IFC can reach the poor quickly and sustainably through a network of financial institutions.
In developing countries, about 400 million businesses lack the credit they need to grow. These enterprises typically employ fewer than 250 people, yet they account for nearly half the jobs created in the developing world.
In all, their unmet financing needs total more than $2 trillion—an amount equal to the gross domestic product of some of the world’s wealthiest countries. It is a sum far beyond the capacity of any one institution to provide. It’s a challenge that can be met only by a wide network of financial institutions.
IFC plays a critical role here. In the six decades since our founding, we have built one of the largest networks of financial intermediaries operating in developing countries. We work with more than 750 financial institutions that command more than 30,000 distribution points in nearly every corner of the developing world.
This is a powerful network for reaching the poor quickly and sustainably. We make the most of it—to provide financing to micro, small, and medium enterprises, to support women entrepreneurs, to encourage climate-friendly investments, to promote responsible finance, and to broadly improve social and environmental standards in developing countries.
In FY11, nearly half of our investments in financial intermediaries went to the poorest countries served by the International Development Association. Working with such institutions has helped us improve access to credit for micro, small, and medium enterprises. In calendar year 2010, financial intermediary clients for which we have data provided nearly 10 million loans totaling more than $140 billion to such enterprises. It has also allowed us to help local banks improve their capacity to serve the poor and the vulnerable—for example, by advising them on diversifying their financial products.
We want financial institutions to act responsibly when we invest in them. We require them to comply with our Performance Standards on environmental and social assessments and management systems, and on labor and working conditions. We instruct them to observe IFC’s Exclusion List, which prohibits them from investing in projects that we ourselves would not invest in. We have also updated our Sustainability Framework in a way that requires these institutions to rate their own portfolio risks more clearly, and have actively engaged with civil society groups on these issues.
Over the past few decades, financial intermediaries in emerging markets have provided access to finance to hundreds of millions of people. But much more needs to be done to close the credit gap. We believe there is no more efficient way to do so than to harness the power of our network of trusted partners to help the poor and the vulnerable.