Covenants
1. Flexibility: Depending upon the circumstances, IFC should structure its investment agreements with flexible covenants, within the limits of prudence, to allow management to respond quickly to a changing environment. This is particularly relevant for well-established clients.
2. Transparency: IFC loan agreements should include a covenant requiring annual disclosure of related-party transactions. All accounting statements should be in English, based on generally accepted accounting principles and audited by internationally recognized auditors.
3. Environment: IFC should develop specific environmental performance indicators for projects and include them as part of the legal covenants to secure better compliance. Environmental supervision needs to be undertaken regularly, particularly at the early stages of projects.
The above lessons are based on 28 lessons from past IFC investments.
Last updated December 1998.
