1956

THE FIRST
SIX DECADES

2016

2010s

2000s

1990s

1980s

1970s

1950s-1960s

LEADING THE WAY IN PRIVATE SECTOR DEVELOPMENTA HISTORY

THE FIRSTSIX DECADESLEADING THE WAY IN PRIVATE SECTOR DEVELOPMENTA HISTORYSECOND EDITION

THEINSTITUTIONS
OF THEWORLD BANK
GROUP
THE
WORLD
BANK
GROUP
is one of the world's largest
sources of funding and knowledge
for developing countries,
consisting of five institutions
with a common commitment to
reducing poverty, increasing
shared prosperity, and promoting
sustainable development.

IBRD

IDA

INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT
lends to governments ofmiddle-income and creditworthy
low-income countries.

INTERNATIONAL DEVELOPMENTASSOCIATION
provides interest-free loans—called
credits—and grants to governmentsof the poorest countries.
Together, IBRD and IDA make up theWorld Bank.

IFC

MIGA

ICSID

INTERNATIONAL FINANCECORPORATION
is the largest global development
institution focused exclusively
on the private sector. It helps
developing countries achievesustainable growth by financing
investment, mobilizing capital ininternational financial markets,and providing advisory services
to businesses and governments.

MULTILATERAL INVESTMENT
GUARANTEE AGENCY
was created in 1988 to promoteforeign direct investment intodeveloping countries to support
economic growth, reduce poverty,
and improve people’s lives. MIGA
fulfills this mandate by offering
political risk insurance (guarantees)
to investors and lenders.

INTERNATIONAL CENTRE FORSETTLEMENT OF INVESTMENT DISPUTES
provides international facilities
for conciliation and arbitration of
investment disputes.

TABLE OF CONTENTSINTRODUCTIONPROLOGUEMESSAGE FROM THE EXECUTIVE
VICE PRESIDENT AND CEO

8

ABOUT IFC

9IFC'S MANDATE10IFC CEOs: A CHRONOLOGY11

IFC HISTORY IN A NUTSHELL

12

THE IFC BRAND

14

IFC BY THE NUMBERS

15

THE EVOLUTION OF IFC'S
BRAND VALUE PROPOSITIONTIMELINE: IFC'S SIX DECADES
OF EXPERIENCE

ORIGINS OF IFC

DECADES 1–3

22

17

18

BEGINNING WITHINNOVATION
1950s–1960s,
1970s, 1980s

30

CHAPTER 1:
EVOLVING THE APPROACH

32

CHAPTER 2:
STRENGTHENING
THE FINANCIAL SECTOR

42

CHAPTER 3:
IMPROVING THE INVESTMENT CLIMATE58

CHAPTER 4:
BUILDING GLOBAL
AND REGIONAL LEADERS

66

DECADES 4–5

DECADE 6

EPILOGUE

INCREASING
INFLUENCE

DEMONSTRATIONANDIMPACT

CREATING
OPPORTUNITY
WHERE IT’S
NEEDED MOST		
138

1990s–2000s
CHAPTER 5:
BROADENING THE
PRIVATE SECTOR'S ROLE
CHAPTER 6:
SETTING STANDARDSFOR SUSTAINABILITY

76

78

90

2010s

104

CHAPTER 7:
INNOVATING FOR INCLUSION

106

CHAPTER 8:
PROVIDING NEW PLATFORMS

114

CHAPTER 9:
WORKING IN THE FRONTIERS126

MESSAGE FROM THE
EXECUTIVE VICEPRESIDENT AND CHIEF
EXECUTIVE OFFICER

Great challenges require great solutions.

countries establish the basic conditions necessary for
entrepreneurship to thrive and prosperity to take root.

2016 marks the first year of implementation of theAcross the world, we helped our clients see the benefits

Sustainable Development Goals—a global initiativeof social inclusion—particularly gender equality—andthat depends on the collective ability of governments

environmental sustainability.

and the private sector to mobilize trillions of dollars
a year to advance prosperity and peace. It’s a year in

We did all of this profitably—and we channeled thewhich investors are growing increasingly risk-averse

profits back into poorest countries. Since 2007, IFC

toward emerging markets. It’s a year in which conflicthas contributed more than $3.5 billion of its income

and violence are displacing and impoverishing millions.

to support the work of International Development
Association (IDA), a World Bank Group institution thatIFC was created for challenges of this kind. Sixty

makes grants to the poorest countries.

years ago, our founders set us on a course to “create
conditions conducive to the flow of private capital”

Today, conventional sources of development financein less developed areas of the world—to intervene

are constrained. But far larger unconventional ones

wherever “sufficient private capital is not available on

remain untapped. Global institutional investors havereasonable terms.” We’ve been doing so ever since—an estimated $70 trillion of assets under management,

venturing ever more deeply into the world’s toughestof which only a tiny fraction reaches the developing

markets.

world. It’s our job to find new investment outlets forthis massive pool of capital, working with the World

Throughout, we have adapted to meet the needs of theBank, IMF, and other partners on policy and regulatory

times. Initially, we helped bring leading multinational

reforms that will help create new markets andcompanies to developing countries. As businesses inopportunities.

these countries began to thrive, we moved our people
and offices closer to them—to help them promote

Our history puts us in a unique position to take on thisprosperity in less-developed areas of the world. In doing

future agenda.

so, IFC built up an unmatched body of knowledge andexperience in sustainable private sector development.
We learned how to do difficult things in the most difficult places. We began to deliver advice alongside ourinvestments, helping the poorest and most strife-ridden

8 IFC: THE FIRST SIX DECADESPHILIPPE LE HOUÉROUABOUT IFC
IFC, a member of the World Bank Group, isthe largest global development institution
focused on the private sector in developing
countries.
Established in 1956, IFC is owned by 184
member countries, a group that collectively
determines its policies.
IFC has six decades of experience in theworld’s most challenging markets.
With a global presence in more than 100
countries, a network consisting of hundredsof financial institutions, and more than
2,000 client firms, IFC has been leading
the way in private sector development.
This is its story.

9 IFC: THE FIRST SIX DECADESIFC ARTICLESOF AGREEMENTIFC'S MANDATE

The International Finance Corporation (hereinafter called the Corporation) is established and shall
operate in accordance with the following provisions:

ARTICLE I
IFC’s charter, the Articles of Agreement, provides
the basis for its work in "encouraging the growth of
productive private enterprise" in three broad ways:

INVESTING
ALONGSIDE OTHERS
in private enterprises that contribute todevelopment without government guarantees

MOBILIZINGCAPITAL FROM OTHERS
by bringing investment opportunities
to investors

ADVISING
to help stimulate private capital flows andimprove the investment climate

PurposeThe purpose of the Corporation is to further economic
development by encouraging the growth of productive
private enterprise in member countries, particularly in theless developed areas, thus supplementing the activities of theInternational Bank for Reconstruction and Development(hereinafter called the Bank). In carrying out this purpose,
the Corporation shall:(i) in association with private investors, assist in financing
the establishment, improvement and expansion of productive private enterprises which would contribute to the development of its member countries by making investments,
without guarantee of repayment by the member government
concerned, in cases where sufficient private capital is notavailable on reasonable terms;(ii) seek to bring together investment opportunities, domestic
and foreign private capital, and experienced management;and(iii) seek to stimulate, and to help create conditions conducive to, the flow of private capital, domestic and foreign,
into productive investment in member countries.
The Corporation shall be guided in all its decisions by
the provisions of this Article.

10 IFC: THE FIRST SIX DECADESIFC CEOs:A CHRONOLOGYMARCH 2016 – PRESENTPHILIPPE LE HOUÉROU

2012 – 2016
JIN-YONG CAI

2006 – 2012LARS H. THUNELL

1999 – 2005
PETER L. WOICKE

1994 – 1998
JANNIK LINDBAEK1984 – 1994
SIR WILLIAM RYRIE

1981 – 1984
HANS A. WUTTKE

1977 – 1980MOEEN QURESHI

1974 – 1977
LADISLAUS VON HOFFMAN

1969 – 1974WILLIAM S. GAUD

1961 – 1969
MARTIN M. ROSEN

1956 – 1961
ROBERT L. GARNER

11 IFC: THE FIRST SIX DECADESW
IFC HISTORY
IN A NUTSHELL
This is a story of experience—an unparalleled body of knowledge
built up in the toughest markets, under the most challenging
conditions, and applied to address the world’s most urgent development challenges.
Six decades ago, a few dozen countries made a calculated bet on
the transformative potential of the private sector in developing
countries. They put up $100 million in capital and established
IFC to reinforce the work of the World Bank in spurring growthand development. Today, IFC is the largest global development
institution focused on the private sector, having delivered nearly$250 billion in financing to businesses in emerging markets.
Throughout its history, IFC has introduced new approaches tomeet the needs of developing countries. Initially, it helped tobring leading multinational companies to developing countries—
beginning in 1957, when IFC invested alongside Siemens in Brazil.
In addition, as businesses in these countries began to thrive,
IFC deployed its staff to local markets to be closer to clients.
Over time, IFC helped drive growth by providing investment andadvice, and by mobilizing resources from other capital providers.
IFC consistently brought to bear a distinctive set of advantages
in working with the private sector to end extreme poverty andboost shared prosperity—a history of innovation, a mandate
for global influence, an understanding of the demonstration
effect of its actions, and a determination to achieve measurable
development impact.

