M03 L01 International Financial Institutions

International financial institutions or ifis play an important role in the social and economic development programs of nations with developing or transitional economies in many parts of the world this position entails providing advice on development projects funding them and assisting with their implementation our discussion today will revolve around the international

Financial institution which is the first lesson of module 3. market integration the learning competency that we need to achieve for this lesson is explain the role of international financial institutions in the creation of a global economy here are the questions that will guide us in the discussion of the lesson 1. what are international financial institutions

The types of international financial institutions 2. how do international financial institutions impose their influence on developing and transitioning countries to begin our discussion lets us first establish the definition of an ifi and its basic functions an international financial institution or ifi is a company that has been established or chartered by more

Than one country and thus is subject to international law it deals with financial and monetary transactions such as deposits loans investments and currency exchange its owners or shareholders are typically national governments though other international institutions and organizations may be shareholders on occasion although some bilateral financial institutions

Created by two countries exist and are technically ifis the most prominent ifis are the creations of multiple nations the most well-known ifis were established after world war ii to aid in the reconstruction of europe and to provide mechanisms for international cooperation in the management of the global financial system international financial institutions can

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Be grouped into multilateral and bilateral which is based on the nature of membership the most common type of ifis is multilateral a multilateral international financial institution is created by a group of countries that provides financing and professional advice to improve development it has many members including both developed donor and developing borrower

Countries it funds projects with long-term loans at market rates very long-term loans at below market rates also known as credits and grants multilateral international financial institutions can be classified further into global international financial institutions and regional international financial institutions global international financial institutions

Have members in different parts of the world the world bank is considered a giphy because of the scope of its members it provides loans and grants to the governments of poorer countries for the purpose of pursuing capital projects on the other hand regional international financial institutions have functions similar to the world bank group’s activities but with

A particular focus on a specific region the best known of these regional banks that cover regions are the inter-american development bank the asian development bank the african development bank the central american bank for economic integration in the european bank for reconstruction and development the second type of ifi is bilateral the bilateral international

Financial institution is set up by one individual country to finance development projects in a developing country and its emerging market hence the term bilateral examples include the netherlands development finance company fmo its headquarter is in the hague and one of the largest bilateral development banks worldwide the deg german investment corporation it is

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Headquartered in cologne germany the french development agency it is founded in 1816 and is headquartered in paris france the cdc group is a development finance institution owned by the uk government headquartered in london in many parts of the world international financial institutions post great influence in the social and economic development programs of nations

With developing or transitional economies this is manifested in their shared objectives ways to achieve their objectives and conditions set by them to the borrowers the first factor of influence by international financial institutions is revealed in their shared objectives the different ifes operate independently all however share the following goals and objectives

1. to reduce global poverty and improve people’s living conditions and standards 2. to support sustainable economic social and institutional development and three to promote regional cooperation and integration another way on how iffy’s imposed influences the manner and how they achieve their objectives to ensure that the common objectives of the iffy’s are achieved

They 1. fund specific projects that focus on economic and socially sustainable development 2. provide technical and advisory assistance to their borrowers 3. conduct extensive research on development issues and 4. lend directly to non-sovereign guaranteed nsg actors the most crucial influence of ifes lies on the conditions they set to the borrowers one of the major

Functions of iffys is lending to help member countries in their economic goals however according to olivier williamson there are attached conditions to the lending of iffys these conditions are one fiscal discipline 2. redirection of public expenditure priorities toward fields offering both high economic returns and the potential to improve income distribution 3. tax

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Reform to lower marginal rates and broaden the tax base 4. interest rate liberalization 5. a competitive exchange rate 6. trade liberalization 7. liberalization of inflows of foreign direct investment 8. privatization 9. deregulation to abolish barriers to entry and exit 10. secure property rights try to evaluate the most common conditions set by a fees to the

Borrowers would these conditions contribute greatly to the economic development of the developing and transitioning countries

Transcribed from video
M03 L01 International Financial Institutions By Wisdom Values Experience