Under the International Bank for Reconstruction and Development scheme

QUESTION

Under the International Bank for Reconstruction and Development scheme, the World Bank offers low-interest loans to risky customers whose credit rating is often poor.

Indicate whether the statement is true or false.

ANSWER

TRUE
Under the International Bank for Reconstruction and Development (IBRD) scheme, money is raised through bond sales in the international capital market. Borrowers pay what the bank calls a market rate of interest—the bank’s cost of funds plus a margin for expenses. This “market” rate is lower than commercial banks’ market rate. Under this scheme, the World Bank offers low-interest loans to risky customers whose credit rating is often poor, such as the governments of underdeveloped nations.