International Financial Institutions, Essay Example

The international financial institutions are the established or chartered financial institutions by more than one country and therefore they are subjects of the international law. The main shareholders or owners are the national governments although occasionally some organizations are also shareholders. The well known types of international financial institutions are the Bretton Woods institutions that were established after the World War II towards assisting Europe reconstruction and also providing the mechanism for the international cooperation in global financial system management. They include IMF (international monetary fund), the Word Bank and the International Finance Corporation; the RDB (Regional Development Banks) are also types of IFIs, they have similar functions to the World Bank group’s activities with having particular focus on the specific regions. Regional countries and major donor countries are the shareholders. The well known regional banks include the Inter-American Development Bank, Asian development bank, African development bank and European Bank for the Reconstruction and development (Goldman, 2005).

Other types of International Financial institutions are the bilateral banks, which are financial institutions set up by the individual countries in financing the development projects in the countries that are developing and, also emerging markets. They include the German Development Bank (DEG) and Netherlands Development Finance Company (Goldman, 2005).

The international Monetary Fund and the World Bank were launched more than 55 years ago at the Bretton Woods. The regional development banks were established in the subsequent decades.  They are two important transformations that have happened in the international financial institution’s roles of which are of high importance to the global financial architecture. The changes include: the globalization has at a great deal progressed over the quarter century that has proceeded. This is an indication that, the private capital and the foreign trade play a major role in the development of the economy than before: Second, the statist models of development and poor performance. This lead to the roles of the state re-examination which motivated the strong shift to the private, market based approaches. This resulted to private international finance and the private sector becoming the prime agents of the economic development (Mark, 2000).

The objectives of the international financial institutions have been the alleviation of poverty and the environment protection. This has been enhanced by the international financial institutions working together with the government and the government agencies (Dreher, 2004).

The political and the structural concerns of countries cause obstacles to the international financial roles development. This is due to the international humanitarian laws. The international financial institution involvement in the international humanitarian law has helped the United Nations towards its effort, in international humanitarian law violation prevention.  The World Bank and international Monetary Fund (IMF) are specialized financial agencies of United Nations that do function as the independent international organizations with their functionalities not bound by the UN decisions, but only regulated by the UN security Council resolutions.

Despite the differences that arose between the developed and the developing countries for combating the financial crises, the role of the international financial institutions was shared towards coping and even solving those crises. It was pointed out by some leaders that the global crises needed the global solution, and hence international institution importance was emphasized. The international financial institution main roles include; preventing the global and the financial crisis and also providing a rescue package in bailing out the countries that are stricken by those crises.

The objective of the international financial institution like the IMF is to help out the macro economies of the countries, and giving them the appropriate and also applicable advises on financial matters if there is need, at the same time even offer assistance on their economic and the financial circumstances. The World Bank main focus was to eradicate poverty, give loans to the developing countries, building the economic infrastructures and even long term development.

The world bank has put in place some proposals and even solutions, in solving out the unemployment in developing nations as well as focusing less on the oil revenues in Iran and relying more on the non oil incomes, the development and changing of protectionism and also subsidiary policies and privatization (Stone, Diane  & Wright, 2006).

The international financial corporation being one of the International Financial Institution promotes the investment of private sector in improving the lives of people. The international financial corporation aims to build a physical and the financial infrastructure which creates the jobs and, also other spin-offs which enables the growth that is market enabled. It also aims at ensuring that, companies meet the high environmental and social standards through the procedures followed by the clients when the IFC through the advisory work supports their projects. Finally, the international Financial Corporation aims at attracting and catalyzing the private investment to the countries and even the sectors that it would not reach (Stone, Diane & Wright, 2006).

The international monetary fund (IMF) being an International Financial institution that was conceived in 1994 in Bretton Woods, United States. It is an international organization that runs the financial system globally by following the macroeconomic policies of the member countries, with emphases on those with impact on exchange rates and payment balance. It is formed with objectives that are stated to stabilizing the international exchange rates and development facilitation. It offers the loans that are high leveraged to the poorer countries. It is usually located in Washington D. C., it was formed with a goal of exchange rates stabilization and also the world’s international payment system reconstruction and also improving the member countries’ economies. Its main purpose is to ensure that the international monetary systems (international payment and the exchange rates) are stable. This is important in the sustainable growth of economy and also the rising standards of living. It reviews global, regional and national economic and the financial developments. It temporarily finances the member countries by helping them in balance problems of payment. It also provides the technical assistance and training to countries towards building institutions that would help them towards economic growth and stability (Dreher, 2004).

The Africa Development Bank was established in 1964, with the main intention being the promotion of the social and economic development in Africa. It provides the grants and the loans to the private companies and also the African governments. It is funded and owned by the member governments with public interests having mandate of reducing the poverty and promoting the sustainable development (Bank Information Centre, 2005).

The main functions of Africa Development Bank are to make loans and the equity investments for social and the economic advancement of regional member countries, it also provides the technical assistance for development programs and projects preparation and execution, this promotes the private and public capital investment for the purposes of development, and finally it assists in the coordination of development policies and the plans of the regional member countries (Bank Information Centre, 2005).

These international financial institutions manage the risks by putting into place various strategies and policies, in order to minimize these risks especially when funding various projects. The management of risks by all these institutions helps to a greater extent in reducing the losses that may occur to their funds and eventually losses of their money (Bank Information Centre, 2005,)

References

Bank Information Centre. (2005, July). African Development Bank. Retrieved December 1, 2009, from http://www.bicusa.org/bicusa/issues/african_development_bank/index.php

Dreher, A. (2004). A Public Choice Perspective of IMF and World Bank Lending and Conditionality.New York: Bank information center.

Goldman, M. (2005). Imperial Nature: The World Bank and Struggles for Social Justice in the Age of Globalization. New York: University of South Asia Press.

Mark, S. (2000). The Corporate Sector Dynamics of Systemic Financial Crises. London: Allan press.

Stone, C., Diane, F.G. & Wright, C. (2006). The World Bank and Governance: A Decade of Reform and Reaction. London: Routledge press.