W’Bank suspends loan fees for poor nations

The World Bank has announced the removal of several loan fees to make borrowing more affordable for vulnerable countries.

The move is part of broader efforts to expand financial capacity and address urgent global challenges, including climate change, inequality, and economic fragility.

The global bank disclosed this through a link posted on its official X handle on Tuesday. A click on the link revealed that the bank had eliminated the prepayment premium on International Bank for Reconstruction and Development loans, introduced a grace period for commitment fees on undisbursed balances, and extended its lowest pricing to small, vulnerable states.

“The bank is working hard to make it easier for countries to borrow and to pay back their loans more easily by removing some fees on IBRD loans,” the financial institution stated.

These changes, according to the financier, aim to ease financial pressure on nations most in need of development financing.

“These measures are designed to make borrowing easier and more affordable for countries facing significant challenges,” the bank said. It added that the reforms align with its vision of building a “better, more efficient, and bigger” institution capable of addressing overlapping global crises.

The fee eliminations are part of the World Bank’s broader financial reforms, which aim to increase lending capacity by $150bn over the next decade.

This is being achieved through innovative financial instruments, leveraging shareholder support, and optimising available capital.

The bank assured that these measures would not compromise its Triple-A credit rating.

The reforms also include adjustments to the IBRD’s equity-to-loans ratio, which was reduced from 20 per cent to 18 per cent, enabling additional lending of approximately $70bn over 10 years.

It stated that a further $10bn has been unlocked through bilateral guarantees, and $1bn was secured via a guarantee from the Asian Infrastructure Investment Bank.

“The adjustments to our capital framework reflect our commitment to scaling up resources while maintaining financial stability,” the bank said.

The global lender emphasised that these changes are critical for addressing the trillions of dollars needed annually to combat climate change, support fragile states, and promote digital inclusion.

However, it acknowledged that governments and multilateral institutions alone cannot meet these financial demands.

To bridge the gap, the Bank has introduced a Framework for Financial Incentives, which encourages investments in cross-border challenges such as biodiversity, water security, energy access, and pandemic prevention.

Approved in April 2024, the FFI also launched the Global Solutions Accelerator Platform and the Livable Planet Fund, with Japan pledging the first contribution.

“The FFI is the first comprehensive framework among multilateral development banks to incentivize financing for projects with global benefits,” the Bank noted.

The bank also highlighted the development of innovative financial tools to attract private sector investment. These include outcome bonds, catastrophe bonds, and climate-resilient debt clauses, which offer borrowers flexible terms during natural disasters.

One notable example is the Wildlife Conservation Bond, which directed private financing toward Black Rhino conservation in South Africa. Another innovation, the plastic waste reduction-linked bond, mobilized funds for recycling projects in Ghana and Indonesia.

“We are finding new ways to channel private investment into emerging markets and address barriers to sustainable development,” the blog post read.