12 IFC: THE FIRST SIX DECADESSIX DECADES OF EXPERIENCEHAVE TAUGHT IFC…
• How to maximize development impact andbusiness results in the toughest social, political,
and financial environments.
• How to mobilize and leverage capital beyond
its own resources, attracting private investors
that otherwise might not invest in riskier markets.
• How to build partnerships that create markets,
expand economic opportunity, and push theboundaries of social and environmental
stewardship.

Those capabilities have made IFC a key player in global efforts
to address shared challenges such as climate change andpandemics. IFC plays a prominent advisory role in major initiatives of the United Nations and the Group of 20 nations. It acts asa trusted liaison between the public and private sectors, bringing
business solutions to the challenges of development.
Today, the challenges of development are simultaneously global
and local. Trillions of dollars must be mobilized each year if theworld is to achieve the Sustainable Development Goals—including
ending poverty—by 2030. Poverty is increasingly concentrated
in fragile and conflict-affected areas of the world, where it ishardest to eradicate. Climate change threatens to force tens of
millions of people in developing countries into poverty.
IFC is uniquely positioned to leverage the capabilities of theprivate sector to address these challenges. Six decades ofexperience and a record of innovation and thought leadership inprivate sector development have made the organization essential
for creating opportunity where it’s needed most.

13 IFC: THE FIRST SIX DECADES

THE IFC BRAND
IFC has built up a strong brand identity over six
decades of experience. The corporate brand isexpressed in the logo—adding IFC’s acronym, full
name, and World Bank Group affiliation alongside
the World Bank Group’s globe and using its colors.
In use since 2014, the current logo is in turn partof a larger visual identity system that also includes
colors, typefaces, and implementation guidelines
applied consistently to all communications material
as part of IFC’s brand management.
IFC’s visual depiction has evolved considerably
over the years, with today’s logo the culminationof several other usages that appeared on earlier
annual report covers and other marketing materials
during different eras of IFC history. The years
marked at right show the first year these logos
appeared on annual report covers.

1956

In the early years the name was fully
spelled out on report covers, supportedby the official legal seal rather than a logo.
The acronym and relationship to the WorldBank were included in all communications
from the outset.

1961

In the 1960s IFC began using an early logo,
combining the acronym and the full name.

1969

Starting in 1969, the logo was modified,adding the affiliation to the World Bank
Group (a term that was first used in
the 1960s).

1973

For more than two decades starting in 1973,
the IFC acronym was primarily used alone,
generally in blue and at times adding thefull name.

1993

Starting in 1993, an enclosed
globe was added to the logo.

2005

In 2005 the enclosed globe element
was modified further, increasingly using
blue as the primary corporate color.

2014

The current IFC logo was adopted as partof a larger new World Bank Group visual
identity system.

14 IFC: THE FIRST SIX DECADESIFC BY
THE NUMBERS• $200 billion: in financing for IFC’s own accountdelivered to businesses in emerging markets.
• $50 billion: mobilized by IFC’s loan-syndications
program from more than 500 financing partners
in over 115 emerging markets.
• $7 billion: raised from other investors by IFC
Asset Management Company.
• $1.3 billion: value of IFC’s advisory portfolio,
including over 700 projects in about 100 countries.
• $3.5 billion: contributed to International
Development Association since 2007.
• $2.56 billion: growth of paid-in capital from$100 million in 1956.
• $19.5 billion: in local-currency financing
provided across 71 currencies.
• $5.1 billion: raised through issuance of green
bonds as of FY16 end.
• 3,757: staff from more than 140 countries, withmore than half located outside the United States.
• 104: offices in 98 countries, with more than
2,000 private sector clients.
(Note: some numbers are approximate)

15 IFC: THE FIRST SIX DECADESCreatingOpportunity Where
It's Needed Most:
A tagline summing
up IFC's vision,
introduced in 2007
and used ever since.

16 IFC: THE FIRST SIX DECADES

THE EVOLUTION
OF IFC'S
BRAND VALUEPROPOSITION
For six decades, IFC has steadily adapted to meetthe evolving needs of emerging markets. Its ongoinggrowth—and increased delivery of investment,
advice, and development impact—reflects an enduring ability to adjust its business model to address
the changing needs of the times.
Although mandated from the outset to invest, advise,and mobilize capital for private sector development,
IFC began in 1956 with a primary emphasis onloans. Equity investment and loan syndication
functions were soon added. As more countries
joined IFC and demand increased, a wider arrayof other products was introduced: expanded advisory services, new knowledge-based services, anda broader range of investment vehicles.
Along the way, IFC’s global network of clients andpartners grew dramatically—as did its financial
resources and breadth of staff skills. By the timeof its 50th anniversary in 2006, this growth had
considerably enhanced IFC’s ability to deliver on
its founding vision.
In 2007 IFC summed up its vision for the new millennium in a single phrase: Creating opportunity forpeople to escape poverty and improve their lives.
Two years later, this vision grew into a defining
corporate tagline, Creating opportunity where it’sneeded most. It has remained in place ever since.

17 IFC: THE FIRST SIX DECADES

During this period, IFC also redefined its own story
to become the story of those whose lives it improves.
Its story was their story. Poised at the intersectionof innovation and impact, IFC was showing that
it was uniquely positioned to make a differencein the 21st century, boosting the private sector’s
essential role in addressing the greatest development
challenges of the day. IFC had become the world’s
leading global development institution focused on
the private sector, working with clients to provide
solutions to challenges that cannot be solved bygovernment alone.
By 2011 IFC had further refined its brand value
proposition—Innovation, Influence, Demonstration,and Impact—and focused more on leveraging thepower of partnerships in seeking transformational
results.
Today, IFC’s work continues to evolve, supporting
an ambitious global agenda that is moving frombillions to trillions in financing for development.
Ultimately, what distinguishes IFC in the marketplace is its role as a Bretton Woods institution—aWorld Bank Group member with unique depth ofknowledge and experience that is well positioned
to help create and develop new markets.

SIX
DECADESOF
EXPERIENCEINNOVATIONINFLUENCE
DEMONSTRATION& IMPACTORIGINS

1947

GLOBAL CONTEXT

1945:
WWII ends in a
divided Europe

World Bank President John
J. McCloy appoints New Yorkfinancier Robert L. Garner asvice president of the Bank.

1945:
Soviet-occupied
countries adopt
command economies

1957

1959

1960

1961

I FC’s first loan:$2 million to help
Siemens’ Brazilian
affiliate manufacture
electrical equipment.

First syndication: IFC
mobilizes $2 million from agroup of banks for Brazilian
pulp and paper company
Champion Celulose.

First investment
in Africa: a $2.8
million loan package
for Kilombero Sugar
Co. in Tanzania.

IFC’s charter amended
to allow equity investments—in time, a key
to its profitability.

1957:
European Economic
Community created;
Ghana becomes first
Sub-Saharan Africancountry to gain
independence.

1973

1974

1976

First housing finance project:
IFC becomes a founding shareholder in start-up Davivienda ofColombia, then adopts that samemodel in 1978 with HDFC in India.

IFC's $17.3 million investment
and advice to Republic of Korea's
LG Electronics helps it become
one of the first globally competitive
emerging-market companies.

First SME finance project:$2 million loan for Kenya
Commercial Bank to lend tosmaller local companies.

1973:
Chile begins gradualtransformation fromstatist to a liberalized,
world-integrated economy

1975:
End of Vietnam War

1976:
Apple founded1975:
Microsoft founded

1979:
Deng Xiaoping begins reforms
to open China’s economy

18 IFC: THE FIRST SIX DECADES1947:
Indianindependence
from the U.K.

1948-49
Garner and colleagues propose a
new institution to stimulate private
investment, working alongside others
and taking full commercial risk.

1948:
Israel created

1950–1953:
Korean War

1949:
People’s Republicof China created1955:
IBM invents thefirst hard disk
(5 MB)

1950s-60s

1962
First equity investment:
about $500,000 stakein Spanish auto parts
manufacturer Fábrica
Española Magnetos.

1956
IFC opens under
Garner’s leadership with$100 million in capital.

1956:
Morocco becomes first
North African country
to gain independence
from France

1970s

1971

1972-74

IFC Capital Markets
Department created
to strengthen local banks,
stock markets, and otherfinancial intermediaries—
which eventually become
IFC’s largest area of emphasis.

Advisory services and field
offices: for the first time IFC
sends experts to Jakarta tohelp build the country's first
securities markets.

1973:
OPEC oil crisis begins
vast wealth transfer tooil-producing nations

1962:
Cuban Missile Crisis
1968:
Prague Spring
1969:
Apollo 11 moon landing

1980s

1980

1981

1984

First investment in Tata
Group, India: Tata Iron
and Steel Company borrows$38 million from IFC.

IFC coins the phrase “emerging markets”—
changing the financial world’s perception ofdeveloping countries and defining a new asset
class.

IFC launches the first publicly
traded emerging market
country fund, the NYSE-listed
Korea Fund.

IFC creates the Emerging Markets Data
Base—basis of the world's first emerging
markets stock index.

1982:
Debt crisis begins
in Latin America,
leading to a “lost decade”

19 IFC: THE FIRST SIX DECADES

1984:
Privatization era begins with
Thatcher government’s saleof British Telecom

1985

1988

1989

IFC provides
investmentclimate reform
advice to China,
leading to thecreation of FIAS,
IFC's largest multidonor trust fund.
FIAS continues
to operate in 80
countries today.

