IFC's Role
1. New markets: IFC can play an important role in investing in new markets. Its presence can lend the credibility needed for a project to proceed, and can accelerate development of the sector. Early entry can result in a greater positive development impact. However, since new markets are risky, IFC should ask the company to anticipate market difficulties and develop contingency plans in advance.
2. IFC's role with governments: IFC's role as an intermediary between the sponsor and government can be of significant benefit to the sponsor, by:
improving relationships with the government;
providing leverage to the company in negotiations with the government; and
helping to protect the independence of a newly privatized company.
IFC should make it clear to the sponsor from the outset what role it is prepared to play as intermediary with the government.
3. Funding: Innovative financial instruments can enhance IFC's developmental role by strengthening a client's access to other funding sources. IFC can be helpful to a company by diversifying its funding sources and familiarizing the company with raising capital in the global market.
4. Boards: IFC may have an important role in participating in an investee's company board, particularly to improve collaboration between joint venture partners. However, IFC should carefully consider the resource implications of fulfilling board responsibilities. In some cases it may be more appropriate to have more technical and investment staff for follow-up rather than board representation.
5. Medium sized enterprises (MSEs): IFC should focus on MSEs (including expanding regional companies) to maximize its development impact. The MSEs should aspire to being globally competitive.
6. IFC and sponsor view of IFC's role: It is important for IFC and the sponsors to share a common view of IFC's role in a project from the outset. The extent of IFC's role will partly depend on the resources it commits to fulfilling it.
The above lessons are based on 53 lessons from past IFC investments.
Last updated December 1998.
