The International Development Association

It is the "soft loan window" of IBRD which was established in September, 1960. It is an affiliate of World Bank. The president of the World Bank is its head. The main objectives of the IDA are two fold:

• To provide assistance for poverty alleviation to the world's poorest countries.
• To provide concessional financial assistance and macro economic management services to the poorest countries so as to raise their standard of living. There relate to human resource development including population control development of health, nutrition and education for the overall objectives or removing poverty.

The finance may be made available to the member governments or to the private enterprise. Advances to private enterprises may be made with out government guarantees. The credit is interest free. Only a small service charge of 0.75% per annum is payable on the amount with drawn and outstanding to cover administrative expenses. IDA finances not only the foreign exchange component but also a part of domestic cost. The credit can also be repaid in the local currencies of borrowing countries. Loans are given for such projects for which no assistance is provided by the World Bank before approving credit in special committee of the IDA considers three criteria.

• Poverty criterion: A country where population pressure is high and productivity is low, there by leading to a low standard of living of the people.
• Performance criterion: It relates to past performance in terms of loans received whether form IDA or the World Bank. It must have been pursuing macro economic policies and executing projects satisfactorily.
• Project criterion: The projects for which credits are to be utilized must yield financial and economic returns to justify their.

On the basis of the above criteria, the IDA sanctions credit for agriculture, education, health, nutrition water: supply, sewerage etc. such credits which are known as "soft loans". IDA has been blessing for the developing countries In keeping with the objectives, most of the assistance has gone to high development priority projects which could not get finance form other sources.