Private Sector Solutions for the Poorest
The world’s poorest countries face enormous demands for development finance that simply cannot be met through public resources. These 82 countries, 40 of them in Africa, are home to 2.5 billion people, 1.8 billion of whom survive on $2 a day or less. They need urgent solutions that maximize the impact of private investment, driving powerful results in job creation, infrastructure, health, education, and other key areas.
This is one of IFC’s most critical roles within the World Bank Group. We leverage private investment to support the work of the World Bank’s International Development Association (IDA), whose concessional loans and grants in turn complement the institution’s original lending arm, the International Bank for Reconstruction and Development (IBRD), which provides loans and advice to middle-income and credit-worthy countries.
Since 2005, IFC investment in IDA countries has grown sixfold, reaching nearly $6 billion in fiscal 2012. IDA countries now account for nearly half of our investment projects and 65 percent of our advisory program expenditures. Our record in these countries has been impressive: for every $1 in equity that IFC invested, we received a return of $1.25. Our financial performance has allowed us to contribute a significant sum to IDA replenishments—$2.2 billion so far.
IDA is working to optimize the World Bank Group’s value proposition—that is, tap the combined strengths and comparative advantages of the IBRD, IDA, IFC, and the Multilateral Investment Guarantee Agency (MIGA)—to enable IDA countries to have better access to a comprehensive package of support.
Cote d’Ivoire is a case point. Just two years after the end of a wrenching conflict that dramatically increased poverty rates, it is now reclaiming its role as a West African economic power, growing by more than 8 percent a year. IFC’s recent emphasis there has been on:
- Infrastructure: The World Bank Group is working together to support the government’s efforts to boost electricity output by around 80 percent over the next six years. With financing from IFC, an IDA partial-risk guarantee, and a MIGA political-risk guarantee, Africa’s largest privately financed power project, Azito, provides the state power utility with more than a third of its electricity. IFC is providing $350 million in financing for the expansion of Azito, whose lead sponsor is U.K.-based Globeleq.
- Investment Climate: Registering an enterprise used to take about a month, requiring many costly visits to various agencies. But now IFC has helped the government centralize all procedures at a new one-stop center. Since it opened in late 2012, 700 new firms have been registered.
- Access to Finance: Three months after the civil war ended, IFC provided $1 million equity and $1.1 million in advisory services to launch Advans Cote d’Ivoire, a new microfinance institution that has since financed more than 5,000 smaller businesses. Another slightly older IFC microfinance client that has our investment at the holding company level, Microcred, has another 22,000 clients.
As an integral part of the new integrated World Bank Group strategy, IDA will strengthen its ability to catalyze private resources, promote foreign and domestic private investment, and maximize the positive spillovers of private investment for IDA countries.