How Does the World Bank Group Work?
The World Bank borrows most of the money it lends to governments. Wealthier countries referred to as “donor countries” also donate money to the World Bank to help developing countries who receive the World Bank’s loans, which are called “borrower countries.” Borrower countries often have less well functioning health, education, and housing systems than developed countries. Often, there are also fewer jobs and opportunities for people living there.
In most cases borrower countries also have less well developed infrastructure systems than donor countries. Infrastructure means the basic physical network to help a village, city, or country operate and includes things like roads, public transportation and electricity.
Many borrower countries cannot get a loan from a regular bank because of all of the problems in their country. The World Bank provides money to these types of governments and charges them a lower rate of interest on the money they borrow than other banks.
Like a regular bank, the World Bank charges interest to the governments that borrow money from it. This means the World Bank often makes a profit from its projects and programs. This additional money is then used to loan more money to other developing countries.