provides.

Understanding the World Bank therefore requires looking at more than how much money it lends or how many projects it funds. It means asking who defines the problems, who shapes the solutions, whose knowledge is considered credible, who has influence within the institution, and what happens when international ideas encounter national institutions and local realities.

Those questions are not unique to the World Bank. They are questions about how international institutions work.

And perhaps that is the more useful place to begin when trying to understand an institution like this: not simply by asking what does it do?, but by asking what kind of role was it created to play, how has that role changed, and how does its influence travel from an international institution into public life?

Featured photo: AI generated