A Letter from Philippe Le Houérou, IFC Chief Executive Officer
For more than six decades, IFC has been a leader in private sector development — working with multinational, regional, and local companies to accelerate growth and lift people out of poverty while promoting global competitiveness and standards for our clients. Fiscal year 2017 was a banner year for IFC: We invested at record levels while intensifying our focus on the most challenging regions and markets and investing a record amount to help address climate change. While we are proud of these results, we know we need to do much more.
Two years ago, 193 countries endorsed the 2030 Agenda, including the Sustainable Development Goals and the Paris Climate Accord. It will take a vast increase in financing to achieve these objectives, given current levels of poverty and the magnitude of other development challenges. Public resources alone are insufficient. That’s why, at the Financing for Development Conference in Addis Ababa in July 2015, the development community committed to a new vision — “From Billions to Trillions,” in which the private sector plays a central role in delivering development solutions while public resources are used strategically to develop projects, mitigate risks, and enable the private sector to invest sustainably.
IFC is uniquely placed to help deliver on this ambitious agenda, given the knowledge we have accumulated over 60 years. The scale of this ambition, together with IFC’s objective of doing more in the poorest countries, requires new approaches and new tools. We call this strategic framework “IFC 3.0.”
A RECORD YEAR
In my first full year at IFC, I saw many examples of our staff’s dedication, professionalism, drive, and creativity — strong evidence of our ability to deliver. In the FY17 context of strengthening growth and improving market conditions in developing economies, we delivered a record $19.3 billion in financing to private companies in 75 countries. This includes nearly $7.5 billion in funds mobilized directly from other investors, of which $531 million was made available through IFC Asset Management Company.
Nearly a quarter of the financing we provided went to the poorest countries — those eligible to borrow from the World Bank’s International Development Association (IDA). Our climate-related investments climbed to a record of nearly 25 percent of our financing. In addition, we increased our focus on creating economic opportunities for women by helping them access financial services, by supporting female entrepreneurs as they expand their businesses, and by fostering gender parity in the corporate world. We also increased our support for innovation and disruptive technologies.
In FY17, our investment portfolio grew by more than $3 billion to $55 billion. The size and diversity of this portfolio ensured that we delivered impact across different dimensions. For example, our clients provided 2.4 million jobs, delivered $411 billion in micro, small, and medium loans, generated power for 79 million people, provided gas to 60 million, and distributed water to 14 million.
Working upstream, we continued to offer comprehensive advisory solutions to clients, especially in fragile and conflict-affected areas and IDA countries. In FY17, 63 percent of IFC’s advisory program was delivered to clients in IDA countries and 20 percent in fragile and conflict-affected areas, while 26 percent was climate-related. In addition, almost a third of new advisory projects included a focus on gender impact in project design.
A NEW STRATEGIC FRAMEWORK
Our strategy, “IFC 3.0,” is embedded in the Bank Group’s Forward Look vision. It recognizes that to step up our game in the most difficult geographies and to achieve impact at scale, we must move from responding to demand to working proactively — leveraging the strengths of the entire World Bank Group and other development partners — to create markets, and mobilize private sector resources at a greater scale. To that end, we developed new analytical and financial tools and approaches.
New analytical tools and approaches: Achieving development results has always been essential at IFC. Given the increasing complexity of the issues our client countries face, we have strengthened our toolkit. We developed a new framework — Anticipated Impact Measurement and Monitoring, or AIMM — to enable us to better define, measure and articulate the development impact of each project and to focus scorecards and incentives on the delivery of economic impact. Eventually, we will be able to judge and communicate our results not only from an operational and financial perspective but also from a development and portfolio perspective.
To systematically look for and act upon opportunities to create markets and maximize finance for development, we have initiated country-level private sector diagnostics. These will help pinpoint where we can work together with governments, the World Bank, MIGA, and development partners to catalyze market creation by establishing the necessary regulatory and policy frameworks, promoting private sector competition, encouraging the spread of best practices and new technologies, and building local capacity and skills. We have also launched a World Bank Group–wide approach that calls for closer collaboration among our colleagues to maximize finance for development. We call this approach the “Cascade.” Bank Group staff, working with our clients, will first seek private sector solutions to address development challenges — where such solutions are advisable and can be effective — and reserve public financing for projects only when other options are suboptimal.
Advisory services are a critical part of IFC’s strategy to create markets and mobilize private investments — especially in the poorest and most conflict-affected areas of the world. This year, our Board of Directors gave us additional tools and resources, agreeing to reduce IFC’s annual transfer of net income to IDA in order to launch the Creating Markets Advisory Window. This three-year funding facility of up to $213 million will address increased demand for IFC Advisory Services, including for upstream work in preparing project pipelines and creating markets in IDA-eligible and fragile and conflict-affected countries.
New financial tools and approaches:The Board also approved the IDA18 Private Sector Window (PSW), supporting our strategy of expanding private investment and creating markets in eligible countries. With the four facilities under the PSW — the Risk Mitigation Facility, the Blended Finance Facility, the Local Currency Facility, and the MIGA Guarantee Facility — totaling $2.5 billion, we will have new de-risking tools to address high-risk projects, and overcome the challenge of limited access to local-currency loans. These are innovative facilities to enable private sector investment in IDA countries. IFC will implement them on behalf of IDA, creating a stronger pipeline of transactions for ourselves and others to finance.
Through our mobilization efforts and the investments from sponsors and other co-investors, every dollar of IFC investment currently contributes to $4 of financing for development. IFC continues to innovate beyond our successful loan syndications and investments by IFC Asset Management Company in private equity. A recent example is IFC’s Managed Co-Lending Portfolio Program for Infrastructure, which taps into private capital from insurance companies to finance a share of IFC’s portfolio of infrastructure loans. Institutional investors hold large pools of money that could be made to work for development. This model opens the door for these funds.
With the knowledge we have accumulated over 60 years, IFC is uniquely placed to give the private sector a central role in financing and delivering development solutions. The scale of this ambition, together with IFC’s objective of doing more in the poorest countries, requires a new strategic framework — based on new analytical and financial tools and approaches — which IFC is now rolling out.
IFC’s new strategic framework is a concrete response to the challenge of converting “Billions to Trillions” of development finance. By starting to deploy the new tools given to us by our Board, by bringing greater analytical depth to our work, and by working more closely as a team with our World Bank Group colleagues, our clients and our other partners, we will amplify our development impact in the years ahead. Through strong partnerships with the private and public sectors, we can enhance our power to create markets and improve the lives of millions of people.
Philippe Le Houérou
IFC Chief Executive Officer
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