Amid the Latin
American debt crisis,
IFC helps several
Mexican conglomerates reduce theirdebt, leading to thecreation of IFC's firstadvisory department,
Corporate Finance
Services.

IFC receives its first
triple-A credit rating—key to a major multicurrency borrowing
program that by 2016
tops $15 billion a year.

GLOBAL CONTEXT

1989:
Fall of Berlin Wall

1990s

1990

1990:
Nelson Mandela
freed in South Africa

1991:
Fall of theSoviet Union

IFC designs
Poland'sMulti-Track
Privatization
Program.

1991:
India launches
market-based
reforms

2000s

2000:
Millennium Development
Goals launched at a
United Nations summit
2001:
September 11 attacks

2001:
Goldman Sachs
economist Jim O’Neillcoins the acronym
BRICs to refer to Brazil,
Russia, India, and China

2009
Having decentralized to be closer
to its clients, IFC has more than
50 percent of its staff in the field
for the first time.
IFC Asset Management
Company is founded. By
2016, it will have raised morethan $7 billion in investor funds.

2010s

2002

2003

2004

Amid worsening
economic conditions in Argentina,
IFC starts a seriesof countercyclicalinvestments,
beginning with$60 million for
agribusiness client
AGD.

Leading commercial banks
launch the Equator Principles,modeled on IFC’s own
standards.

IFC launches its firstlarge-scale gender
initiative, encouraging
projects to help local
women-owned businesses.

IFC and World Bank publish first
Doing Business report, helping
establish a global benchmark
for countries to improve theirinvestment climate.

2004:
Argentina’s sovereign
debt default

2002:Euro notes andcoins go into effect2004:
Facebook founded

2010

2012

IFC launches a private sector
window in the $1.25 billion
Global Agriculture and Food
Security Program (GAFSP),
a new World Bank Groupinitiative formed at the
G-20’s request.

A year after conflictends in Côte d’Ivoire, IFC
finances the expansion of
the country’s largest thermal
power plant, Azito.

2011:
Arab Spring begins

20 IFC: THE FIRST SIX DECADESIFC oversees creation of
the Emerging Market
Private Equity Association,
or EMPEA.

IFC launches its Pan-African
Domestic Medium-Term
Note Program.

1992

1996

1998

IFC coins the phrase “frontier markets.”

IFC enters the microfinance sector with a $3 million
stake in ProFund, which is focused on Latin America andthe Caribbean.

IFC adopts new environmental
and social review procedures andsafeguard policies. (later renamed
the Performance Standards).

IFC leads one of Russia’s first privatization
programs, auctioning 2,000 businessesin Nizhny Novgorod.

1993:
European Union
created
1994:
NAFTA takes
effect, increasing
US-MexicanCanadian trade

1995:
UN World Conferenceon Women sets global
agenda for gender equality

In one of our first investments in a conflict-affectedstate, IFC helps launch Bosnia’s microfinance pioneer(now ProCredit Bank).
IFC leads Africa’s largest privatization: the $70 million
sale of the government’s stake in Kenya Airways to KLM.

Responding to the Asian financial
crisis, IFC begins a five-year,
nearly $1 billion countercyclicalinvestment and advisory package
to strengthen clients in Korea.

1997:
Asian financial crisis

1998:
Russian financial crisis
1998:
Google founded1995:
Widespread commercial
use of the Internet begins

1999:
Anti-globalization protests
at WTO meeting in Seattle

2005

2006

2007

2009

Launch of IFC's
Global Trade
Finance Program.

New IFC
PerformanceStandards

IFC's $5 million investment in
FINO, a start-up Indian IT firm,
helps expand access to financefor people in rural areas.

The G-20 launches its Financial
Inclusion initiative, naming IFC
its SME finance adviser.

Launch of IFC's
first Panda bondin China.

Responding to the global financial
crisis, IFC provides €2 billion to
an international effort to maintaincommercial bank lending inCentral and Eastern Europe.

2006:
Microfinanceleader Muhammad
Yunus wins Nobel
Peace Prize

2007:
Al Gore documentary An
Inconvenient Truth wins an
Academy Award, focusing world
attention on climate change
2008:
Global financial crisis begins

2013

2014

2015

Launch of the World Bank
Group’s twin goals—ending
extreme poverty and boosting
shared prosperity.

IFC’s first offshore
Masala bond in
Indian rupees issued
in London. The
program has now
grown to $3 billion.

IFC plays a key role in highlighting the importance of the private
sector in achieving the Sustainable Development Goals.

The People’s Bank of China pledges$3 billion to IFC’s new Managed
Co-Lending Portfolio Program,
becoming the new syndications
program’s first investor.

2013:
Emerging markets accountfor more than 50 percent ofworld GDP for the first time

21 IFC: THE FIRST SIX DECADESAs part of the coordinated World Bank Group response to
the Ebola crisis in West Africa, IFC provides $225 million
to help local banks maintain lending to local SMEs.
A thought leader at historical international climatechange talks in Paris, IFC showcases emerging-market
clients with innovative climate-smart solutions.

2015:
Launch of Sustainable
Development Goals
2015:
3.2 billion Internet users and evenmore mobile-phone accounts worldwide

IFC founder
Robert Garner.

PROLOGUE

ORIGINS OF IFC

1956: Robert Garnertakes the helm at the
newly launched IFC.

24 ORIGINS OF IFC

March 1947: New leadership arrives at thethat few others shared at the time. “It was my firm

World Bank, a first-of-its-kind institution

conviction that the most promising future for thefounded along with the International Monetaryless-developed countries was the establishing of good

Fund just three years earlier at the historic Bretton

private industry,” Garner recalled in his 1972 memoirs.

Woods conference, and operating since June of 1946.
It was a big goal—one that he knew would require
It was the early post–World War II era. A new period
of international cooperation was just beginning—one
needing a central nexus point, providing intellectual“a new approach, if we were going to be influential.”

THE CONTEXT OF IFC'S CREATION

and financial resources at a significant scale to help
countries rebuild, re-engage, and move forward.

It was clear at the time that private sector development
was being restricted by several factors. There was a

From the outset, this new entity—formally called

serious lack of both domestic savings and the institutions

the International Bank for Reconstruction andand incentives necessary to channel what savings there

Development—was to be global in nature. “In a world

were into productive ventures.

dominated by nation-states,” its official historians
wrote 50 years later, “the new Bank was indeed a

Local entrepreneurs with promising businesses

multilateral institution: It was owned and governedfrequently could not find the necessary capital forby national governments, but it was not formally orlaunch or expansion. Managerial and technical skills

legally the creation of any of them.”

were scarce, and there was little opportunity to acquire
industrial expertise. The ability to identify, define, andThe new president starting work at the World Bank

implement investment projects was severely limited.

that day in March 1947 was prominent New York

Foreign direct investment from industrialized economies

attorney John J. McCloy, whose predecessor departed

was also small. Aside from the extractive industries,

after leading the institution through its earliest

most businesses from wealthier nations typically had

months. As his vice president, McCloy brought a

no knowledge of the opportunities in the developing

man of bold and singular vision: Robert Garner, aworld, and many of those that did were hampered bysenior financial executive at General Foods Corp. inrisk perceptions.

New York who had been recommended by Morgan
Stanley co-founder Harold Stanley.

It was a time, then, of serious structural problems
that distorted and restricted the allocation of private

Working closely together, McCloy and Garner led thecapital and expertise so essential to creating jobs andWorld Bank’s initial lending to governments, beginning

reducing poverty in developing countries. The recog-

with a $250 million reconstruction loan to France

nition of these problems defined what would become

just two months after they arrived. The first loan to

the most important dimension of IFC’s operations—its

a developing country followed the next year—$13.5

catalytic role.

million for hydropower development in Chile.
From the beginning, Garner viewed IFC as a means to
In doing this groundbreaking work alongside McCloy,stimulate private investment, acting as a catalytic agent

Garner brought a keen sense of the role private busi-

in the chemistry of entrepreneurship, investment, andness could play in international development, one

production. He recognized that IFC should not compete

25 IFC: THE FIRST SIX DECADES

THE WORLD
TAKES NOTE

1955

1955

1956
26 ORIGINS OF IFC

1955

against or replace private capital, and would never besustainability. Garner’s early leadership was critical.

a panacea for the problems of development. However,

Reflecting later on these initial days, Garner’s chief

IFC could be one of many tools brought to bear onaide, Richard Demuth, called him a man not just of

those problems.

“tremendous work, but tremendous toughness,” one
who always insisted that “we operate not as a publicThis became the blueprint for a new institution that
could finance private enterprise without the World Bank’s
requirement for government guarantees. Garner andhis colleagues made the case persistently for several
years, gradually winning over the skeptics—and in theprocess establishing a culture of long-term commitment and dedication to the cause that would become alasting hallmark of IFC. “I missed no opportunity during
my travels of promoting the idea with top government
officials,” he later wrote.

