Closer collaboration between IFC and the World Bank's International Development Association has reached a milestone. World Bank Group Chief Financial Officer Vincenzo La Via and IFC Executive Vice President and CEO Lars Thunell recently signed an agreement for IFC to transfer $500 million to IDA, which extends grants and interest-free credits to the world's poorest countries. This is the first portion of IFC's $1.75 billion commitment to support IDA through 2011.
IFC's unprecedented financial support matches that of the World Bank's International Bank for Reconstruction and Development. This allows the Bank Group to more than double its contribution to IDA, compared with the last funding of IDA in 2005.
"IFC's financial strength has made it possible for us to contribute more to the countries where we are needed most," Thunell said during the signing ceremony.
A new IDA-IFC Secretariat was established recently to forge more effective collaboration across the World Bank Group and to better coordinate its work in IDA countries. The secretariat seeks to foster more projects where IDA, IFC, and the Multilateral Investment Guarantee Agency working together can enhance development impact. The result will be a new World Bank Group business line of joint projects.
A natural area for more private investment and public-private partnerships is in infrastructure. The secretariat is looking closely at how the Bank Group can better address the power crisis facing so many IDA countries by streamlining the business model for joint projects.
"The Group's client countries, especially IDA countries, will have to raise public and private capital to meet vast needs for investment in energy, water, agriculture, transportation, and telecommunications infrastructure," La Via said.
Financial Markets and Public-Private Partnerships
Financial market development also shows promise for public-private partnerships.
For example, IDA and IFC are working to expand access to finance for small and midsize businesses in Madagascar. The project includes partial guarantees and advisory assistance to make banks more comfortable lending to these companies, which are seen as riskier and have less access to credit than large companies.
Within the first 18 months of operation, the participating banks approved over 800 new SME loans for a total of about $22 million. In addition, close to 400 loan officers and bank employees have been trained through the IDA-funded advisory service component of the program, and the banks have opted to implement better lending procedures in all of their branches.
For the Madagascar project, $2.5 million of IDA funds leveraged $22.5 million from IFC and other private investment. The positive experience has created potential for expanding the program within the country and for replicating it across the region.
The World Bank Group institutions include:
- IBRD (International Bank for Reconstruction and Development)
- IDA (International Development Association)
- IFC (International Finance Corporation)
- MIGA (Multilateral Investment Guarantee Agency)
- ICSID (International Centre for Settlement of Investment Disputes)
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For more information contact:
Elizabeth Price
IFC Communications Officer
Phone: (202) 458-0387
E-mail:
EPrice@ifc.org
Published March 25, 2008
