The World bank and the International Development Association (IDA) are complementary international financial institutions, both providing development assistance to member countries.
They have played a pivotal role in the economic development of the countries and chiefly contributed to the expansion of international trade. But these two institutions differ from each other in the manner of granting assistance to member countries.
Differences between World bank and IDA
The following are the differences between World bank and IDA in terms of lending operations and conditions imposed while granting assistance to member countries.
Period of credit:
IDA provides assistance to member countries on more flexible terms than the World Bank. The period of credit extended by the IDA is 5 to 15 years or even more. Poorer countries are given loans repayable over 40 years or more.
Repayment of loans:
The repayment of IDA loans begins after a long grace period of 10 years. But in the case of the World Bank, it is very short.
The World Bank loan is extended at the interest rates consistent with market rate. But the interest rate is very low in case of IDA loans covering only the administrative charges.
Form of repayment:
World Bank loan is required to be repaid in terms of Special Drawing Rights (SDRs) or in terms of one of the principal currencies. The IDA loans are repayable even in terms of local currency. So, the borrowers are relieved from the botheration of arranging the scarce foreign exchange for the repayment of IDA loans.
The World Bank loan requires the guarantee of the Government of the member nation while lending loans. In the case of IDA, there is no insistence upon any guarantee.
Conditions of loan:
World Bank loan is extended for specified projects and the credit worthiness of the borrowing country is taken into account. The IDA does not impose such conditions.