BUILDING MOMENTUM
A major political boost came in March 1951 from
Nelson Rockefeller, a former U.S. Assistant Secretaryof State and grandson of the world’s wealthiest man,oil tycoon John D. Rockefeller. Chairing an influential
U.S. presidential advisory board in international development, the younger Rockefeller urged the formation of “an International Finance Corporation” tosupport local private enterprise as part of a larger
set of recommendations. This proposed IFC would
support development by making loans to private businesses in developing countries, but only on the condition that it would take no government guarantees,
always work alongside other private investors, andnever manage its investee companies. U.S. President
Harry Truman quickly endorsed the idea.
After four years of negotiations, IFC won acceptancefrom the World Bank’s board of country shareholders
in 1955, opening in 1956 with Garner at the helm.
IFC began with a staff of only 12 people, $100 million
in initial capital, and no authorization to make theequity investments that Garner desired and thatwould later be key to IFC’s unique impact and financial

27 IFC: THE FIRST SIX DECADES

institution, but as a business institution.”

IFC’s First
Headquarters:
Inside theWorld Bank,
Washington, DC.

THE FOUNDING VISION“The view of management was that if these countries were really going to develop…the only way
they were going to really increase the productionof goods and have people get more jobs, raise thestandard of living, and build up their countries was
through the development of private enterprise,industry, and agriculture.
“After a few years, some of us began to realizethat the Bank was not the best type of instrument
to finance purely private business. We began towork on the idea of a separate institution affiliated with the Bank, but with separate capital andseparate organizations which could deal directlywith private industry. It took about seven or eight
years to get the idea accepted, but finally it was in
1956, and IFC was set up: the principle was that
it would operate in conjunction with private business and in partnership if possible with private
investment capital.
“Just as I felt private business has been largely
responsible for everything built in my country, it was
the thing that could be the most important elementin the economic growth of these other countries.
"IFC will be able to do a great many constructive
things that no public institution is doing.”WORLD BANK/IFC ARCHIVES ORAL HISTORY PROGRAM
INTERVIEW WITH ROBERT L. GARNER, JULY 19, 1961

28 ORIGINS OF IFC

GROWING SUPPORT
Though IFC would grow dramatically over time, Garner

Chile, 1956:
Robert Garner(secondfrom right),
leads IFC’s
first overseas
mission.

knew all too well that it would never have enoughmoney to make a major difference strictly with its
own investments. The goal was always to serve as anhonest broker and lead the way in attracting muchlarger pools of capital from other private investors.
This defining mission remains intact today.
Business leaders in the poorer countries embraced
the idea. “The dynamic force of private enterprise isstrengthened considerably by initiatives such as IFC,”
Brazilian CEO Vicente De Paula Ribeiro said at an IFC
seminar at the 1958 World Bank/IMF Annual Meetings
in New Delhi. “It accelerates its spread and process ofgrowth by acting as a catalyst.”
By 1959, IFC had a $19.8 million portfolio of investments

urged staffers to support reforms that would improvein 11 countries, reporting to its shareholders that every

the investment climate in developing countries,

dollar invested from its own resources was matchedsensing the potential impact in a developing worldby three dollars from the private sector. “Private

where he saw not just extreme poverty, but “growing

industrial growth provides developing countries

markets, untapped raw materials and abundant laborwith a vigorous force in their economic development

able to acquire modern skills.”

and distributes its benefits widely among the people,”
Garner wrote in that year’s annual report. “IFC’s

In one of his final acts before retiring in 1961, Garnerobjectives are to assist and stimulate this growth byat last convinced the shareholders to agree to one

associating with private business and investmentof his original agenda items: expanding IFC’s role bycapital, both from the more highly-developed and theamending the charter to allow equity investments

developing countries.”and other financial instruments.

Always eager to do more, Garner also pushed for IFC

When Garner retired, World Bank President Eugene

to provide formal advisory services, which would

Black provided words of acknowledgment. Garner, hetake time to develop. While staying clear of politics, hesaid, “was a pioneer.”

29 IFC: THE FIRST SIX DECADESDECADES 1–3
1950s–1960s
1970s
1980s

BEGINNING
WITH
INNOVATIONCommitted to innovation from the outset, IFC started
as a small, Washington-based institution.
In these early years, IFC worked to increase the private
sector's growth and contribution to development,
well before these essential ideas had widespreadinternational acceptance.
Wherever possible, the institution focused on “firsts”—
as it has ever since.
Initially IFC worked mainly alongside foreign multinationals in key sectors such as manufacturing,mining, and agribusiness.
Over time, the approach widened, as IFC found ways
to help local companies obtain financing in their own
countries, and support governments’ efforts to improve
the investment climate.

CHAPTER 1

EVOLVINGTHE
APPROACH

Bristol deMéxico: An
early IFC clientin the aircraft
repair industry.

t first, IFC pursued its mission on a transaction-

production of heavy electric equipment ranks very

by-transaction basis—growing gradually andhigh because of the great emphasis put on the devel-learning lessons that would later allow it toopment of power.”

work at a much larger scale.
Other loans in this same pioneering spirit followed in
Working without a large capital base, IFC could at firstthat first year, including:offer only limited amounts of financing. Demand washigh, nonetheless, with hundreds of proposals received• $600,000 to help the U.S.-Mexican joint venturein the first year. The first investments were confined toEngranes y Productos Industriales, S.A., launchloans, typically in the $200,000 to $3 million range, toMexico’s first manufacturing plant for specialized

finance industrial projects in Latin America and Asia.

automotive parts.

Supplementing private capital, they supported “firsts”• $520,000 for Bristol de México, a local company tiedof various kinds that could stand as points of progress

to Bristol Aeroplane Co. of the UK. It was building

in private sector development—something that would

Mexico’s first aircraft engine overhaul and repair

become a hallmark of IFC operations.

facility, serving national airline Aeroméxico.
• $2.2 million to develop the Mantos Blancos copper

IFC’s first investment came in September 1957. It

mine in Chile, using new metallurgical ore treatment

was a $2 million, 15-year loan to help the local affil-

technologies that were just coming into use that year.

iate of German electrical equipment manufacturer
Siemens build Brazil’s first integrated assembly plant

Many more loans ensued in different markets in theto supply local utilities.

coming years, financing steel products plants in India
and Pakistan, textiles in El Salvador, and cement

Located near São Paulo, the new plant would “fill a real

production in Thailand. In 1960, IFC first invested

gap,” investment officer Hans von der Goltz wrote inin Africa with a $2.8 million loan package for thehis credit analysis report. “So far there is no producer

new Kilombero Sugar Co. operation in Tanzania (thenof heavy electric equipment in the country,” he added.

called Tanganyika).

“In the list of industrial development priorities, the33 IFC: THE FIRST SIX DECADESBut this selected, loan-only approach could only go sofar. After five years, the institution was making less ofa mark on the world than expected, having approved
just $44 million in total lending by 1961. In response,
IFC challenged its own status quo.
“It was time for the idea of change,” recalled Martin
Rosen, who succeeded Robert Garner at IFC’s helm in
1961. “In the opinion of many, IFC would do no morethan pick at the fringes of its problems unless its
scope was greatly widened.”
This new thinking led to three dramatic shifts thatsoon became core aspects of IFC’s business model, ineach case catalyzing much greater results over time.

1959: FIRST MOBILIZATIONThe Articles of Agreement encouraged IFC to focus notjust on investing its own resources, but on mobilizing
additional capital from others. The first step in this key
direction was IFC’s first loan syndication: $2 million
raised from commercial banks in 1959 for Brazilian pulp
and paper producer Champion Celulose. Packaged
alongside IFC’s own loan, the financing supported a
new bleached sulfate wood pulp mill then being built
at Mogi Guacu in the state of São Paulo. The mill still
operates today, now owned by one of the world’s
largest pulp and paper companies, International Paper.
By putting a trusted stamp of approval on this high-priority start-up, IFC was able to mobilize more capitalfrom other investors than it could provide alone. This
capability soon became a critical aspect of IFC’s
approach to financing development. Today, IFC’s
loan-syndication program is the oldest and largest of
its kind among multilateral development banks. The
program has mobilized approximately $50 billion for
more than 1,000 emerging market projects.

34 BEGINNING WITH INNOVATION1960:
New York Times
coverage of
IFC’s first Africantransaction.

1962: FIRST EQUITY INVESTMENT
Equally important was addressing the charter’s initial$500,000 stake in Spain’s Fábrica Española Magnetos,

restriction against making equity investments, some-a manufacturer of automotive electrical components.

thing that at first had hindered IFC’s ability to be a

The company used the money to expand its Madrid

catalyst of private sector capital flows in emerging

factory and build a new one in Treto.

economies. Equity investments provide critical but
scarce long-term growth capital. Private enterprises

At the time, it was not uncommon for IFC to invest

need this capital to reach their potential, and econ-in Western Europe. In many ways, Spain was still anomies need this capital in order to develop. Without

emerging market in 1962 and considered fully worthy

the ability to make these investments and become aof IFC support. Building on this initial investment inshareholder of client companies—to have a true seat

the Spanish factory (later acquired by Bosch Groupat their tables—IFC's role would always be limited.

of Germany), IFC began using its new equity tool toencourage a widening pool of other investors to share

Following the 1961 charter revision that granted thisrisks and rewards in the developing world. Today, equity

authority, IFC took up the challenge, actively working as

investment represents approximately 30 percent of

an equity investor to strengthen the capital structure of

IFC’s $52 billion global portfolio.

client firms. It all began in 1962 with an approximately

Madrid, 1962:
Signing of IFC’s firstequity investment, in
Spanish auto parts
manufacturer Fábrica
Española Magnetos.

