International Development Association facts for kids

Quick facts for kids
International Development Association

Association internationale de développement
IDA logo
Formation	1960; 65 years ago (1960)
Type	Development finance institution
Legal status	Treaty
Purpose	Development assistance, Poverty reduction
Headquarters	Washington, D.C., United States
Membership	174 countries
Parent organization	World Bank Group
Website	worldbank.org/ida

The International Development Association (IDA) is a special part of the World Bank Group. It helps the world's poorest countries by offering them easy-to-pay-back loans and gifts of money. The IDA was started in 1960. It works alongside another part of the World Bank called the International Bank for Reconstruction and Development (IBRD).

Both the IDA and IBRD are often just called the World Bank. They share the same leaders and staff. The main goal of the IDA is to help reduce poverty. It gives money to countries that are too poor to borrow from regular banks or other World Bank programs. The IDA wants these countries to grow faster, fairer, and in a way that lasts.

The IDA is the biggest helper for projects that improve economies and people's lives in the poorest nations. For example, between 2000 and 2010, the IDA helped:

• Train 3 million teachers.
• Immunize 310 million children.
• Give $792 million in loans to 120,000 small and medium businesses.
• Build or fix 118,000 kilometers of roads and 1,600 bridges.
• Bring clean water to 113 million people.
• Provide better toilets for 5.8 million people.

Since 1960, the IDA has given out a total of US$238 billion in loans and grants. Many countries have become strong enough to no longer need IDA's help. However, some countries have needed help again after improving.

How the IDA Started

Why Poor Countries Needed Help

In the 1940s and 1950s, many low-income countries realized they couldn't afford to borrow money from the International Bank for Reconstruction and Development (IBRD). They needed loans with much easier terms.

The Idea of a New Kind of Aid

In 1949, President of the United States Harry S. Truman wanted to help developing countries. He hoped this would stop them from joining communist states. His team suggested a new international group that would offer a mix of loans and grants. The United Nations (UN) and the U.S. government supported this idea. However, the U.S. was busy with the Korean War and wasn't sure if more money was really needed for development.

Push for Fairer Lending

Developing countries felt it was unfair that European nations received a lot of help through the Marshall Plan, while they struggled to get affordable loans. They asked the UN to create an agency that would offer technical help and easy loans. They wanted this agency to give each country one vote, like other UN groups. The U.S. didn't agree with this voting idea at first.

The Cold War and the IDA's Birth

As the Cold War grew, the U.S. became more concerned. In 1954, it supported the creation of the International Finance Corporation (IFC). But developing countries still wanted a new way to get easy loans. The idea of an International Development Association, linked to the IBRD, started to gain support.

A U.S. Senator named A. S. Mike Monroney suggested studying the idea of an IDA. This idea was more popular in the U.S. than other proposals. In 1958, the Senate approved his idea. Other countries were encouraged to do similar studies. By 1959, the World Bank's leaders agreed to create the IDA.

IDA Opens Its Doors

By January 1960, fifteen countries signed the agreements to start the IDA. It officially began in September 1960 with a budget of $913 million (which would be about $7.1 billion today). Within eight months, 51 countries had joined. The IDA had already loaned $101 million (about $784.2 million today) to four developing countries.

How the IDA Works

Who Runs the IDA?

The IDA is managed by the World Bank's Board of Governors. This group meets once a year. It includes one leader from each member country, usually their finance minister. Most of the daily decisions, like giving out loans, are handled by the Board of Directors. This board has 25 executive directors and is led by the President of the World Bank Group. As of April 2019, David Malpass was the President. The IDA and the IBRD share about 10,000 employees.

Checking How Well IDA Works

The Bank's Independent Evaluation Group checks how well the IDA is doing. In 2009, they found some ways to improve how the IDA protects against fraud. In 2011, they suggested giving awards to staff who help countries manage their money better. They also said the IDA should work with other aid groups to help countries lead their own development efforts. Researchers like William Easterly have found that the IDA is one of the most open and best-run aid organizations.

The Future of IDA

Experts from the Center for Global Development believe that by 2025, about half of the countries that currently borrow from the IDA will no longer need its help. Most of the remaining countries needing help will be in Africa. This means the IDA will need to think carefully about how it works in the future.

Who Can Join the IDA?

