The major aim and role of the World Bank also known as the International Bank for Reconstruction and Development (IBRD) is the reduction of poverty and the promotion of sustainable development in developing countries.
Corruption has been a great source of concern for the Bank alongside other organisations as it hinders the mandate of the Bank which is development of the world’s poorest countries and ending extreme poverty by 2030. Corruption in times past and now has been recognised as a developmental policy issue and its reduction has formed part of the recently established Sustainable Development Goals. Good governance and anti-corruption is seen by the World Bank as essential in its strong fight against poverty.
Corruption weakens Public Institutions and Governments and as a result prevents the advancement of new activities, and reduces the growth of the economy, discourages foreign investment and this directly affects the poor because it diverts public resources that are meant to lift them out of poverty.
In the Banks fight against corruption, the Bank-financed projects are monitored through the work of its Integrity Vice Presidency. The Bank is mandated by Article III section 5(b) and (c) of its Articles of Agreement: to make certain that the purpose for which money was obtained is used for that purpose; to pay out money from the fund only; to meet expenses in connection with the project as they are actually incurred; and that the Bank should concern itself when giving loans to member States with the functions provided for in Article III section 4(vii) of IBRD Articles of agreement which is to help finance projects for productive purposes.
As the world’s major finance Institution, the World Bank has a duty to concern itself with the successful flow and proper use of resources it gives to borrowing member States. Thus, it is practically impossible for the World Bank to separate itself from International development policy issues like corruption. The wide spread of corruption in any country has effects on the distribution of public and private funds for investment in such a Country. If the World Bank is going to take measures to ensure that the funds are used for the purpose(s) for which the borrowing Member takes the loan, then it has to ensure that the steps taken are consistent with the Articles of Agreement.
Although Article IV sec. 10 of the Articles of Agreement provides for the political neutrality clause which means the absence of opinions in relation to political concerns of member States of the Bank. The implication of this is that the Bank is not expected to interfere in the political affairs of associates. James D Wolfensohn President of the Bank in 1996 in the Bank-fund annual speech stated that the Bank Group cannot intervene in the political affairs of member countries but that advice, encouragement and support can be given to governments that wish to fight against corruption.
The World Bank can take actions to fight against corruption without going against Article IV sec. 10 of the Articles of Agreement by agreeing with the borrowing Member Country to help them curb corruption. However this does not happen often as the countries that mostly need the help of the bank to fight corruption are least likely to ask for help and as such the bank can find other means or an indirect approach in helping such countries. For example when such countries source for funds from the Bank such loans may be refused. Another way the Bank can do this is by analysing the borrowing Member. Where the level of corruption, is likely to affect the success of the bank reaching its goals, the Bank can use this as a factor in lending to the Country. If corruption in a member State will hinder the Bank from reaching its goals then the bank’s refusal may not be seen as interfering in the political affairs of the Member State as Article 1 provides that the bank should be guided by its purposes, and if corruption is going to deter its purpose(s) then the Bank would not be overstepping its boundaries. See Article 3 sec. 5 (c) of the Articles of Agreement of the Bank.
The bank has created mechanisms over the past years on monitoring corruption to make certain that development funds are used for their purposes, and has taken measures to know the effectiveness of the support it has been giving countries on governance and anti-corruption by using Actionable Governance Indicators (AGI’s) to access improvements and help in weak areas.
The World Bank Group President, Jim Yong Kim at the Anti-Corruption Summit 2016 held in London, United Kingdom recognised the ongoing efforts of the Nigerian president: President Muhammadu Buhari’s fight against corruption. For example the Bank has enabled Nigeria implement the Extractive Industries Transparency Initiative (EITI) which has been used to audit Nigeria’s oil sector value chain and recover lost revenues.
The Bank’s motto ‘working for a world free of poverty’ cannot be accomplished, if resources are not used for the intended purposes. The bank has made its zero tolerance to corruption known by refusing countries like Chad, Kenya, Congo, India, Bangladesh, Uzbekistan, Yemen and Argentina loans. This goes a long way to explain that the Bank has not been in any way handicapped by Article IV section 10 from taking measures to curb corruption in its member states.
The World Bank regardless of Article 10 of the Articles of Agreement has been carrying out measures to control corruption because where corruption is eradicated; it will be for the political and economic good of member states.
Further Reading Materials:
Anwar Shah and Mark Schacter, ‘Combating Corruption: Look Before you Leap’ (December 2004), p. 4 see at http://siteresources.worldbank.org/INTWBIGOVANTCOR/Resources/CombatingCorruption.pdf
A.S Kindra & R. Stapenhurst, ‘Social Marketing to Fight Corruption’ (World Bank Institute Working Paper 1998), p.3 see at http://siteresources.worldbank.org/INTWBIGOVANTCOR/Resources/socialmktg.pdf
Ibrahim F.I Shihata, ‘The World Bank in a Changing World’, (Martinus Nijhoff,The Hague/London/Boston 2002) Vol. III, p.158
The World Bank, Anti-corruption, http://www.worldbank.org/en/topic/governance/brief/anti-corruption
The World Bank, Tackling Corruption to Create a More Just and Prosperous World: Jim Yong Kim, http://www.worldbank.org/en/news/speech/2016/05/12/remarks-by-world-bank-group-president-jim-yong-kim-at-anti-corruption-summit-2016