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At the core of our work to enhance our effectiveness is a commitment to deeper collaboration—both within the World Bank Group and with other development institutions. Development finance needs vastly outweigh what IFC can provide, and by partnering with others, we can accomplish far more than we ever could alone.
One early building block of 3.0, the World Bank Group Joint Capital Markets Program (J-CAP) is combining World Bank advisory alongside IFC investment to better tap the resources of local bond and equity markets to generate more local currency financing and attract capital from deep global markets to help meet local developmental needs. This financing is directed toward a more development-led agenda, such as support for affordable housing, small and medium enterprises (SMEs), infrastructure, and green financing.
Since the launch of J-CAP, across its priority countries alone, there has been over $530 million of IFC investment projects and a further over $150 million of IFC local currency bond issuances involving products and asset classes, which are priorities for capital markets-related World Bank advisory as well as IFC investment activities. An additional $74 million has been mobilized through J-CAP.
This year, for example, J-CAP helped spark significant amounts of new local currency financing for SMEs in Cote d’Ivoire. It came via a ground-breaking transaction: the first securitization of loans originated by a commercial bank in the eight-country West African Monetary Union. IFC was an anchor investor, buying into NSIA Banque’s $67 million-equivalent securitization in Abidjan’s regional market with support from the IDA Private Sector Window’s local currency facility.
J-CAP is made possible because of the support of the governments of Australia, Germany, Japan, Luxembourg, the Netherlands, Norway, and Switzerland.
Read more about our partners and funders, including our development partner commitments, on pages 101–104 of the IFC 2020 Annual Report.
IFC and other development finance institutions (DFIs) are collaborating to develop innovative models to increase their impact in five low-income, fragile, and conflict-affected pilot countries: Democratic Republic of Congo, Ethiopia, Madagascar, Nepal, and Sierra Leone.
IFC developed the Joint Collaboration Framework Agreement (JCFA) to provide a structure for increased collaboration among DFIs. Proparco, the private arm of the French Development Agency and DEG — Deutsche Investitions- und Entwicklungsgesellschaft — have signed the JCFA. The JCFA builds on existing partnership frameworks, such as the IFC Master Cooperation Agreement, to cover a range of new areas of collaboration, including the DFI Collaboration Pilots at the country level. However, with the COVID-19 crisis underlining the magnitude and scope of support needed by the private sector globally, the agreement was expanded to facilitate cooperation on COVID-19 responses.
The JCFA offers guidance on Upstream project development and preparation with other DFIs and promotes greater reciprocity in project co-financing arrangements, allowing IFC and its partners to deliver faster, more flexible responses to the challenges posed by frontier markets and the pandemic. The JCFA is expected to encourage the development of Upstream activities with the goal of increasing the pipeline of bankable projects that underpin investment and sustainable private sector economic growth.
IFC’s partners for the DFI Collaboration Pilots include: Proparco; the CDC Group, the United Kingdom’s development finance institution; the Swiss Investment Fund for Emerging Markets; the African Development Bank; and the Africa Finance Corporation.
Action on Implementing the Cascade
The World Bank Group is accelerating the implementation of the Cascade approach, a framework for prioritizing the use of private sector solutions to development challenges wherever possible and optimizing the use of public sector resources. The framework requires World Bank Group teams to first try and address policy and regulatory hurdles to private sector investments before using public sector resources to finance investments. Examples from FY20 include:
- In Kenya, the World Bank put in place a $1 billion Development Policy Operation after the government agreed to new policy reforms directly benefiting low-income Kenyan households. These steps paved the way for IFC to finance private sector transactions and attract new private investments in the affordable housing and SME finance sectors.
- In Côte d’Ivoire, a country where access to electricity is limited, a similar collaboration between the World Bank and IFC has helped the government reform the power sector — making it more bankable and enabling IFC to finance and mobilize investment for two large-scale power plants.
The Cascade framework is also serving as a valuable tool in deploying World Bank Group support in response to COVID-19 and building a more resilient world. The World Bank, IFC, and MIGA financial sector teams have agreed on a protocol that prioritizes use of credit lines and guarantees to private financial intermediaries before using public sector entities — adding efficiencies and freeing up scarce public sector resources for other uses.