A large chunk of IFC financing is channeled to private sector projects in developing countries
through intermediaries. IFC uses its full range of financial products
to provide finance to a wide variety of financial intermediaries.
Working through intermediaries allows IFC to extend its long-term
finance to more companies, in particular to small and medium enterprises
(SMEs) and microfinance entrepreneurs.
In many regions of the world, small private companies are the principal
engines of economic growth and employment creation. But micro, small and
medium-size investments carry high transaction costs, limiting smaller
companies' access to long-term finance. By working with local or
specialized financial institutions, IFC finance can reach these
businesses.
IFC operates on a commercial basis. It invests exclusively in for-profit
projects and charges market rates for its products and services.
Examples of investments in financial intermediaries include:
- Credit and equity lines to banks for on-lending to local companies.
These investments help the banks to provide working capital and
investment financing for their corporate customers.
- Private equity and investment funds, such as index funds and
country funds. IFC also invests in venture capital funds which help
channel flows to companies that generally are unlisted and do not
receive the notice of large investors.
- Leasing companies, which are essential to the development of
SMEs as smaller companies typically lease costly capital equipment.
Leasing plays a critical role in financial sector development in
countries with small economies or low per capita incomes. IFC has
actively helped establish leasing industries in countries all over the
world.
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