The International Bank for Reconstruction and Development (IBRD), better known as the World Bank, was established in 1944 to help Europe recover from the devastation of World War II. The success of that enterprise led the Bank, within a few years, to turn its attention to the developing countries. By the 1950s, it became clear that the poorest developing countries needed softer terms than those that could be offered by the Bank, so they could afford to borrow the capital they needed to grow.
In the early 1950’s, reports from the United Nations and the U.S. government supported the establishment of a program to lend to poor countries on concessional terms with the backing of multilateral donors. After initial deliberations, the idea to create the International Development Association (IDA), an agency to provide ‘soft-loans’ to developing countries, was floated within the Bank under the stewardship of President Eugene Black.
As the initiative to launch IDA gained considerable momentum within the Bank, externally it received support from Democratic Senator Mike Monroney of Oklahoma, who was interested in the provision of soft-loans for developing nations with the World Bank as the dispenser of the aid. When appointed chairman of the Senate Subcommittee on International Finance, he proposed what came to be known as the Monroney Resolution.
Articles of Agreement for IDA
As the resolution was passed in the U.S. Senate, the U.S. Treasury Secretary announced at the 1958 annual Bank and Fund meetings in New Delhi that the U.S. was seriously studying the proposal of a Bank-based IDA and hoped others would do the same. After consultations, which began among the member governments of the World Bank in 1958, the Bank's Board of Governors at its Annual Meeting in 1959 approved a United States resolution calling on the Bank's Executive Directors to draft the Articles of Agreement for IDA (pdf).
Before the end of January 1960, the Bank had circulated the Articles of Agreement to all of the members for ratification, and received approval from member countries including the U.S. under President Dwight D. Eisenhower.
Launch of IDA
With an initial funding of $912.7 million, IDA was launched on September 24, 1960 with 15 signatory countries - Australia, Canada, China, Germany, India, Italy, Malaysia, Norway, Pakistan, Sudan, Sweden, Thailand, United Kingdom, United States, and Vietnam. Within its first eight months of launch, IDA had 51 members and allocated credits worth $101 million to four countries. Honduras received the first IDA credit for highway maintenance. Chile, Sudan, and India were the other three recipients.
IDA has grown to include 173 member countries, and has become the leading source of concessional lending to 75 of the world’s poorest countries, with 39 countries in Africa. Overall, 42 countries have graduated from IDA and some have ‘reverse-graduated’ or re-entered IDA. Since its inception, IDA credits and grants have totaled $328 billion, averaging $19 billion over the last three years.