The “Black Plan” was World Bank President Eugene Black’s strategy for winning U.S. support for creating IFC. Two concerns that U.S. officials had voiced about the proposal were the riskiness of equity investments and the amount of funding being requested for initial capitalization.
On October 20, 1954, Black wrote a letter to W. Randolph Burgess, Undersecretary of the U.S. Treasury for Monetary Affairs, with his ideas for overcoming these objections. Black restated his belief that the capacity to make equity investments would make IFC more effective, but he said that the World Bank would be willing to go forward without such capacity, provided that IFC would be allowed to use debentures with income and conversion features. Another element of Black’s plan was a reduction in the amount of paid-in capital requested from the United States, from $400 million to $100 million.
In its first few years, however, IFC found both of these concessions posed significant challenges. The scale of IFC’s start-up capital imposed limits on the amounts of financing that could go to specific projects. Meanwhile, IFC was faced with the prospect of wooing clients who were both unfamiliar with the new development finance institution and wary of the somewhat unconventional mixture of financial instruments it could provide – loans with profit-sharing and convertibility features along with fixed maturities and interest rates. Loans from export credit agencies, while of shorter duration, often seemed more attractive to prospective clients.
If you have an idea for a “postcard from the past,” please email Celeste Diaz-Ferraro at cdiazferraro@ifc.org.