35 IFC: THE FIRST SIX DECADESStrengthening
the Private
Sector: IFC's
role from the
beginning, inBrazil (left) andother countries.

36 BEGINNING WITH INNOVATION

1962: FIRST FOCUS ON
FINANCIAL INSTITUTIONSIn addition to launching its first loan syndications

Also significant was Korea’s first private industrial

and equity investments, IFC’s innovations in the early

investment institution, the Korean Development

1960s included its first work to strengthen local

Finance Corporation (KDFC), which IFC helped launchfinancial markets. At the time, such markets wereas a founding shareholder in 1967. A $702,000 equity

typically too underdeveloped to support large-scalecommitment for KDFC came alongside $5 million

private sector development on their own. The earliest

in loans from the World Bank and $17 million fromwork in this sector—now the largest component

foreign and domestic investors. IFC would provide

of IFC’s portfolio—involved joint support with thecritical capital for the national takeoff that would

World Bank to local development finance corpora-follow, as the bank changed its name and evolved

tions (DFCs), specialized institutions financing local

over time, first to Korean Long-Term Credit Bank andbusinesses that otherwise had limited access tolater to KB Kookmin Bank. Today, Kookmin is one ofcapital. In 1962, IFC set up a dedicated DFC depart-the four largest banks in the country and stands as

ment. Over the next six years, IFC, together with

one of the world’s great development success stories.

the World Bank, invested $560 million in DFCs inThis innovative investment, IFC’s first in Korea and

15 countries, often also providing contracted manage-

an early case of crowding in private capital, came at

ment and staff training. Some of these clients became

just the right time.

major forces in their countries’ development over time.
“When we helped to set up the KDFC in 1967, exports
The best known example is the precursor of what iswere around $250 million a year,” IFC’s William

today India’s largest private financial institution, ICICI

Diamond said later. “When I went back for a review

Bank. Founded at the World Bank’s initiative in 1955,of their structure with them in 1977, 10 years later,

the Industrial Credit and Investment Corporation ofexports had hit $10 billion a year. The city of Seoul

India was at first a relatively small institution that

was a different world compared to the one I had firstreceived extensive World Bank funding and additionalgone to in '67.”

IFC technical support for many years. Redefined as
ICICI Bank in 1994, it has now evolved into a major
financial power, with the rupee equivalent of $109
billion in assets as of March 2016.

Korea, 1969:
IFC chief
Martin Rosen(center) visits.
37 IFC: THE FIRST SIX DECADESFUTURE DIRECTIONS
Yet even with these three significant new product

Lester B. Pearson:
A former Prime
Minister of Canada who
encouraged IFC to takeon a larger role.

lines, the IFC of the mid-1960s remained a small player
with only limited success in delivering on its vision. A
significant turning point came in 1969 with the releaseof a major report on the future of development financefrom a blue-ribbon panel of experts headed by former
Canadian Prime Minister Lester B. Pearson. In many
ways, it changed the course of IFC history.
Created at the World Bank Group’s request in 1967,
the Pearson Commission spent nearly two years traveling the world to investigate a wide variety of topics,
including the volume and terms of aid, the debt burdenof developing countries, trade, private investment, andmore. One of its key findings was that IFC could havea powerful role in international development, but only
if it stepped up its activities.
The commission’s report criticized the narrowly
defined IFC of the 1960s for “overemphasizing profitability as an investment criterion and not taking
project initiatives,” wrote historian Jonas Haralz in theWorld Bank’s official 50th anniversary history book.
New World Bank Group President Robert McNamara
agreed, encouraging IFC to start thinking bigger. His
call for more changes signaled a redefinition of IFC’s
commitment to development impact.
The first change was the hiring of IFC’s first economics

It was in this new environment that IFC brought inadviser, a sharp-thinking International Monetary Fund

Wall Street venture capitalist David Gill to launch theofficial from Pakistan, Moeen Qureshi. He would go on

Capital Markets Department, soon to be home toto become IFC’s chief and, later, his country’s Primesome of the institution’s most innovative work.

Minister.
Qureshi energized the intellectual environment in
IFC, adding new analytic rigor to IFC projects that
until then had been evaluated almost exclusively on
financial terms.

LESSONS OF EXPERIENCE
Ch. 1: Evolving the Approach

Development finance requires an ever-growing
set of tools, adapted and refined over time inresponse to global needs.

38 BEGINNING WITH INNOVATION

Venezuela:
Part of IFC’s
early emphasis
on Latin America.

Mexico,1962

CHAPTER 2

STRENGTHENING
THE FINANCIAL
SECTOR

Access to Finance:
A cornerstoneof development,
strengthened in many
countries by IFC.

S

eptember 1970: IFC charts a new course.

World Bank President Robert McNamara, a one-time

had sensed the unique ability of capital markets tochannel local savings into productive investment,
thus fueling local entrepreneurship, creating jobs, andreducing poverty.

president of Ford Motor Company, had received thePearson Commission’s report and was ready to give

Anticipating the distant economic future with uncannyhis response. Speaking at the World Bank Group/IMF

precision, the Pearson report observed that as poor

annual meetings in Copenhagen, he fully endorsed thecountries’ economies grew, “the need for aid shouldcommission's findings, including its call for IFC to “giveeventually subside” and that foreign direct investment

greater emphasis to the development implications

and access to capital markets “would then increas-of its investments.”

ingly meet the demand for development finance.”

Pearson and his team had been deeply concerned“IFC has done some useful work in this area,” theabout the world’s rising population and the growing

authors had written in 1969, “but it is in a position to

gap between rich and poor. While strongly supportive

do very much more.”of increased foreign aid, they opened their report withrecommendations for two key market-based solutions:

The commitment to this groundbreaking work began
in 1971, with the creation of IFC’s Capital Markets•Free and equitable trade

Department, an act of “profound importance,”•Promotion of mutually beneficial flows of foreign

according to historian Jonas Haralz. It was a pioneering

private investment

effort from the outset, one that involved a combination of investment and knowledge sharing in order toTo help get there, the report urged a much stronger

help countries develop deep, efficient, local capitalrole for IFC—not just in finance but in development.

markets as a foundation of a thriving private sector.

Few noticed at the time, but the Pearson Commission

43 IFC: THE FIRST SIX DECADES

Indonesia: IFC CapitalMarkets Director
David Gill meets withgovernment officials
outside Jakarta, 1975.

The department’s founding director, David Gill, later

foreign or local co-investors establish new institutions

recalled the time in his 2012 memoir, Tales of a Financial

in them, often creating new subsectors by setting

Frontiersman:up a first-of-its kind institution. In the process ofbroadening and deepening local financial markets,"After doing what we could to help improve the finan-

IFC pioneered new products and markets that werecial infrastructure, the logical next step was to help

both profitable and impactful, including:establish the appropriate financial companies tooperate in the markets. We worked in every financial•Creating the Emerging Markets Data Base in 1981—

subsector—banking, leasing, housing finance, secu-

the earliest and single most comprehensive source

rities firms, insurance, venture capital, investmentof stock market data on emerging markets for insti-

companies and related management companies. As

tutional investors

access to foreign capital was another objective, we•Launching or revitalizing moribund stock exchanges

also promoted what came to be called country funds

in more than 20 countries

to encourage foreign portfolio equity investment.

•Structuring and underwriting the first successful

And, finally, we participated in initial public offerings

closed-end country fund (the Korea Fund, 1984) andof stocks and bonds in local markets."the first global emerging markets fund (the Emerging

Gill’s team was committed to discovering niches•Establishing the first venture capital or private equity

where the private sector could operate, then helping

funds in more than 20 countries

Markets Growth Fund, 1986)

44 BEGINNING WITH INNOVATION

THE THAILAND EXAMPLEThis approach brought benefits to many countries.

market. By 1975, a new basic legislative framework

Among them: Thailand, a country that had little

was in place, and the new exchange officially started

presence in the global economy in the 1970s, andtrading. Known since 1991 as the Stock Exchange of

where IFC helped foster remarkable growth overThailand, it became a mainstay of one of East Asia’s

the next two decades by giving the government anstrongest economies, supported by IFC’s invest-

early blueprint for capital market development. Thisments over the years in related institutions such as

included advice for creating an independent regula-brokerages, credit-rating agencies, a mutual fundtory body to oversee a new local stock exchange; anmanagement company, and local currency bonds.

existing exchange had seen its trading levels fall to

The exchange has mobilized vast sums of capital toalmost nothing, finally ceasing operations altogether.

finance the country’s modernization. It has become

In 1974, long-awaited legislation establishing thea nexus for local pension funds and retail investment

new exchange was enacted, followed by other terms

opportunities, giving millions of Thai families financial

allowing the investment of savings in the capitalsecurity over the years.

Thailand: A founding
shareholder of IFC in1956 (left), it was afocus of early capital
markets work in
the 1970s, fuelingindustrial growth.

