International Finance Corporation
Encyclopedia
The International Finance Corporation (IFC) promotes sustainable private sector investment in developing countries.
IFC is a member of the World Bank Group
and is headquartered in Washington, D.C.
, United States
.
Established in 1956, IFC is the largest multilateral source of loan and equity financing for private sector projects in the developing world. It promotes sustainable private sector development
primarily by:
(IBRD). IFC's corporate powers are vested in its Board of Governors, to which member countries appoint representatives. IFC's share capital, which is paid in, is provided by its member countries, and voting is in proportion to the number of shares held. As of June 30, 2010 and 2009, IFC’s authorized capital(the sums contributed by its members over the years) was $2.45 billion, of which $2.37 billion was subscribed and paid in.
The Board of Governors delegates many of its powers to the Board of Directors, which is composed of the Executive Directors of the IBRD, and which represents IFC's member countries. The Board of Directors reviews all projects.
The President of the World Bank Group, Robert Zoellick
, also serves as IFC's president. IFC's CEO and Executive Vice President, Lars H. Thunell
, is responsible for the overall management of day-to-day operations. He was appointed on January 15, 2006.
Although IFC coordinates its activities in many areas with the other institutions in the World Bank Group, IFC generally operates independently as it is legally and financially autonomous with its own Articles of Agreement, share capital, management and staff.
.
Non-members are: Andorra
, Brunei
, Cook Islands
, Cuba
, Liechtenstein
, Monaco
, Nauru
, Niue
, North Korea
, Saint Vincent and the Grenadines
, San Marino
, Tuvalu
and Vatican City
. The remaining non-members are all states with limited recognition.
Private sector
financing is IFC's main activity, and in this respect is a profit-oriented financial institution (and has never had an annual loss in its 50-year history). Like a bank, IFC lends or invests its own funds and borrowed funds to its customers and expects to make a sufficient risk-adjusted return on its global portfolio of projects.
IFC's activities, however, must meet a second test of contributing to a reduction in poverty in line with its mandate. In practice, this is broadly interpreted, but considerable time and effort is devoted to both (i) selecting projects with positive developmental outcomes, and (ii) improving the developmental outcome of projects by various means.
IFC provides both investment and advisory services. IFC also carries out technical cooperation projects in many countries to improve the investment climate. These activities may be linked to a specific investment project, or, increasingly, to broader goals such as improving the legislative environment for a specific industry. IFC's technical cooperation projects are generally funded by donor countries or from IFC's own budget.
IFC's Advisory Services focus on five core areas: Access to Finance, Business Enabling Environment, Environmental & Social Sustainability, Infrastructure Advisory, and Corporate Advice. Advisory services to expand access to finance (A2F) often accompanies IFC's financial investments, and includes assistance to banks and specialized financial institutions in improving their ability to provide financial services to micro, small, and medium enterprises.
After successful pilots in several countries, the WorldHotel-Link
project was successfully spun off from the IFC on 31 March 2006 and is now a private company with global reach helping locally owned small scale travel service providers in developing-world destinations overcome market access barriers.
CommDev (The Oil, Gas and Mining Sustainable Community Development Fund) is a funding mechanism for practical capacity building, training, technical assistance, implementation support, awareness-raising, and tool development. Operating flexibly and efficiently, CommDev serves as an integral component of an extractive industry project, enhancing, accelerating, and extending the value-added support given to communities beyond the compliance requirements of IFC investment projects and World Bank loan.
Critics have questioned the sustainability of some IFC-funded projects. The IFC recently invested $9 million in the upgrading of a slaughterhouse facility in the Amazon region owned by Brazil's biggest beef producer, despite opposition from local NGOs and the Sierra Club
. In 2009 an internal audit found that the IFC had ignored its own environmental and social protection standards when it approved nearly $200 million in loan guarantees for palm oil production in Indonesia.
IFC is a member of the World Bank Group
World Bank Group
The World Bank Group is a family of five international organizations that makes leveraged loans, generally to poor countries.The Bank came into formal existence on 27 December 1945 following international ratification of the Bretton Woods agreements, which emerged from the United Nations Monetary...
and is headquartered in Washington, D.C.
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....
, United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
.
Established in 1956, IFC is the largest multilateral source of loan and equity financing for private sector projects in the developing world. It promotes sustainable private sector development
Private sector development
Private Sector Development is a strategy for promoting economic growth and reducing poverty in developing countries by building private enterprises, membership organizations representing them, and competitive markets that are stronger and more inclusive....
primarily by:
- Financing private sector projects and companies located in the developing world.
- Helping private companies in the developing world mobilize financing in international financial markets.
- Providing advice and technical assistance to businesses and governments.
