International Financial Institutions

Business studies study module

Some of the institutions that play a role in international monetary system include;

  • International Monetary Fund (I.M.F)
  • African Development Bank (A.D.B)
  • African Development Fund (A.D.F)
  • International Bank For Reconstruction and Development (World Bank)

International Monetary Fund (I.M.F)

This bank operates like the central bank of the central banks of the member countries. Its objective includes the following;

  • Ensuring that the member country maintains a stable foreign exchange rates for their currencies. This it does by advising the country to raise or increase the supply of their currency to devalue them or increase their value internationally
  • Provide financial support to the member country to alleviate poverty and boost their income.
  • Relieving heavily indebted countries of debt repayment so that it can use that fund to raise the living standards of its people.
  • Providing funds to the member countries to finance the deficits in their balance of payment.
  • Provide forum through which the member country can consult and cooperate on matters concerning trade among them
  • Maintaining currency reserves of the different countries, enabling member countries to buy foreign exchange to be used to import goods and services.

African Development Bank (A.D.B)

This bank was formed to promote the economic and social progress of its regional member countries in Africa. It main source of finance is the members’ contributions and the interest charged on the money they lend members.

Its functions include;

  • Providing loans for economic and social development to member countries
  • Provide technical advice in planning and implementation of the development plans
  • Assist member country to appropriately exploit it resources
  • To encourage co-operation among African countries in order to bring economic growth
  • To co-operate with various economic institutions in order to bring about development especially in Africa countries

African Development Fund (A.D.F)

This was formed to provide long term financial assistance to the low income countries that cannot obtain loan from other financial institutions at the prevailing terms and condition. Their loans may recover a longer repayment periods with no interest except the commitment fees and service charge which is minimal. They fund activities, which includes;

  • Education and research activities
  • Offer technical advice to the member countries

International Bank For Reconstruction and Development (World Bank)

The World Bank was formed to carry out the following functions;

  • Giving loans to countries at very low interest rates to finance economic development activities.
  • Provision of grants to finance the provision of social amenities and basic infrastructural development in developing countries.
  • Fighting against corruption and poor governance which may lead to misuse of public funds in different countries.
  • Advancing money to countries to finance balance of payment deficit.
  • Giving advice on economic challenges that countries may face.
  • Availing technical assistance and personnel to help countries run their economic programmes

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