45 IFC: THE FIRST SIX DECADESSMALL AND MEDIUMENTERPRISES
Knowing that they are the backbone of emerging
market economies but too often are held backby a lack of access to capital, IFC has long madesmall and medium enterprises (SMEs) a focus of its
work with local financial institutions. Helping local
lenders see the potential in this market has unlocked
vast sums of private capital for entrepreneurs whodrive job creation.
It all began in 1976 with a $2 million line of credit
to Kenya Commercial Bank (KCB), which thenprovided smaller sub-loans and business advice tolocal SMEs. It was the first transaction of its kind inWorld Bank Group history, and “took some doing
and a lot of hand-holding,” IFC’s investment officer
in the transaction, Promodh Molhotra, later wrote,“but the new approach slowly began to take holdand loans began to be made successfully.” Withinseven years, all the loans had been repaid. The
businesses that KCB had selected had all expanded
profitably, helping it see the promise of the untapped
SME finance market.
IFC’s commitment to increasing capital flows to
local SMEs grew dramatically over time, supported by new products such as the African Project
Development Facility advisory initiative for SMEs,
launched with UNDP and the African Development
Bank in 1978 and then replicated in other markets.
Today, IFC’s SME finance work is global in scope,delivered through 900 financial intermediaries in
120 countries. It is part of a larger effort to mobilize
private capital for the traditionally excluded—not
just SMEs, but also women, youth, firms, andindividuals based in rural and underserved areas.

46 BEGINNING WITH INNOVATIONSME Finance: IFC's
support helps local banks
tap this growing market.

COINING A PHRASE:EMERGING MARKETSBeginning in the late 1970s, IFC began collecting dataon emerging stock markets and gave presentations
in various global forums, putting forth data on size,
depth, liquidity, and the regulatory environment. This
helped launch a global debate on the advantages of
local stock markets and the issues involved in allowing
foreign investment.
In 1980, IFC began tracking total return data since
1976 for 10 markets (Argentina, Brazil, Chile, Greece,
India, Jordan, Korea, Mexico, Thailand, and Zimbabwe),showing attractive results and making a good casefor increased investment. In 1981, IFC’s Antoine van
Agtmael made a presentation to investment bank
Salomon Brothers in New York, proposing a global listed
equity investment fund for developing countries. While
many of the fund managers present were interested, abanker from JP Morgan made an astute observation:
IFC would never get buy-in using the original proposed
name, “Third World Equity Fund.”Van Agtmael agreed. He spent the weekend considering a name and came up with a new term for both

was used primarily as an internal research tool forthe idea and the investment he wanted to promote:

IFC’s equity investment program. It also served as

emerging markets. “Third world” was a term thatthe basis for advice given to member countries on theconnoted extreme poverty, shoddy goods, and hope-integration of securities markets into their economic

lessness to many at the time. But “emerging markets,”development programs. IFC teams, armed with data

van Agtmael would later write, “suggested progress,

and analysis based on EMDB, made their case for

uplift, and dynamism.” It reframed the picture, in timestocks in emerging markets as attractive investment

becoming the universal term used in the financial world

opportunities to investors and mutual fund managers

to describe developing economies.

in the industrialized world. The availability of consistent and reliable information on developing-country

Building on the momentum, IFC then created thestock markets, designed to look similar to informa-

Emerging Markets Data Base (EMDB), providingtion provided on developed markets, facilitated theinvestors with a much-needed source of performancemarketing and performance measurement of the earlydata in an era when information was much harder toemerging market–focused investment vehicles thatcome by than it is today. In its early days, the EMDBIFC helped create.

47 IFC: THE FIRST SIX DECADES

Quantitative Data:
In the 1980s IFC
was a vital sourceof information,
underscoring the
growth of emerging
market investing.

COUNTRY FUNDSThe next step was to create an effective channel for

By the 1990s, the equity and bond markets of theforeign investors to begin participating in emerging

emerging economies were becoming more interesting

stock markets. The early emphasis was on country

to international investors. After the successful devel-

funds, creating pools of capital for investment in listed

opment of the Korea Fund, over 150 country funds forcompanies. Rather than expecting them to purchase

emerging markets were launched in the late 1980s

individual shares locally, this closed-end model gaveand early 1990s.

investors a means for exposure in a diversified portfolio of equities, while also offering dedicated portfolio

GLOBAL SCALE

management, brokerage, and custody services thatwere not previously available.

Building on this success, IFC’s Capital Markets team
decided to scale up the country fund concept. Working

After working together with the Korean authorities

with a respected asset management company, the Los

for many years in developing rules and institutions toAngeles-based Capital Group, the team built the first

enforce security market regulations, IFC structured

global fund for securities from the developing world—

the groundbreaking Korea Fund in 1984 and sought

as always, putting IFC’s own money at risk along withco-lead underwriters to help list the fund on the New

that of other investors. Pension funds and insurance

York Stock Exchange. This first $60 million listed fundcompanies expressed interest, and by 1986 a globallyin turn catalyzed a global emerging market country

diversified $50 million vehicle had been created: thefund industry, in time attracting hundreds of billions

Emerging Markets Growth Fund (EMGF). Today, threeof dollars in new investment.

decades later, the fund stands at $3.3 billion.

The establishment of the Korea Fund became a blue-

IFC’s initial steps in the mid-1980s gave rise to a newprint for other emerging market funds. IFC’s central

industry, one that over the years would see mainstreamrole in the Korea Fund’s development went beyond

investors pour billions into stocks and bonds frommerely acting in an advisory capacity. IFC helped

developing countries. This catalytic effort helped

establish the structure and best practices approach

local capital markets mature, do more to finance job

for emerging market equity funds, creating a niche

creation, and spur savings growth around the world—

within the financial services sector that was replicatedheeding the Pearson Commission’s early, visionary call.

many times. Because the model could be adapted
across different countries and platforms, this processcontinued in later iterations of country funds, evenwhen IFC was not directly involved. This replication
illustrated IFC’s important catalyzing role in financial
sector development in emerging markets.

LESSONS OF EXPERIENCE
Ch. 2: Strengthening the Financial Sector

Financial institutions are essential fordevelopment, bringing widespread benefits
as they grow stronger.

48 BEGINNING WITH INNOVATIONPRIVATE EQUITY
Along with country funds that primarily invest inlarge companies listed on local stock exchanges,
IFC also pioneered the growth of emerging market
private equity funds, which target growing, unlistedcompanies. Using a model long established in industrialized economies, they mobilize capital frominstitutional investors and invest it in growing
privately held firms, scouring the market for goodbusiness opportunities and strengthening local
economies in the process.
Today this is a large-scale industry, with $29 billion
invested in emerging market private equity andventure capital in 2015 alone, according to industry estimates. But it was completely unknown
when IFC first entered the field in 1978 with an

Private Equity: Rising
companies need growth
capital, which helps
drive job creation acrossemerging markets.

$877,000 investment in the Sociedad Española
de Financiación de la Innovación (SEFINNOVA)
private equity fund for Spain, then still considereda developing country. In the annals of the industry’s
history, investor Peter A. Brooke wrote in his 2009
book A Vision for Venture Capital, SEFINNOVA
stands as “not only the first in Spain, but in theentire developing world.”
From this small starting point, IFC gradually built a
global portfolio of emerging market private equity
and venture capital funds. By 2000, IFC had invested
in more than 100 such funds, many of them thefirst of their kind in their markets. But the investor
base at the time was almost exclusively made up of
development finance institutions. As the new millennium began, few private investors were willingto tie up their money in these long-term vehicles,
not knowing how local risks would affect theirexit strategies.
To attract more private capital, IFC began focusing
on industry standards. Working with research firm
Cambridge Associates, IFC created the first performance benchmark for emerging market private
equity, launching the Emerging Market Private
Equity Association (EMPEA) as the industry’s
membership organization. This helped open thedoor to today’s significant private investment levels,
building an industry that now plays an essential rolein financing job creation, growth, and development.
Today IFC has a more than $7 billion private equity
portfolio, with investments in more than 280 funds.

CAPITAL MARKET
DEVELOPMENT
Over the decades, IFC has learned that strengthening the local financial landscape is a necessity indevelopment—not a luxury.
This is why its work goes beyond supporting banks
and other financial institutions to include helping
build deep, liquid, and efficient capital markets
as well. Such markets are essential for a thriving
private sector. They connect large pools of savings
from institutional investors to financing needs inthe local economy, putting available capital toproductive use.
From the early 1970s to the mid-1990s, IFC’s
capital-markets work focused mainly on stock
markets, with the goal of expanding cross-borderinvestment. But the Asian and Russian financial
crises in the late 1990s underscored the need tobolster local-currency bond markets as well. These
markets give local businesses another source of debt
financing—and also eliminate foreign-exchangerisks, allowing companies to access financing inthe same currency as their revenues. The stronger
they are, the less vulnerable local firms will be intimes of financial crises.

three components: expanding IFC’s local-currency
solutions for clients; helping clients issue their own
corporate bonds for the first time; and issuingbonds in IFC’s own name to build the markets’
depth and diversity.