Ownership and management
IFC has 182 member countries, which collectively determine its policies and approve investments. To join IFC, a country must first be a member of the International Bank for Reconstruction and DevelopmentInternational Bank for Reconstruction and Development
The International Bank for Reconstruction and Development is one of five institutions that compose the World Bank Group. The IBRD is an international organization whose original mission was to finance the reconstruction of nations devastated by World War II. Now, its mission has expanded to fight...
(IBRD). IFC's corporate powers are vested in its Board of Governors, to which member countries appoint representatives. IFC's share capital, which is paid in, is provided by its member countries, and voting is in proportion to the number of shares held. As of June 30, 2010 and 2009, IFC’s authorized capital(the sums contributed by its members over the years) was $2.45 billion, of which $2.37 billion was subscribed and paid in.
The Board of Governors delegates many of its powers to the Board of Directors, which is composed of the Executive Directors of the IBRD, and which represents IFC's member countries. The Board of Directors reviews all projects.
The President of the World Bank Group, Robert Zoellick
Robert Zoellick
Robert Bruce Zoellick is the eleventh president of the World Bank, a position he has held since July 1, 2007. He was previously a managing director of Goldman Sachs, United States Deputy Secretary of State and U.S. Trade Representative, from February 7, 2001 until February 22, 2005.President...
, also serves as IFC's president. IFC's CEO and Executive Vice President, Lars H. Thunell
Lars H. Thunell
Lars H. Thunell is a Swedish businessman, since January 2006 Executive Vice President and CEO of IFC , a member of the World Bank Group....
, is responsible for the overall management of day-to-day operations. He was appointed on January 15, 2006.
Although IFC coordinates its activities in many areas with the other institutions in the World Bank Group, IFC generally operates independently as it is legally and financially autonomous with its own Articles of Agreement, share capital, management and staff.
Membership
Members of the IFC are 181 of the UN members and KosovoRepublic of Kosovo
Kosovo , officially the Republic of Kosovo is a partially recognised state and a disputed territory in the Balkans...
.
Non-members are: Andorra
Andorra
Andorra , officially the Principality of Andorra , also called the Principality of the Valleys of Andorra, , is a small landlocked country in southwestern Europe, located in the eastern Pyrenees mountains and bordered by Spain and France. It is the sixth smallest nation in Europe having an area of...
, Brunei
Brunei
Brunei , officially the State of Brunei Darussalam or the Nation of Brunei, the Abode of Peace , is a sovereign state located on the north coast of the island of Borneo, in Southeast Asia...
, Cook Islands
Cook Islands
The Cook Islands is a self-governing parliamentary democracy in the South Pacific Ocean in free association with New Zealand...
, Cuba
Cuba
The Republic of Cuba is an island nation in the Caribbean. The nation of Cuba consists of the main island of Cuba, the Isla de la Juventud, and several archipelagos. Havana is the largest city in Cuba and the country's capital. Santiago de Cuba is the second largest city...
, Liechtenstein
Liechtenstein
The Principality of Liechtenstein is a doubly landlocked alpine country in Central Europe, bordered by Switzerland to the west and south and by Austria to the east. Its area is just over , and it has an estimated population of 35,000. Its capital is Vaduz. The biggest town is Schaan...
, Monaco
Monaco
Monaco , officially the Principality of Monaco , is a sovereign city state on the French Riviera. It is bordered on three sides by its neighbour, France, and its centre is about from Italy. Its area is with a population of 35,986 as of 2011 and is the most densely populated country in the...
, Nauru
Nauru
Nauru , officially the Republic of Nauru and formerly known as Pleasant Island, is an island country in Micronesia in the South Pacific. Its nearest neighbour is Banaba Island in Kiribati, to the east. Nauru is the world's smallest republic, covering just...
, Niue
Niue
Niue , is an island country in the South Pacific Ocean. It is commonly known as the "Rock of Polynesia", and inhabitants of the island call it "the Rock" for short. Niue is northeast of New Zealand in a triangle between Tonga to the southwest, the Samoas to the northwest, and the Cook Islands to...
, North Korea
North Korea
The Democratic People’s Republic of Korea , , is a country in East Asia, occupying the northern half of the Korean Peninsula. Its capital and largest city is Pyongyang. The Korean Demilitarized Zone serves as the buffer zone between North Korea and South Korea...
, Saint Vincent and the Grenadines
Saint Vincent and the Grenadines
Saint Vincent and the Grenadines is an island country in the Lesser Antilles chain, namely in the southern portion of the Windward Islands, which lie at the southern end of the eastern border of the Caribbean Sea where the latter meets the Atlantic Ocean....
, San Marino
San Marino
San Marino, officially the Republic of San Marino , is a state situated on the Italian Peninsula on the eastern side of the Apennine Mountains. It is an enclave surrounded by Italy. Its size is just over with an estimated population of over 30,000. Its capital is the City of San Marino...
