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.
1971 was a turning point in IFC history.
It was the year we created our first specialized department targeting one of the cornerstones of private sector development: strong, efficient local financial institutions.
At the time, most financial sectors in poorer countries were weak and undeveloped. But they had great potential. Given the right support, they could grow far better at channeling savings into investment—and eventually become true drivers of development, financing the job creation needed to reduce poverty. It was time to seize the opportunity.
Until then, IFC’s financial-sector work had been limited to collaborating with the World Bank in strengthening specialized institutions called development finance corporations that targeted local businesses with limited access to capital. These initial steps in the 1960s had drawn attention, and were now ready to be scaled up and go deeper.
“IFC has done some useful work in this area,” an independent review commission chaired by former Canadian Prime Minster Lester B. Pearson wrote in 1969, “but it is in a position to do very much more.”
Heeding this call, in 1971 IFC created the Capital Markets Department to help build a wide range of local financial institutions: banks, stock markets, insurance companies, and many others. The work has continued ever since. Today, the financial sector represents the largest industry component of IFC’s $52 billion global investment portfolio.
From the outset, the emphasis was on pioneering, innovative work. IFC teams discovered new niches where the private sector could contribute, then helped foreign or local co-investors establish new financial institutions in them, often setting up a first-of-its-kind entity.
One example is India’s Housing Development Finance Corporation (HDFC). The pioneer of that country’s vast home-loan market, it has helped more than 5 million Indians realize the dream of owning their own homes, while also sharing its knowledge to help build the housing-finance industry in various countries across Asia, Africa, and Eastern Europe.
HDFC was created with IFC’s support in 1978. A founding shareholder alongside ICICI, the Aga Khan Foundation, and others at the time, IFC has invested more than $240 million in HDFC over the years, using the corporation as inspiration for its global housing-finance business, which today has a portfolio of more than $1 billion.
IFC’s investment officer on the original HDFC transaction, Promodh Molhotra, sees it a classic example of the catalytic role for which we were created in 1956. “If IFC just does it right at the beginning, then points the way for other in the market and gives the right signals, “ he says, “the market in a developing country will take care of the rest.”