International Financial Institutions and Global Corporation

• International Financial Institutions - IFI
• IFI

  • is a financial institution that has been established by more than one country, and hence is subject to international law.
• IFI's

  • The best known IFIs were established after World War II to assist in the reconstruction of Europe and provide mechanisms for international cooperation in managing the global financial system.
• Goals and Objectives of IFI's

  • to reduce global poverty and improve people's living conditions and standards;
  • to support sustainable economic, social and institutional development; and
  • to promote regional cooperation and integration.
• How IFI's achieve these objectives?

  • through loans, credits and grants to national governments
  • also provide technical and advisory assistance to their borrowers and conduct extensive research on development issues
  • increasingly lending directly to non-sovereign guaranteed (NSG) actors. These include sub-national government entities, as well as the private sector.
• International Source of Finance

  1. The Bretton Woods System
  2. World Bank
• The Bretton Woods System

  • was created at the Bretton Woods conference in 1944, where the 40 participating countries agreed to establish a fixed exchange rate system.
  • The collective goal of this initiative was to standardize international monetary exchanges and policies in a broader effort to create post World War II stability.
• • The World Bank and International Monetary Fund were founded simultaneously under the Bretton Woods Agreement with generally the same focus to help serve international governments globally
• World Bank

  • The World Bank and IMF are headquartered in Washington, D.C. The World Bank currently has more than 10,000 employees in more than 120 offices worldwide.
• World Bank

  • International organization dedicated to providing financing, advice, and research to developing nations to aid their economic advancement.
  • The bank predominantly acts as an organization that attempts to fight poverty by offering developmental assistance to middle- and low-income countries.
• World Bank

  • The World Bank Group offers a multitude of proprietary financial assistance products and solutions for international governments as well as a range of research-based thought leadership for the global economy at large.
• The World Bank Group

  1. International Bank for Reconstruction and Development
  2. International Development Association
  3. International Finance Corporation
  4. Multilateral Investment Guarantee Agency
  5. International Centre for Settlement of Investment Disputes
• International Bank for Reconstruction and Development (IBRD) - An institution that provides debt financing to governments that are considered middle income
• International Development Association (IDA)

  • A group that gives interest- free loans to the governments of poorest countries
• International Finance Corporation (IFC)

  • Focuses on the private sector and provides developing countries with investment financing and financial advisory services
• Multilateral Investment Guarantee Agency (MIGA)

  • An organization that promotes foreign direct investments in developing countries
• International Centre for Settlement of Investment Disputes (ICSID)

  • An entity that provides arbitration on international investment disputes
• Where does the World Bank get its money?

  • The World Bank raises money for its development

  programmes by tapping the world’s capital markets and in the case of the IDA, through contributions from wealthier member governments.
• Who runs the World Bank?

  • The World Bank is owned by more than 180 member countries whose views and interests are represented by a board of governors and a Washington based board of directors.
  • Member countries are shareholders who carry ultimate decision making power in the World Bank.
  • Each member nation appoints a governor and an alternate governor to carry out these responsibilities.
• Who runs the World Bank?

  • The governors, who are usually officials such as ministers of finance or planning, meet at the Bank’s annual meetings each fall.
  • They decide on key Bank policy issues, admit or suspend country members, decide on changes in the authorized capital stock, determine the distribution of the IBRD’s net income and endorse financial statements and budgets.
• International Sources of Finance

  • International Monetary Fund (IMF)
• IMF

  • The IMF's mission is to promote global economic growth and financial stability, encourage international trade, and reduce poverty around the world.
• IMF

  • The IMF was originally created in 1945 as part of the Bretton Woods agreement, which attempted to encourage international financial cooperation by introducing a system of convertible currencies at fixed exchange rates. 
• IMF

  • The IMF makes loans to countries that are experiencing economic distress to prevent or mitigate financial crises.
• IMF

  • IMF is a cooperative institution that 182 countries have voluntarily joined because they see the advantage of consulting with one another on this forum to maintain a stable system of buying and selling their currencies so that payments in foreign currency can take place between countries smoothly and without delay.
  • Its policies and activities are guided by its Charter known as the Articles of Agreement
• Members and administration

  • On joining the IMF, each member country contributes a certain sum of money called a ‘quota subscription’, as a sort of credit union deposit. Quotas serve various purposes.
• Members and administration

  • They form a pool of money that the IMF can draw from to lend to members in times of financial difficulty.
  • They form the basis of determining the Special Drawing Rights (SDR).
  • They determine the voting power of the member.
• Global Corporation

  • also known as a global company
  • is any company that operates in at least a country other than the country where it originated. Realistically, expanding to even just one additional country is a lot of work and is therefore a great achievement.

  • e.g Coca-Cola,Hilton and Hyatt Hotels, Adobe, Cisco, 3M, Monsanto, American Express Facebook and Google
• The Benefits of Global Corporation

  • You can increase your customer base
  • You can reduce your operating costs
  • You don’t need to be bogged down by seasonality
  • You can boost the growth rate of your company
  • You can create new jobs