, Tuvalu
Tuvalu
Tuvalu , formerly known as the Ellice Islands, is a Polynesian island nation located in the Pacific Ocean, midway between Hawaii and Australia. Its nearest neighbours are Kiribati, Nauru, Samoa and Fiji. It comprises four reef islands and five true atolls...
and Vatican City
Vatican City
Vatican City , or Vatican City State, in Italian officially Stato della Città del Vaticano , which translates literally as State of the City of the Vatican, is a landlocked sovereign city-state whose territory consists of a walled enclave within the city of Rome, Italy. It has an area of...
. The remaining non-members are all states with limited recognition.
Funding
The IFC's equity and quasi-equity investments are funded out of its paid-in capital and retained earnings (which comprise its net worth). Strong shareholder support, triple-A ratings, and a substantial capital base allow the IFC to raise funds on favorable terms in international capital markets.Activities
Within the World Bank Group, the World Bank finances projects with sovereign guarantees, while the IFC finances projects without sovereign guarantees. This means that the IFC is primarily active in private sector projects, although some projects in the public sector (at the municipal or sub-national level) have recently been funded.Private sector
Private sector
In economics, the private sector is that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state...
financing is IFC's main activity, and in this respect is a profit-oriented financial institution (and has never had an annual loss in its 50-year history). Like a bank, IFC lends or invests its own funds and borrowed funds to its customers and expects to make a sufficient risk-adjusted return on its global portfolio of projects.
IFC's activities, however, must meet a second test of contributing to a reduction in poverty in line with its mandate. In practice, this is broadly interpreted, but considerable time and effort is devoted to both (i) selecting projects with positive developmental outcomes, and (ii) improving the developmental outcome of projects by various means.
IFC provides both investment and advisory services. IFC also carries out technical cooperation projects in many countries to improve the investment climate. These activities may be linked to a specific investment project, or, increasingly, to broader goals such as improving the legislative environment for a specific industry. IFC's technical cooperation projects are generally funded by donor countries or from IFC's own budget.
IFC's Advisory Services focus on five core areas: Access to Finance, Business Enabling Environment, Environmental & Social Sustainability, Infrastructure Advisory, and Corporate Advice. Advisory services to expand access to finance (A2F) often accompanies IFC's financial investments, and includes assistance to banks and specialized financial institutions in improving their ability to provide financial services to micro, small, and medium enterprises.
After successful pilots in several countries, the WorldHotel-Link
WorldHotel-Link
Worldhotel-link.com Limited is an online travel-services booking network. The company is incorporated in Hong Kong and has offices in Ho Chi Minh City, Prague, Cape Town, Belo Horizonte, Sydney and Seattle....
project was successfully spun off from the IFC on 31 March 2006 and is now a private company with global reach helping locally owned small scale travel service providers in developing-world destinations overcome market access barriers.
CommDev (The Oil, Gas and Mining Sustainable Community Development Fund) is a funding mechanism for practical capacity building, training, technical assistance, implementation support, awareness-raising, and tool development. Operating flexibly and efficiently, CommDev serves as an integral component of an extractive industry project, enhancing, accelerating, and extending the value-added support given to communities beyond the compliance requirements of IFC investment projects and World Bank loan.
Critics have questioned the sustainability of some IFC-funded projects. The IFC recently invested $9 million in the upgrading of a slaughterhouse facility in the Amazon region owned by Brazil's biggest beef producer, despite opposition from local NGOs and the Sierra Club
Sierra Club
The Sierra Club is the oldest, largest, and most influential grassroots environmental organization in the United States. It was founded on May 28, 1892, in San Francisco, California, by the conservationist and preservationist John Muir, who became its first president...
. In 2009 an internal audit found that the IFC had ignored its own environmental and social protection standards when it approved nearly $200 million in loan guarantees for palm oil production in Indonesia.
See also
- World Bank GroupWorld Bank GroupThe World Bank Group is a family of five international organizations that makes leveraged loans, generally to poor countries.The Bank came into formal existence on 27 December 1945 following international ratification of the Bretton Woods agreements, which emerged from the United Nations Monetary...
- Global Environment FacilityGlobal Environment FacilityThe Global Environment Facility unites 182 member governments — in partnership with international institutions, nongovernmental organizations, and the private sector — to address global environmental issues....
- Environment, Health and SafetyEnvironment, Health and SafetyEnvironment, Health and Safety – also Safety, Health and Environment or HES or HSE – is often used as the name of a department in corporations and government agencies. The EHS guidelines were created by the International Finance Corporation in 1998...
- Grassroots Business FundGrassroots Business FundThe Grassroots Business Fund is a non-profit based in Washington, DC. It has field offices in Ghana, Kenya, and India. Their mission is to build and support high-impact enterprises that provide sustainable economic opportunities to thousands of people at the base of the economic pyramid...