International Finance Corporation (IFC)

Key takeaways

• The IFC is the World Bank Group’s arm for private-sector investment in developing countries.
• It provides loans, equity investments, and advisory services to promote economic development and reduce poverty.
• The IFC raises funds by issuing bonds in international markets and committed a record $43.7 billion in fiscal year 2023.
• Critics argue the IFC sometimes prioritizes financial returns over social and environmental outcomes.

What the IFC is

The International Finance Corporation (IFC) finances and advises private enterprises in developing countries to foster economic growth, job creation, and poverty reduction. Headquartered in Washington, D.C., the IFC operates in more than 100 countries and focuses on expanding access to markets and finance where infrastructure or liquidity is lacking.

How the IFC works

• Activities: Provides loans, equity investments, guarantees, and advisory services to private companies and financial institutions.
• Funding: Raises capital by issuing bonds in international capital markets, including in emerging-market currencies. As of 2023, the IFC had issued $12.5 billion across 198 bonds in 22 currencies and committed $43.7 billion to private companies and financial institutions in FY2023.
• Strategic focus: Supports sustainable agriculture, microfinance and small-business expansion, infrastructure, climate initiatives, health, and education.
• Reach: Active across regions including Africa, the Middle East, Central Asia, Europe, Latin America and the Caribbean, South Asia, Afghanistan, and Pakistan.

Impact and outcomes

The IFC reports measurable development outcomes from its portfolio, including:
* Reached 2.7 million farmers.
Served 329.5 million patients through projects it supports.
Supported 3.4 million jobs.
Provided 63.3 million people with internet access.
Supplied electricity to 69.7 million people.
* Reduced an estimated 11.5 million tonnes of greenhouse gas emissions from IFC-supported projects in 2023.

Criticisms and challenges

Critics contend the IFC sometimes behaves more like a private investment bank, emphasizing corporate profits and returns over social and environmental protections. Specific concerns include:
* Insufficient attention to environmental and social harms tied to certain projects.
Weaknesses in exit strategies, including problematic early exits from debt-financed investments.
Complaints handled by the Compliance Advisory Ombudsman have highlighted instances where outcomes diverged from IFC sustainability commitments.

Examples of IFC-supported projects

Africa — sports and entertainment partnership

The IFC partnered with Proparco and Helios to expand sports and entertainment industries in Africa. The initiative aims to leverage growth in e-commerce, fashion, and audiovisual content to create jobs (especially for youth) and boost related sectors such as tourism, real estate, creative industries, and media.

Pakistan — dairy sector investment

The IFC provided $145 million to support FrieslandCampina’s acquisition of a 51% stake in Engro Foods, Pakistan’s leading dairy processor. Objectives included:
* Improving supply-chain efficiency and farmer productivity through shared best practices.
Benefiting an estimated 200,000 farmers and 270,000 distributors.
Creating roughly 1,000 new jobs across the dairy supply chain.

Governance

The IFC is owned by its member countries (186 members). The board of governors, composed of one governor and an alternate from each member, delegates operational authority to a 25-member board of directors that sets policies and oversees the institution’s work.

Funding model

The IFC finances its operations primarily by issuing bonds in international capital markets and reinvesting returns from its investments. Proceeds support lending programs, equity investments, guarantees, and advisory services that aim to catalyze private-sector development in emerging markets.

Conclusion

The IFC plays a central role in promoting private-sector development in low- and middle-income countries by providing finance and technical assistance. Its activities can create jobs, expand infrastructure and services, and support climate and social goals. At the same time, the institution faces ongoing scrutiny over the balance it strikes between financial returns and social and environmental safeguards.