Is the World Bank set to become the African Bank?

Once they are created, international organizations can be awfully hard to change (and even harder to dissolve). Amending or revising the formal treaties or charters that created these organizations is often prohibitively difficult. What’s more, the bureaucracies of the organizations themselves often figure out how to resist major change or adapt just enough to seem useful. The World Bank may be about to conduct an interesting experiment in whether major organizational change is possible. 

Since the early 1960s, the World Bank has made reducing poverty in the poorest countries a principal focus. The Bank has pursued that goal mostly through the International Development Association (IDA), one of the several institutions that comprise the World Bank Group. Created in 1960, IDA offers very low-interest loans with long repayment plans to a group of countries below a certain wealth threshold. A country growing richer eventually "graduates" from IDA eligibility. That graduation process means that IDA’s "client base"–the group of states to which it can lend–is in a constant state of flux.

A new report by Jean-Michel Severino and Todd Moss of the Center for Global Development (CGD) argues that coming changes in the set of IDA-eligible countries pose a major, perhaps existential, challenge to the institution:

IDA will face a wave of likely client graduations over the next 10-15 years. CGD projections suggest that IDA’s client base will soon be much smaller, more fragile and almost entirely African, creating major implications for its operational model, future replenishments, and its relationship with other multilateral [organizations].  

Some of IDA’s largest clients, including India, Vietnam, and Nigeria, will likely graduate in the next several years. When they do, the report explains, the combined population of IDA-eligible countries will shrink dramatically. Those states that remain will be disproportionately weak states—almost all African—in which the Bank has had trouble implementing projects effectively. According to Moss, only about a third of Bank projects in these fragile countries succeed (and even that figure may be exaggerated, since the Bank is understandably reluctant to declare projects failures).

As the IDA client states become overwhelmingly African, IDA’s mission may become indistinguishable from that of the African Development Bank, which has its own fund for the continent’s poorest countries.  "For the sake of efficiency and to justify to donors two separate institutions with nearly identical client bases and mandates," the authors point out,  "IDA will have to work with the [African Development Bank]  differently."

As Moss acknowledged in an interview, IDA could kick the can down the road by simply raising the IDA eligibility caps and keeping some of the more solid countries among its clients. He thinks that would be a mistake. Instead, the report argues for IDA to think creatively about its future—and to contemplate the possibility of declaring success and downsizing:

It would be shame if [World Bank president] Jim Kim tied his legacy to an ever larger IDA envelope. It might have made sense in the past when we wanted to increase flows to these countries and the number of these countries was growing, but that’s no longer the case…I would hope that the Bnak is thinking about how to adapt the model rather than to grow the envelope. But big bureacracies are good at keeping things the way they are and they’re not great at repurposing. But if you continue to act as if nothing’s changed and the world is changing rapidly, you can suddenly find yourself irrelevant.