Business Model

Results measurement in the context of IFC's business model

To be able to assess IFC’s institutional effectiveness, it is important to understand how we work. IFC aims to generate sustainable private sector development in emerging markets. We do this by working at various levels:

• IFC helps governments create a business enabling environment, for example by simplifying and strengthening business regulation
• IFC invests in companies that operate in emerging markets, making loans (project or corporate finance) or taking an equity stake
• IFC supports companies through our advisory services; for example, we help clients improve their corporate governance

In addition, we partner with many international development actors to advance the field of sustainable private sector development, for example by participating in multi-stakeholder initiatives.

Bringing others along
As a development bank, we do not carry out projects on the ground ourselves: we help finance the work of others. As such, our success is determined by how effective we are at choosing the partners and investments we support, influencing project design and execution, and catalyzing future investments by others in successful and sustainable ventures.

IFC is always a minority investor. This makes the profitability of our projects very important: if our investments are not financially viable, we will not be able to find private sector financiers willing to invest alongside us. On the other hand, if our investments do well, they send a signal to the market: responsible private sector development in emerging markets is viable and profitable.

How it works in practice
Take the example of mobile phones: starting in the mid-90s, IFC invested in African mobile phone providers in some of the most difficult environments. This was a great success: over 10 years, our clients provided telecommunications services to 20 million customers. Today, customers in many African countries can chose among many commercial providers. We now try to encourage investments in Internet/broadband providers, important facilitators of private sector development that help bridge the digital divide.

Small players acting as catalysts
At $6 billion in 2006, IFC’s investments accounted for a small share of the $530 billion in global financial flows to the private sector in emerging markets. Investment amounts only tell a part of the story however: IFC and other development banks play a significant role in making funds and expertise available where these are needed most, for example in low income countries, or countries that are considered high risk to investors ("frontier countries").

In 2006, these international finance institutions supported the majority of investments in frontier countries with maturities of five years or longer (63 percent) and an even larger share with maturities of seven years or longer (71 percent).



When we measure the impact of IFC's investments, the various performance dimensions are therefore important. We assess not only whether projects are profitable, environmentally and socially sustainable, or economically beneficial, but also whether they make a contribution to private sector development in the country or industry more broadly, such as through demonstration effects, a measure of our effectiveness in acting as a catalyst for further investment.