The Power of Major Donors in World Bank Soft and Hard Loan Allocation

• In Event: International Political Economy of Aid

Abstract

What factors affect the “power” of stakeholders in exerting their influence in international organizations? I argue that the power of stakeholder is related to their economic importance to the international organization. Higher economic reliance of the institution to the stakeholder will translate into higher bargaining power of the stakeholder against the institution, which increases the chances that the stakeholder’s interests to be achieved.

I examined my theory through analyzing the two main loan windows in the World Bank, soft loan window (IDA) and hard loan window (IBRD), which have very different business models and funding structures. I find that major donors are more capable of affecting the loan allocation in IDA than IBRD in realizing its interests, which lends empirical support to my theory since IDA is more financially reliant on the capital from major donors than IBRD. Meanwhile, the World Bank is more capable of maintaining its autonomy in loan allocation in IBRD. Through maintaining the stable lending relationship with the “premier borrowers” in IBRD, the World Bank realizes its interests in sustainable operation and financial robustness.

Author

• Zheng Zhai, National University of Singapore