ifm agencies that facilitate international flows

1. INTERNATIONAL FINANCIAL
MANAGEMENT
AGENCIES THAT FACILITATE INTERNATIONAL FLOWS
By
V S SARMA ,PROF, MBA VJIT
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2. INTERNATIONAL FINANCIAL MANAGEMENT
Various organizations were established to
facilitate international trade and Financial
transactions
 These agencies often represent a group of
Nations
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3. INTERNATIONAL FINANCIAL MANAGEMENT
 Important agencies that facilitate International
flows are:
(1) International Monetary Fund (IMF)
(2) World Bank (WB)
(3) International Finance Corporation (IFC)
(4) International Development Corporation (IDC)
(5) Asian Development Bank (ADB)
(6) Multilateral Investment Guarantee Agency (MIGA)
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4. INTERNATIONAL FINANCIAL MANAGEMENT
(1) International Monetary Fund (IMF)
 It is a part of Bretton woods ( New Hampshire)
conference held in 1944
 Sources of funds: Each member contributes as per
quota fixed on the basis of each country’s
importance in the world trade
- Contributions are partly in international reserve
currencies and partly in domestic currencies
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5. INTERNATIONAL FINANCIAL MANAGEMENT
IMF (contd….)
Various schemes for which IMF lends to its members
 Standby agreements: (w.e.f 1952) countries can
borrow when they observe first indications of possible
need. Need not wait till actual requirement.
 Compensating Financing Facilities: (wef 1963) Financial
assistance to countries facing short fall in reserves
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6. INTERNATIONAL FINANCIAL MANAGEMENT
IMF (contd….)
Various schemes for which IMF lends to its members
Buffer stock Financing : ( wef 1969) To purchase
approved primary products. Prevents countries to price
shocks
 Extended Facility: (wef 1974) Medium term loans to
overcome BOP problems
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7. INTERNATIONAL FINANCIAL MANAGEMENT
IMF (contd….)
 Oil facility (from 1974 – 1976): Help extended to
countries most affected by oil price rise
 Trust fund : IMF assists countries having low per capita
income
 Supplementary Financing facilities :
- Serious BOP problems
- High debt
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8. INTERNATIONAL FINANCIAL MANAGEMENT
WORLD BANK
 International Bank for Reconstruction and Development
(IBRD) is better known as World Bank(WB)
 Delegates of BW Conference also created a sister concern
world Bank along with IMF.
 WB is mainly responsible for financing individual
development projects.
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9. INTERNATIONAL FINANCIAL MANAGEMENT
WORLD BANK
 International Bank for Reconstruction and Development
(IBRD) is better known as World Bank(WB)
 Delegates of BW Conference also created a sister concern
world Bank along with IMF.
 Sources of Funds:
 Taps world capital markets
 Through contributions from its members ( IDA)
 Sells ‘AAA’ rated papers , rated bonds and other debt securities
to pension funds, insurance companies, other banks and
individuals around the world.
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10. INTERNATIONAL FINANCIAL MANAGEMENT
WORLD BANK (contd…)
 WB arranges loans
 WB is the largest ‘development assistance agency’ that
is providing nearly US$ 30 billions as loans annually
 WB charges interest from its borrowers at cost of
capital
 Loan repayment : 15 to 20 years
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11. INTERNATIONAL FINANCIAL MANAGEMENT
WORLD BANK (contd…)
WB extends assistance for various schemes involving the welfare
of people, such as:
 Basic health and Education
 Protecting the environment
 Encouraging private business development
 Promotion of reforms to create stable macro economic
environment
 Govts. are investing from the funds received from WB in
HRs, Infrastructure , Environmental protection etc.,
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12. INTERNATIONAL FINANCIAL MANAGEMENT
WORLD BANK (contd…)
World Bank group comprises Five constituent
institutions as shown below:
___________________________________
IBRD IDA IFC MIGA ICSID
IBRD : International Bank for Reconstruction and Development
IDA :International Development Association
IFC : International Finance Corporation
MIGA : Multilateral investment Guarantee Agency
ICSID International centre for settlement of Investment Disputes.
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13. INTERNATIONAL FINANCIAL MANAGEMENT
WORLD BANK (contd…)
1) The international Bank for Reconstruction and
Development (IRBD):
- Lends to governments of middle income
and credit worthy low income countries
2 ) International Development Association :
- Finances projects in developing countries which may
not financially profitable but have positive effects on
their economy
- Sets up in 1960
- Membership in WB is prerequisite for IDA members
-Usually called ‘soft loan window of WB’
- Provides highly concessional loans (including long
term and interest free loans)
- IDA insists government guarantee
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14. INTERNATIONAL FINANCIAL MANAGEMENT
WORLD BANK (contd…)
3) International Finance Corporation(IFC)
 Setup in 1956
 Helps private sector in number of way . It finances
their projects through loans and equity participation
 Provides Technical Assistance to private enterprises
 Does not insists on Govt. guarantee. Takes more risk
 Brings private capital and pvt. management together
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15. INTERNATIONAL FINANCIAL MANAGEMENT
WORLD BANK (contd…)
4) Multi Investment Guarantee Agency(MIGA)
 Setup in 1988
 Promotes Foreign Direct Investments into developing
counties to support :
 Economic growth
 Reduce poverty
 Improve people’s lives
 MIGA fulfils the above mandate by offering political
risk insurance(guarantee) to investors and lenders
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16. INTERNATIONAL FINANCIAL MANAGEMENT
WORLD BANK (contd…)
5) The International Centre for Settlement of Investment
Disputes (ICSID)
 ICSID provides international facilities, for conciliation
and arbitration of investment disputes
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17. INTERNATIONAL FINANCIAL MANAGEMENT
WORLD BANK (contd…)
6) Asian Development Bank (ADB)
 Set up in 1996
 Promotes investment both in public and private capital
 Encourage development in developing countries thru
utilizing their resources
 Provides technical assistance in preparing, Financing
and executing Development plans
 Also encourages (a) agriculture (b) Agro Industry (c)
Energy and (d) infrastructure and social conditions.
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