PROVIDING LOCAL-CURRENCYFINANCE TO CLIENTSCompanies in developing countries traditionallyborrow in foreign currency such as U.S. dollars or
euros, exposing them to currency risk in the event of
exchange rate volatility. Providing a local-currency
financing alternative is particularly important for
key sectors like infrastructure, housing, and small
and medium enterprises—and thus something that
IFC has developed as a fundamental element of its
private sector investment product array.
Beginning with initial transactions in the late 1990s,
IFC has now scaled up these operations significantly.
In the past decade, IFC committed the equivalent of

IFC was a pioneer among international development institutions in focusing on this important
agenda. In the early 2000s, IFC’s Treasury beganbuilding on its traditional work of managing the
Corporation’s own finances, adding a strategic effort
to support local capital markets. The initiative had

Capital Markets:
A key componentof financial sector
development.
50 BEGINNING WITH INNOVATION

Local-Currency
Financing:An essential tool forrising companies inthe developing world,
matching liabilities
with revenues.
nearly $13 billion in local-currency financing across
60 currencies—more than any other international
financial institution—through loans, swaps, guarantees, risk-sharing facilities, and other structured
products. IFC also structures tailored solutions
to provide local currency when domestic markets
are nascent.
In Rwanda, IFC client Bakhresa Grain Millingneeded capital in 2010 for expanded operations,such as acquiring new trucks to transport wheatfrom the Tanzanian port of Dar es Salaam to its flour
mill in the Rwandan capital, Kigali. In response, IFC
provided a local-currency loan for the equivalent of$25 million. It was made possible by a first-of-itskind swap agreement with the National Bank of
Rwanda—the country’s central bank—that enabled
IFC to swap dollars for Rwandan francs.
Normally, IFC would have entered into a swap
agreement with a commercial bank, but countries
like Rwanda that lack commercial swap markets
require a different solution. Based on this experience,
IFC has since entered into swap agreements withother central banks, including Paraguay’s.

51 IFC: THE FIRST SIX DECADESHELPING CLIENTS ISSUE BONDS
Another key transaction came in 2003, when an IFC
partial credit guarantee helped a Chilean private
university place the equivalent of $23 million in
local-currency bonds with domestic institutional
investors. It was the first future-cash-flow securitization by a Latin American university, allowing
Universidad Diego Portales to finance its expansion
by tapping a large new funding source.
IFC has since expanded this approach considerably—for example, acting as an anchor investor to help
Zambia’s largest microfinance institution raise funds
in its local bond market in 2014. By investing in
Bayport Financial Services Limited’s bond issue forthe equivalent of $26.5 million, IFC sent a strong
vote of confidence to the nascent market, helping
its client increase access to finance in Africa.
IFC now regularly uses credit enhancements, anchor
investments, and other client solutions in capital
markets. They are a pillar of its work to makelocal bond markets a greater source of finance forprivate sector development.

IFC BOND ISSUES
Issuing benchmark-setting bonds in local currencies
is also central to IFC’s strategy. As a triple-A-rated
global institution, IFC brings many benefits when
it borrows locally. These include:• Setting an important precedent that clears the way

for future corporate bond issues by others• Testing and improving domestic processes, andsupporting regulatory changes on key issues such ascost of issuance and pension-fund asset allocation• Opening local markets to new investors, particularly international ones
A milestone transaction in this area came in 2005,
when IFC launched the first renminbi-denominatedPanda bond in China’s domestic capital markets.
Defined as local-currency bonds from foreignissuers in the domestic markets, the Pandas have
proved to be an important tool in building out
the country’s large capital markets and provided
local-currency financing for IFC client companies
in health care, SME finance, and other key sectors.
The asset class has since grown dramatically, withthe equivalent of more than $4 billion of Pandas
issued in 2016 alone.
Overall, IFC has now issued bonds in 18 emerging
market local currencies, including a Pan-African
Domestic Medium-Term Note Program active in
Nigeria, Zambia, Rwanda, and other countries.
IFC also advises local regulators, authorities, andinstitutions on best practices in capital-market development. Together, the combined investment andadvisory solutions package has helped strengthen
local capital markets—a crucial force for private
sector development.
China: IFC Panda bonds
have supported growing
local companies like AierEye Hospital Group, now thecountry's largest domestic
ophthalmology institution.

52 BEGINNING WITH INNOVATIONBUILDING INDIA’S CAPITAL
MARKETS: MASALA
AND MAHARAJA BONDS
Working both offshore and onshore, IFC plays
an important role in strengthening India’s capital
markets.

while also enabling Japanese household investors
to participate in the development of India’s fastgrowing economy.

Since 2014, IFC has been carrying out a $3 billionequivalent Masala bond program attracting
international investment for infrastructure
projects and other priority needs in India. Initiallyplaced by IFC, then adopted by private sector issuers
as well, Masala bonds are rupee-denominatedinstruments issued offshore, connecting international savings with private sector investment inIndia. They range in tenor from three to fifteen years,
stretching the yield curve and deepening the market.

The Masala program’s success has sent a clear
signal that investor demand for high-quality assets
in India remains strong despite global financial
uncertainties. It prompted the Reserve Bank ofIndia to authorize Indian companies to issue similarbonds in offshore markets.

The program has seen IFC issue the first green
Masala bond and the first Masala bond to mobilize
Japanese retail savings specifically for India’s
private sector. The latter opened up a new sourceof local-currency finance for businesses in India,

Complementing the program are IFC’s onshore
Maharaja bonds—local-currency bonds placed byforeign issuers in India’s domestic capital markets.
Under the program IFC will issue up to 150 billion
rupees—the equivalent of $2.2 billion—in the
country’s domestic capital markets.
Together, the two programs show India’s capital
markets are open for business.

India: IFC's rupeedenominated Masalabonds help spark capital
market development.

53 IFC: THE FIRST SIX DECADESADVISORY SERVICES
AT IFC
Launched in the 1970s with an early focus on thefinancial sector, IFC has now built a large-scale,global advisory services business—one that has
grown dramatically over the decades. Integratingknowledge of global industries and local markets,
it now covers many industries and products andis an integral part of IFC’s work to increase theprivate sector’s role in development.
Complementing the other core focuses on investment
and mobilization, IFC’s advisory services add value
to three broad categories of clients:• Companies• Governments• Financial institutions and funds

Built on six decades of experience, IFC's advisory
services help create new markets, unlock investment
opportunities, and strengthen client performanceand impact.
In 2004, for example, China sought IFC’s technicalsupport in increasing access to finance for its small
and medium enterprises. The goal was to develop
an appropriate legal and institutional framework toallow the use of movable assets such as receivables
as collateral for loans—something that until thenhad been hindered by the lack of an adequate
secured transactions law and the poorly functioning
registries.
In 2007, China enacted a new property law. Adopting
a number of important principles of modern securedtransactions systems, the law allowed the use of

54 BEGINNING WITH INNOVATION

movables such as receivables, set up a clearer priority
rule, and provided a better basis for enforcement.
That same year, China opened its first nationwide
Internet-based filing system for secured transactions,
incorporating all the key features of a modern
movable collateral registry.
In 2011, a private consulting firm carried out
an independent evaluation of IFC’s role in theseven-year project, which involved close, ongoingsupport to Chinese government clients from IFC
specialists with deep knowledge of secured transactions law, registry, and movables financing issues.
The evaluation found that cumulatively the project
had facilitated $3.58 trillion of accounts receivablefinancing involving movable assets, including morethan $1 trillion of SME lending in China—as indicated by the collateral registry's data.
Globally, IFC’s advisory services portfolio now
includes more than 700 projects in about 100
countries, valued at $1.3 billion. Most of IFC’s
advice was delivered to clients in IDA countries—
including more than 20 percent in fragile andconflict-affected areas.

IFC Advisory
Services: Focusedon lower-income
countries, butdelivered globally.
In China, IFC's
support helped
unlock more than
$1 trillion in newlending for SMEs.

55 IFC: THE FIRST SIX DECADESMali,
1980s

CHAPTER 3

IMPROVING
THE INVESTMENT
CLIMATE

Indonesia: Today's
Cibinong cement
plant, first financed
by IFC in 1971.

F

rom the beginning, the challenge was always

and control; issues in taxation, regulatory, and laborlarger.

policy; and others. Garner called on governments tobegin removing these obstacles in order to attract

No matter how much capital IFC and its partners

capital, spur private sector growth, and ease poverty.

could provide, it would never be more than a fraction“Now is the time,” he wrote in his introductory letterof what was needed to finance the large-scale job

to IFC’s 1959 Annual Report.

creation required to lift countries out of poverty. Thatwould necessitate broad and concerted government

INDONESIA

action to improve the investment climate, turning
countries into more attractive destinations for private

It took time for the right opportunities to appear. After

capital. But such thinking went against the grain inearly behind-the-scenes efforts in the first decade,the early decades, when most governments believed

IFC’s initial investment-climate work gained strength

in state-driven models of development. IFC could playin 1967 in Indonesia, then just emerging from a trau-

a critical role in ushering in the transition, advisingmatic period of prolonged conflict. Once stability

on reforms and financing landmark projects whose

was restored, the new Suharto government began an

demonstration effect would clear the way for others.

economic reform program. This program included a

Ultimately, though, governments would have to show

plan to start attracting foreign investment, which was

the political will to drive the reform process that would

negligible in Indonesia at the time.

increase investment.
Understanding outside investors’ reluctance, theRobert Garner realized this in the 1950s. He knew thatgovernment invited an IFC team to Jakarta to help

the perceived risks of individual companies were justcraft new laws and regulations governing joint ventures

one reason outside investors were holding back inwith foreign companies, and then to finance early,

developing counties. He saw bigger-picture obstacles

precedent-setting examples. Two key industries werestanding in the way: restrictions on foreign ownershiptargeted: textiles and cement.

