World Bank-Cum-Commercial Bank Financing: A Comparative Analysis Critical Appraisal of World Bank Funding in the African Region

By Swamy, M. R. Kumara | Journal of Financial Management & Analysis, July-December 1997 | Go to article overview

World Bank-Cum-Commercial Bank Financing: A Comparative Analysis Critical Appraisal of World Bank Funding in the African Region


Swamy, M. R. Kumara, Journal of Financial Management & Analysis


Introduction

Before dealing with the issue of similarities and dissimilarities in the operations of the World Bank and a Commercial Bank, it is of utmost importance to have a knowledge of what either bank is. Banking itself is a trade because banks are set up as other business concerns. In short, a bank, whether, an international or domestic, can be defined as a dealer in money and credit, holding itself out to receive from the public deposits repayable on demand by cheque/cash.

The World Bank

The popularly known, the World Bank or the International Bank for Reconstruction and Development (IBRD) was created alongside the International Monetary Fund (IMF) at the Bretton Woods Conference in 1944. It was established by the experts of the Allied Nations, when they realised that the reconstruction of war-damaged Europe and the development of backward economies, would entail the mobilization of capital well beyond the scope of private investors. In June 1946, the World Bank opened for business and proceeded to call up capital from its members. All members were required to pay a subscription to the Bank which depended roughly on their economic importance. The Bank's authorised capital was US$ 10,000 million and by December 31,1973 it had increased to US$ 27,000 million. Out of this authorised capital, US$ 25,222 million had been subscribed, 1/lOth (US$ 2522 million) of which was paid in. The remaining 9/1 Oth (US$ 23,000 million) was not paid in, but was to be paid on call (callable) by the Bank, if required to meet its obligations arising out of its loans or guarantees.

The control of the Bank is vested in the Board of Governors with one representative from each member country, but it meets only once a year. Real control lies with the Board of Executive Directors chosen by each of the five largest stockholders.

Commercial Bank

The commerical bank on the other hand operates on the domestic scene and in England it originated with the London goldsmiths. The London goldsmiths were the first bankers in England who, by issuing transferable receipts on the security Against this security (capital base), loans are raised on international capital markets, etc. at commercial (conventional) rates of interest which are relent by IBRD to qualified eligible member countries at commercial rates of interest.

Axiom : Callable capital creates loans : strengthens IBRD capital base which enables 'economic development' lending to IBRD - member countries for maintenance of productive assets to ensure prompt loan repayment.

Axiom: Minimum cash holding combined with maximum lending s ensures safety of depositors funds combined with profitability.

of gold deposited with them, paved the way for the development of rudimentary current accounts, bill discounting, and cheque and loan facilities.

The distinguishing factor of the commercial bank is its role in providing three basic services which have always been recognised as the hallmarks of the genuine banker. These are -- the receipt of the customers' deposits, the collection of his cheques drawn on other banks, and the payment of the customers' cheques drawn on himself. But from the point of view of monetary policy its importance lies in its power to create credit or purchasing power. Before going further, a look at the following chart, showing each bank's place in the world of business would be meaningful.

Inspite of their wide differences in size, volume and level of operation -- international versus domestic characteristics -- the World Bank vis-avis commercial bank are not diagrammatically different financial Institutions from a financial management practitioner's point of view.

SIMILARITIES AND DISSIMILARITIES

World Bank and Commercial Bank

The important points of dissimilarities evolve on the relationship which the banks stand to the world of nations, business units and individuals in the supply of funds. While it is agreed that the World Bank and Commercial Bank fundamentally render similar services -- provision of funds at the time it is wanted/required, and management of liquid assets - a point of dissimilarity arises from the relationship in which these institutions stand to their various customers in the discharge of these functions. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

World Bank-Cum-Commercial Bank Financing: A Comparative Analysis Critical Appraisal of World Bank Funding in the African Region
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.