Establishing ‘Emerging Markets’

For six decades, we have held true to our founding vision—that the private sector is essential to development.

In this series of stories, you’ll learn more about how IFC grew from a small organization to become the largest global development institution focused on the private sector.


As the 1980s began, foreign investment in the stock markets of developing countries was minimal—a tiny fraction of what it is today, not yet playing a key role in supporting growth and modernization.

IFC looked beyond the status quo, focusing on the future. We decided to take two steps that sparked a breakthrough:

  • Making the case to investors with new data
  • Changing negative perceptions of what was then referred to as “the Third World.”

In 1980, IFC began tracking total investment-returns data for 10 local stock markets (Argentina, Brazil, Chile, Greece, India, Jordan, Korea, Mexico, Thailand, and Zimbabwe). The analysis revealed surprisingly attractive results, presenting a good argument for increased participation by foreign investors.

Drawing on this quantitative work, in 1981, IFC’s Antoine van Agtmael went to a meeting at investment bank Salomon Brothers in New York and proposed a new global investment fund for stock markets in developing countries. Many of those present were interested. But a banker from JP Morgan identified a hurdle: IFC would never get buy-in using the original proposed name, “Third World Equity Fund.”

Van Agtmael agreed.

He spent the next weekend considering a name and came up with a new term for both the idea and investment he wanted to promote: “emerging markets.”

“Third World” was a term that connoted extreme poverty, shoddy goods, and hopelessness to many at the time. But “emerging markets,” van Agtmael would later write, “suggested progress, uplift, and dynamism.” It reframed the picture, in time becoming the universal term used in the financial world to describe investment in developing economies.

Building on the momentum, IFC then created the Emerging Markets Data Base (EMDB), providing a much-needed source of performance data in an era when information was much harder to come by than it is today. Armed with this data and analysis, IFC teams then made the case for stocks in emerging markets to investors and mutual-fund managers in the industrialized world.

With this consistent, reliable market-performance information in hand, IFC was able to help create key early investment vehicles that sparked creation of a vast new asset class. These included the Korea Fund—one of the first of over 150 country funds for emerging markets that would be launched in the late 1980s and early 1990s.

In time, these initial steps in the mid-1980s gave rise to a new industry, one that over the years would see mainstream investors pour billions into stocks and bonds from developing countries. This catalytic effort did much to help local capital markets mature, allowing them do more than ever before to finance job creation, spur savings growth, and reduce poverty around the world.


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