International financial institutions are established by two and more countries. These financial institutions are following the international lows guideline. These financial institutions are established by multiple nations, although some bilateral financial institutions exist. These institutions are playing a vital role in world economic growth. The main objectives behind the establishment of international financial institutions were to aid the task of reconstruction of the war-affected economies and guide the underdeveloped nations of the world. First few years they guide and work for only the war-affected nations of Europe. After achieving this success then they give attention to undeveloped nations. They invest more and more in these nations and guide them effectively. The given main attention to the health and education of the nations: could bring about the needed social and economic transformations of the developing nations. After the success of achieving objectives by a few international financial institutions, many other financial institutions take part in establishing peace on the earth. So we will discuss these financial institutions that work for global growth and their objects as well.
This is the first international financial institution. The international bank for reconstruction and development is commonly known as World Bank. It has many objects that are listed.
- The first object of the World Bank was to reshape the war-affected Europe nations and assist in the development of undeveloped nations in the world.
- It gives mainly attention to the undeveloped nation. It invests in strengthening the education and health sectors because these are the main pillar of the growth of the economy.
- It invests in the economic sector of undeveloped nations and provides funds for a long time. It gives funds to poor nations.
- Its emphasis is on strengthening the infrastructure facilities like energy, transportation, education, health, and many more.
Many institutions are also under the World Bank like the international development association, international financial cooperation, the multinational guarantee agency, the international monetary fund, and many other institutions. These institutions perform different functions. Let us briefly discuss them one by one.
International development association
The international development association was established in 1960. The reason for the establishment of this organization was to provide funds to member nations on soft loan conditions. There are other major objects also that are high lighting below.
- To provide financial help to undeveloped nations on easy terms.
- The object is to reduce poverty alleviation in the poorest nations.
- The international development association has the main purpose to provide concessional interest rates to promote economic development for raising the productivity and living standards in less developed nations.
- It would also guide and extend macroeconomic management services such as those relating to health, education, nutrition, human resources development, and many more.
International financial cooperation
It was set up in July 1956 to provide financing to the private sector. International financial cooperation is an affiliate of the World Bank but it has a separate legal identity also. it is mainly focused on the private sector of the world because it also plays an important role in the development of nations. It guides operations of the private sector and required funds as well.
The multinational investment guarantee agency
The main reason behind establishing this organization was to supplement the function of the World Bank. The objective of the multinational investment guarantee agency is the following.
- To maintain the cash flow of direct foreign investment in the undeveloped member nations.
- To provide insurance to undeveloped nations against political risk.
- Guarantee is the main object of the multinational investment agency against the commercial risk such as danger involved in currency transfer, civil disturbance, and many more.
- It also brings new investment for the member nations and expansion of existing investment for privation and finical reconstruction.
International monetary fund
The international monetary fund is the second international organization after the World Bank. This organization has 191 members. The main objective is to evolve the international monetary system all around the world. it also facilities a system of international payment and adjustment in the exchange rates among national currencies. There are several other objects also that are following.
- It has been main to facilitate the expansion of balance growth in international trade and contribute towards maintaining a high level of employment and real income since its existence in 1945.
- To promote exchange stability to maintain foreign currency among the member nations.
- It also guides the establishment of the multilateral system of payments in respect of current transactions between members.
- It also promotes international business through its guidance.
The function of the international monetary fund
Numerous functions are performed by the international monetary fund to achieve the forecasted goals, but some of the important functions are listed below.
- It acts like a short-term creditor institution.
- It also acts like reservoirs of the currencies of all the member nations, that allow nations to borrow the currency of different nations.
- It is the main lending institution for foreign currency and current transactions also.
- The international monetary fund also determines the value of a country’s currency and alters it when needed. So brings adjustment of exchange rates of member countries.
- It also provides guidance in international consultations for member nations.