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International Development Association (IDA) is called the ‘soft’ window of the World Bank (WB) because
- a)it lends for software and It development
- b)taking loans from it is very easy
- c)its loans are interest free
- d)none
Correct answer is option 'C'. Can you explain this answer?
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International Development Association (IDA) is called the ‘soft&...
Very important point to remember about IDA. Its loans are interest free (only administrative cost is charged). Further, the repayment period is very long like 35-40 years and the repayment starts after 10 years of taking loans. This way, it helps the developing countries to focus on development without worrying about paying back of loan quickly.
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International Development Association (IDA) is called the ‘soft&...
Why IDA is called the soft window of the World Bank?
The International Development Association (IDA) is referred to as the soft window of the World Bank due to the nature of its loans. Here's why:
Interest-free loans:
- IDA provides interest-free loans or grants to the world's poorest countries. These concessional loans have very low or zero interest rates, making them highly favorable for countries with limited financial resources.
- The terms of IDA loans are more flexible compared to the World Bank's International Bank for Reconstruction and Development (IBRD), making them more accessible and suitable for countries facing economic challenges.
Focus on poverty reduction:
- IDA primarily focuses on poverty reduction and sustainable development in low-income countries. By offering concessional financing, it aims to support projects that address key development issues such as healthcare, education, infrastructure, and economic growth.
- The soft terms of IDA loans enable countries to invest in critical areas without being burdened by high interest rates, allowing them to prioritize poverty alleviation and long-term development goals.
Complementing the World Bank:
- While the IBRD provides loans to middle-income and creditworthy countries at market-based interest rates, IDA complements this by offering concessional financing to the poorest countries that may not qualify for IBRD loans.
- Together, the World Bank and IDA work towards sustainable development and poverty reduction in a comprehensive manner, with IDA serving as the soft window that caters to the unique needs of the world's poorest nations.
In conclusion, the term "soft window" is used to describe IDA within the World Bank group because of its focus on concessional loans, interest-free terms, and support for poverty reduction in the poorest countries around the world.
The International Development Association (IDA) is referred to as the soft window of the World Bank due to the nature of its loans. Here's why:
Interest-free loans:
- IDA provides interest-free loans or grants to the world's poorest countries. These concessional loans have very low or zero interest rates, making them highly favorable for countries with limited financial resources.
- The terms of IDA loans are more flexible compared to the World Bank's International Bank for Reconstruction and Development (IBRD), making them more accessible and suitable for countries facing economic challenges.
Focus on poverty reduction:
- IDA primarily focuses on poverty reduction and sustainable development in low-income countries. By offering concessional financing, it aims to support projects that address key development issues such as healthcare, education, infrastructure, and economic growth.
- The soft terms of IDA loans enable countries to invest in critical areas without being burdened by high interest rates, allowing them to prioritize poverty alleviation and long-term development goals.
Complementing the World Bank:
- While the IBRD provides loans to middle-income and creditworthy countries at market-based interest rates, IDA complements this by offering concessional financing to the poorest countries that may not qualify for IBRD loans.
- Together, the World Bank and IDA work towards sustainable development and poverty reduction in a comprehensive manner, with IDA serving as the soft window that caters to the unique needs of the world's poorest nations.
In conclusion, the term "soft window" is used to describe IDA within the World Bank group because of its focus on concessional loans, interest-free terms, and support for poverty reduction in the poorest countries around the world.
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