What Is International Development Association (IDA)?
The International Development Association (IDA) is a vital part of the World Bank Group that provides financial assistance to the world's poorest countries. Established in 1960, IDA offers highly concessional loans and grants to nations that have low gross national income per capita and limited creditworthiness, often precluding them from borrowing on commercial terms43. As a leading entity in international finance, the International Development Association aims to support economic growth, reduce inequalities, and improve living conditions in eligible developing countries.
History and Origin
The International Development Association was conceived in the late 1940s and 1950s as a response to the growing realization that many low-income countries could not afford conventional loans offered by the International Bank for Reconstruction and Development (IBRD)42. These nations required more flexible financing to address their significant development challenges. Initiated under the leadership of then-IBRD President Eugene R. Black Sr., and with a resolution drafted by the United States, the articles of agreement for the International Development Association were signed by fifteen countries by January 196041. The IDA officially launched in September of the same year with an initial budget of $913 million40. Over its six-decade history, IDA has become a cornerstone of foreign aid, evolving its focus from primarily large-scale infrastructure projects to a broader spectrum of development needs including social services, human capital, and climate action39.
Key Takeaways
- The International Development Association (IDA) is a member of the World Bank Group, providing financial assistance to the world's poorest countries.
- It offers highly concessional loans and grants, designed for countries that cannot access commercial financing due to low income or limited creditworthiness.
- IDA's resources are primarily funded by contributions from its wealthier member countries, with replenishments occurring every three years.
- The IDA plays a crucial role in global poverty reduction and sustainable development efforts across various sectors.
- Since its inception in 1960, IDA has provided hundreds of billions of dollars in financing to more than 100 countries, with many having "graduated" from eligibility over time38.
Interpreting the International Development Association
The existence and operations of the International Development Association are interpreted as a global commitment to addressing severe poverty and underdevelopment. For eligible countries, access to IDA financing signifies a crucial lifeline, enabling investments in essential services and long-term development plans that would otherwise be impossible37. IDA's focus on policy performance, alongside financial aid, means that recipient countries are often encouraged to implement reforms conducive to sustainable development and stronger governance. The volume of funds committed by the International Development Association each replenishment cycle, such as the historic $93 billion in IDA20 (2021), also serves as an indicator of the international community's dedication to supporting these nations35, 36.
Hypothetical Example
Consider "Agriland," a hypothetical low-income country struggling with food security and limited access to education. Due to its low Gross National Income per capita and high debt burden, Agriland cannot secure loans from commercial banks or even the International Bank for Reconstruction and Development (IBRD).
The International Development Association assesses Agriland's eligibility and, finding it meets the criteria, approves a multi-year financing package. This package might include:
- A concessional loan with a 0% interest rate and a 38-year repayment period, including a 10-year grace period, to fund a national agricultural productivity program. This program could involve providing high-yield seeds, irrigation systems, and training for local farmers.
- A grant to support a "Schools for All" initiative, focusing on building new schools in rural areas and training teachers to improve human capital development.
Through these IDA interventions, Agriland can invest12, 3456[33, 347](https://aif.bancomundial.org/en/about/history/ida-at-60), 891011, 1213, 141516, 17[18](https://www.eurodad.org/a_wrong_turn_for_world_bank_c[28](https://ida.worldbank.org/en/replenishments), 29, 30oncessional_lending)19[20](https://documents1.worldbank.org/curated/en/1[24](https://ida.worldbank.org/en/replenishments/ida18-replenishment), 25, 26, 2772561554826578227/pdf/Learning-from-IDA-Experience-Lessons-from-IEG-Evaluations-with-a-Focus-on-IDA-Special-Themes-and-Development-Effectiveness.pdf)21