That empty-nest feeling The World Bank, founded to fight poverty, is searching for the right role in places that need its help less and less

A typical bank will do its very best to retain customers who are relatively mature and reliable. Whenever it deals with these favoured clients, it will try to offer a personalised service, devise innovative products and keep rival lenders away.

The World Bank is certainly not a typical bank, but in this respect it follows the norm. It relishes dealing with its “best” customers: the middle-income countries (MICs), a group whose GDP per head typically ranges from about $1,000 to $6,000. In general, these countries have the decent habit of repaying loans and showing results in their efforts to reduce poverty, which is the bank's main job. Bank-supported projects in middle-income countries—like dams in the Philippines (see the picture above)—can plausibly be presented as contributions to a broader story of success.

Pleasant and rewarding as this MIC business may be, is it doing anything useful that could not be done just as well by others? And if not, is there anything else the bank should be doing? That was the question asked by the Independent Evaluation Group, an in-house monitor, which this week issued a report on the bank's work in the MICs over the past decade.

The MICs are not simply the best but also the biggest customers of the World Bank—accounting for 63% of its loans and over half of its administrative budget. But the trouble with promising protégés is that one day they no longer need you. The MICs are now heading for the exit: over the past 12 years, they have repaid an annual average of $3.8 billion more than they have taken out in new loans. Financing from the multilateral lender accounted for just 0.6% of the MICs' national investment in 2005, down from twice that in 1995.

There are several factors at work here, mostly benign. The MICs are growing faster than either the poorest or the richest states. Five countries have “graduated” from the bank in the past ten years (while several, notably China, have joined the middle-income group). But most crucially for the bank's future, the MICs have started doing a better job at nursing their own balance sheets. This means they can raise capital from private lenders: 31% of the bank's middle-income lending now goes to countries with investment-grade credit ratings. A further 62% goes to countries with credit ratings below investment grade. Just 7% of MIC lending goes to countries with no credit rating and virtually no access to private capital at all.

Naturally, the MICs now turn to private lenders, who do not tie money to advice. The World Bank claims that the best thing it lends is its expertise. But many governments feel they know best; it is hard to make them put up with the advisers who come with “soft” loans, unless the other terms are very attractive.

Nancy Birdsall of the Centre for Global Development, a think-tank in Washington, DC, favours decoupling advice and loans. Some countries (presumably those deemed sensible enough not to need any counsel) would take loans but no advice. Others (like China, with plenty of finance) could take just the advice. By offering a more clearly differentiated range of products, the World Bank could improve the quality of its services to MICs.

An interesting idea, and perhaps one way of easing the identity crisis which looms over the bank as it deals with middling countries. It has devoted three strategy papers in six years to this topic, without dispelling the impression that it is still searching for a clear aim. When the bank was founded, it really was the only source of capital for many poor countries. It is only slowly adapting to a world in which it is one player among many.

In carrying out the institution's core missions—boosting economic growth and reducing poverty—the bank's work in the MICs has been moderately successful, the new evaluation finds. Isn't that good enough? In an earnest quest for relevance, the report's authors name three areas where the bank could do better: corruption, inequality and the environment. In these areas, most borrowers—whatever their view may be worth—saw the bank's work as mildly unsatisfactory or worse.

Nobody calls these issues trivial—but they are also among the hardest to deal with. Battling corruption takes generations. In poor African countries, where the bank and other donors sometimes supply a third or half of the government's revenues, aid-givers cannot avoid being political; they can bankroll or bankrupt ill-governed regimes. But in a country such as Brazil or China, the bank's clout is trifling. At best, it can have influence through advocacy and example. Its measures of corruption, for example, inveigle their way into the political debate in many of its client countries. But if it becomes too intrusive, the borrower will walk away.

In the end, there may be little the bank can do to clean up governance in a large, powerful country, such as India. The best it can manage is to ensure that its own people and projects are above suspicion—as it has been trying to do. Before he was forced out as bank president last May, amid controversy over some professional help he gave his girlfriend, Paul Wolfowitz attempted to beef up the institution's internal-investigations unit. But the unit failed to win the trust of some of the bank's employees. Mr Wolfowitz duly picked Paul Volcker, an ex-chairman of the Federal Reserve, to investigate the investigators; Mr Volcker's report is due out soon.

Inequality is another front on which the bank is ill-equipped to fight. The new evaluation says more than half its middle-income borrowers have become more unequal over the decade under review. But the bank might do more harm than good if it shifted focus from absolute poverty to relative deprivation. When the rich get richer, is that the bank's business?

Finally, the bank's environmental role has long been close to its heart. But it can be argued that positively promoting greenery is not a central task for the institution; it already tries to avoid projects that harm the ecosystem. If it insists on an activist role, it will run up against MICs that take a different view of the trade-off between greenery and growth, and hence borrow elsewhere.

What of the bank's own books, if it should lose its returns from its lending to the MICs? The bank claims that this profit-making activity helps it to dole out money to the poorest countries. But Adam Lerrick of the American Enterprise Institute, a conservative think-tank, calls the bank's “profit” from lending a fiction. He says this income is really the return on cost-free capital that belongs to its shareholders; the bank should invest these funds in the capital markets and use the income on projects in the poorest countries, instead of lending it to governments that don't need it.

Arguably, the bank should be proud of old pupils who have achieved growth, repaid debt and attracted private financing. Of course, if credit markets now tighten, then Robert Zoellick, the bank's president, may be proved right when he insists that MICs will need the bank for a while longer. But whatever happens, setting unrealistic new aspirations is probably not the best way to remain in business.