Today IFC manages more than $100 million in technical assistance funds, much of it sourced from bilateral donor agencies. TA is core business, occupying a third of our staff and central to our value proposition.
But it wasn’t always this way.
When did IFC first start working with donors? The 1990s? The 1980s? Even earlier?
Almost from its beginning in 1956, IFC has been expected to provide not just financing, but knowledge as well.
In the first few decades, this knowledge transfer came for free — with IFC’s expert staff giving clients extensive industry and technical guidance as well as loans and equity investments. IFC absorbed any additional costs involved as part of its operations, which had no separate costing of technical assistance, and rarely measured the impact of its technical assistance.
What a difference from today. These days IFC provides more than $100 million of technical assistance to clients a year, much of it on a cost-share basis, with the subsidy element funded by donor and our own resources. This scaled up knowledge transfer function is central to the way we do business, helping us carry out our mission and stand apart from commercial banks.
How did it all start?
The story begins with World Bank President Robert McNamara’s decision to create a Capital Markets Department in IFC in 1971 — a bold step that deserves far more credit in the annals of development history than it has received.
At the time, agriculture, health, and education were the world’s poverty reduction priorities. Few realized the importance of building strong national financial institutions that could turn savings into investment, financing domestic capital formation.
But McNamara did. He encouraged IFC chief William Gaud to create a Capital Markets Department, headed by an experienced Director. That director turned out to be a Canadian venture capitalist working on Wall Street, David Gill, who realized the scope of the task ahead of him as soon as he began to travel.
“When I went to Indonesia in 1972, it had a per capita income of maybe $100. I saw that they had a stock exchange, but didn’t have any stocks, which I realized was a bit of problem,” Gill recalls today. “And then I saw that they had a securities exchange commission with only 200 employees, so I thought, ‘What a pity that they don’t have 200 stocks.’”
Indonesia needed a lot of advice in starting not just a securities market, but a sound banking system as well. Gill’s idea was to send a crack team of 12 retired senior bankers from Canada to go to Indonesia on two-year terms and give input on capital market development. At the time, though, IFC had no way to fund large-scale advisory work unrelated to its investments.
Undeterred by such obstacles, Gill worked out an arrangement with the Canadian aid agency CIDA to fund the bankers. But after he had recruited them, Ottawa’s bureaucracy was slow in delivering on its commitments, ultimately declining to provide the promised TA funding. In the end the Indonesian government agreed to pay for it all themselves. A team of 12 Canadian bankers plus, two IFC staff, end up staying in Jakarta for four year, eventually attracting additional bilateral funding from the U.S. and U.K. aid agencies.
It may have been a rough start to donor relations, but it worked. Everyone kept the end goal in mind, not the bumps in the road.
“Ultimately it worked well, and 10-15 years down the road the banking and stock exchange system were much better,” Gill recalls today.
But what about real money? When did IFC actually start to get TA funding from donors?
If you have an idea for a “postcard from the past,” please email Celeste Diaz Ferraro at cdiazferraro@ifc.org.