International Development Association member states

The IDA has 173 member countries. These countries give money to the IDA every three years to keep its funds strong. On December 12, 2008, Samoa became the 173rd member. The IDA currently lends money to 75 countries, and more than half of them (39) are in Africa. Only countries that are already members of the World Bank (especially the IBRD) can join the IDA.

Becoming Eligible for Help

To get help from the IDA, countries are checked for how poor they are and if they can't get loans from regular banks. The IDA looks at:

• How much money people earn on average (per capita income).
• If the country can borrow money from private banks.
• How well the country is doing with policies that help growth and reduce poverty.

As of 2019, a country's average income per person (Gross National Income or GNI) must not be more than $1,145 to get a loan from the IDA.

IDA Borrowing Countries

The following 75 countries currently borrow from the IDA:

Countries That No Longer Need IDA Loans

These countries have improved enough to "graduate" from needing IDA loans:

Countries That Needed IDA Loans Again

These countries had graduated but then needed IDA loans again. Some are now "blend countries," meaning they get some IDA help and some regular loans.

•  Cameroon (1994)
•  Congo (1994)
•  Cote d'Ivoire (1992)
•  Honduras (1991)
•  Nicaragua (1991)
•  Nigeria (1989)
•  Papua New Guinea (2003, partially eligible)
•  Syria (2017)
•  Zimbabwe (1992)

How IDA Gets Its Money

The IDA is special because it needs new money all the time. Member countries give money to the IDA every three years. The International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC) also add funds. Unlike the IBRD, which gets most of its money from financial markets, the IDA relies heavily on these contributions.

About half of the IDA's money comes from 45 donating countries. In the beginning, the United Kingdom and the United States gave most of the money. But other developed nations stepped in when these two countries couldn't always provide enough.

Every three years, the countries that give money meet to "replenish" the IDA's funds. The main donors are the United States, Japan, France, Germany, and the United Kingdom. As of 2016, there have been 18 such funding rounds. In the 16th round, 51 countries gave US$49.3 billion.

When the IDA gives out loans, the money isn't usually given all at once. It's given out bit by bit as the project needs it. Most donor countries, like the U.S., promise money to the IDA. This money doesn't earn interest and can't be taken back. It's turned into cash when needed for projects. Other countries pay their full contributions right away to help cover the IDA's running costs. Donors don't get their money back. When countries repay their loans, that money is then loaned out again to new projects.

What IDA Loans Are For

IBRD loans and IDA credits in 2005

The IDA gives loans to countries for projects that build infrastructure (like roads and bridges). It also helps improve education, healthcare, access to clean water, sanitation, and environmental protection. The IDA is seen as the "soft" loan part of the World Bank, while the IBRD is the "hard" loan part.

IDA loans and grants can be paid back over 25 to 40 years. Countries usually don't have to start paying for 5 to 10 years. The interest rates are very low (2.8% or 1.25%) or even no interest at all for the poorest countries.

The IDA gives more money to countries that are doing well with policies that help growth and reduce poverty. It uses a special rating system to decide which countries are most likely to use the money effectively. The IDA also has special ways to give emergency money quickly when a crisis happens, like a natural disaster.

These funding rounds are usually agreed upon every three years. The 18th round was finished in December 2016, and the 19th was being discussed in October 2019.

Helping Africa

Africa has some of the worst poverty and lack of development. Because 39 of the IDA's poorest countries are in Africa, about half of the IDA's money goes to projects there. Thanks to the IDA's efforts, since 1997, 66 million more Africans have electricity. Since 2002, 240,000 kilometers of paved roads have been built or fixed, and 15 million more African children are in school. In May 2012, the IDA approved US$50 million to help women in Ethiopia start businesses or get skilled jobs. While improvements in Africa were slow at first, the large amount of funding has led to good results, especially in farming and building infrastructure.

Helping Asia

The IDA's work in Asia has been very successful. Many Asian countries, like the Philippines, China, South Korea, Thailand, and India, have improved so much that they no longer need IDA loans. About 20 of the countries that still borrow from the IDA are in Asia. In South Asia, the IDA focuses on projects for education, healthcare, transport, farming, and energy. Even with fast population growth, the IDA has helped reduce poverty in Asia in ways that fit local cultures.

See also

• Bretton Woods system
• United Nations Development Programme