59 IFC: THE FIRST SIX DECADESSensing the promise of the local market, IFC arranged

between Kaiser Cement of the US and Gresik Cement

for a group of leading Japanese textile manufacturers

Company of Indonesia, investing $13.1 million in

to visit Indonesia and meet potential business part-financing in 1973. Within a few years, both the cement

ners. By 1971, two modest projects emerged, soonand textile industries were thriving and had attracted

becoming IFC's first investments in the country: newadditional foreign direct investment, no longer needing

Indonesian/Japanese fabric production joint ventures

IFC’s help to make their case to investors. A larger

called PT Unitex and PT Primatexco. Together theysurge in investment and private sector development

created 1,500 new jobs that helped increase foreign

then followed. Along with the government’s soundinvestors’ interest in the country.

pro-poor policies—including support for agriculture,
education, health services, and infrastructure—thisDuring this same period, IFC also helped set up ahelped Indonesia’s poverty rate drop from 40 percent$26 million joint-venture cement plant in Cibinong

to 18 percent between 1976 and 1996.

Indonesia: Inside
the Cibinong cement
plant, now owned
by global building
materials leader
LafargeHolcim.

60 BEGINNING WITH INNOVATION

Yugoslavia:
IFC financed
automaker
Zastava's
expansionin 1970.

YUGOSLAVIAOver these same years, IFC provided a similar support

entity’s initial $12 million in capital, with Yugoslavia

package of advice plus investment to Yugoslavia,

supplying $3 million and a group of Western andwhich posed different challenges. Josef Tito, theJapanese banks providing the rest.

longtime ruler, led a nonaligned socialist state that
had begun making limited moves to liberalize theIn 1970, IFC then made a large vote of confidence ineconomy and attract foreign investment. In 1967 his

the initial reform program, financing the $105 million

government invited an IFC team to help with these

expansion of Yugoslavia’s largest automaker, Zastava.

new policies and finance future projects that they

But the country’s economic model remained an

hoped would have a demonstration effect.

obstacle to larger-scale private sector development.
Without sustained government support for policy

IFC’s initial efforts focused both on translatingreform, foreign direct investment in Yugoslavia could

Yugoslavia’s complex accounting practices into

not increase dramatically in the following years, andWestern terms and helping create a legal frame-

IICY had to be closed. The IFC team learned that it waswork where foreign companies could feel confident

not enough to set up the foundational legal structuresthat they could eventually take profits out of theand provide initial financing: results also depended on

country. For further support, in 1969 IFC helped set

ongoing political commitment. Proof of this essential

up a specialized investment vehicle to finance joint

concept would later be seen in the world’s largest

ventures, the International Investment Corporation

emerging market, China.

for Yugoslavia (IICY). IFC contributed $2 million of the

61 IFC: THE FIRST SIX DECADESCHINAAs China began to liberalize its economy and open

economic decisions to be made by market forces,

itself to foreign investment in the 1980s, the country

which drove productivity increases, innovation, andasked several international development agencies for

rapid economic growth;” and “China opened up to thehelp. IFC began providing support in 1985: making its

outside world to trade, foreign investment and ideas,

first investment in China, supporting a $79.5 million

which it adapted for its own particular circumstances

Peugeot pickup truck factory in Guangzhou, andas reforms progressed.”advising on improving the laws governing joint
ventures. In the course of carrying out that advisory

From that key starting point in China in 1985, IFC

work, IFC's team discovered a much bigger barrier

worked with the World Bank and the donor commu-

to foreign direct investment (FDI): Joint venture

nity to create a new body to help countries attract

candidates would face difficulty repatriating profits

foreign direct investment, the Foreign Investment

earned in local currency due to restrictions in China’s

Advisory Service (FIAS). Over the next 12 years, it

foreign exchange regime.

would support reforms in 108 countries. The work
contributed to a time of explosive and widespread

To address this critical issue, in 1986 IFC provided

growth in foreign direct investment, with net flows to

Chinese authorities with the results of a survey ofdeveloping countries increasing from just $12 billion

100 foreign companies that had expressed interest inin 1986 to $120 billion in 1998. A program review thatthe country. The companies’ biggest concern was theyear concluded that while in 1985 most countries “bydifficulty of exchanging currency. Playing its honest

design or consequence” had policies that discouraged

broker role as a member of the World Bank Group,

foreign investment, the opposite was now the case.

IFC was able to make a persuasive case for reform.
A new era had begun: the era of unlocking private
The Chinese government eventually agreed to grad-investment on a much larger scale. This key part ofually ease these restrictions over the next few years.

IFC’s founding vision was at last now being achieved—

After essential last steps in 1990, coupled with reforms

not by IFC alone, but by the larger combined forcesencouraged by other development agencies, Chinaof public sector policy reform and private sector

saw an explosion in foreign direct investment. While

response.

the export-oriented sectors got most of the attention,much of this investment was aimed at the domestic
market, where currency exchange was essential. Overthe next 25 years, the country achieved unprecedented
economic growth.
By 2016 it had lifted 700 million people out ofpoverty, more than any other country in history. In
reflecting on this remarkable achievement, a WorldBank analysis cited two primary factors: “China gradually reformed its economic system to allow more

62 BEGINNING WITH INNOVATIONLESSONS OF EXPERIENCE
Ch. 3: Improving the Investment Climate

Large-scale job creation depends on a vibrantprivate sector, which thrives when governments
are committed to setting the right conditions
for business growth.

China: IFC's
investment climate
advice starting in
1985 came at a
critical time.

Brazil,
2000s

CHAPTER 4

BUILDING
GLOBAL AND
REGIONAL LEADERS

A Strong Partnership:
Syed Babar Ali (left), founderof Pakistan's leading pulp andpaperboard firm, Packages,
Ltd., signs an investment
agreement with IFC, 1982.

hile IFC initially focused on investing

identified promising local companies—in some cases

alongside foreign multinationals, local

assisting in establishing them—and then supported

enterprises were always on its radar as well.

their growth. This has helped a new generation ofGrowing over time from some early examples, theemerging market firms compete on the global stage,process of strengthening these cornerstones ofwith IFC accompanying them through their businessprivate sector development through long-term part-

cycles and evolving market environments, and offeringnerships has become an essential part of IFC’s work.

them investment and advisory services to meet theirchanging needs.

Traveling throughout Asia in 1953, three years before
the creation of IFC, Robert Garner met with some

The Tata relationship, for example, has grown steadilyof India’s leading industrialists. Among them wasfrom the initial 1980 financing of its steel and hotel

J.R.D. Tata, then head of the country’s best-known

units—company divisions that later became significant

conglomerate, the Tata Group. Sensing opportuni-

global players. Today, Tata companies remain close IFC

ties for collaboration, Garner laid the groundwork

partners in India and other countries, even as theirfor client relationships in India, today IFC's largest

roles continue to evolve. Tata Power, for example, iscountry of operations, representing a more thancosponsoring the Shuakhevi Hydropower Project in$4 billion portfolio. Since then, IFC has followed theGeorgia, an IFC-financed 187-MW clean energy plantsame relationship-based approach with many otherthat is expected to open in 2017.

rising emerging market businesses.
In Pakistan, IFC has been investing steadily since 1965
The Indian investments began with a 1959 loan toin Packages, Ltd., helping it evolve from a mid-size

Republic Forge Co.’s steel forging plant in Hyderabad

packaging unit into that country’s largest integrated

and continued with others, including a 1963 loan to apulp and paperboard mill. This work anchored several

Mahindra Group alloy steel products factory outsideother initiatives led by the firm’s founder, Syed Babar

Mumbai. Ever since these and other early steps, IFC has

Ali, including collaborating in the creation of the

67 IFC: THE FIRST SIX DECADESLahore University of Management Services in 1984.
In the 1990s, IFC helped Packages establish an invest-

KOREA: LG ELECTRONICS

ment bank in collaboration with American Express

When Robert Garner retired in 1961, Korea had an

and expand manufacturing operations to Sri Lanka. In

annual per capita income of $110. It was an impover-

2013, IFC played a key role in brokering a relationshipished post-conflict country, with weak infrastructurewith Finland’s Stora Enso, which took a 35 percent

and institutions, a painful past, and an uncertain

equity stake in Packages’ paper mill, Bulleh Shah

future. Today it is a thriving OECD country with per

Packaging (Private) Limited.

capita income of more than $33,000 and many
globally competitive companies. IFC played a part in

Jordan’s Nuqul Group has worked with IFC for nearlybuilding one of them, LG Electronics.

30 years, growing in that time from a modest local
trading company into a worldwide corporation

In the early 1970s, Gold Star, as it was then known,embracing a number of ventures in the Middle East.

was a local company, successfully producing and“IFC, unlike other financing institutions, considers

selling appliances, radios, televisions, and a few otherthe developmental needs of the region and themodest products at home, but barely known outsiderole that the private sector plays in supporting the

Korea's borders. Hoping for better things, it sought toeconomy as a source of growth and employment,”

expand production and increase its exports, which thensays Ghassan Nuqul, vice chairman of Nuqul Group.

brought in less than $20 million a year. But there was“By providing long-term financing and investments,a big barrier in the way: access to finance.

IFC has supported the region’s economy in several
sectors including infrastructure and industry, as well

Korea’s commercial banks were providing little long-as providing access to finance.”

term credit. They had tough exposure limitations that

Jordan: IFC has
supported Hikma
Pharmaceuticals
since 1987, providing
financing and advisory
services that helped it
become one of the top
generics companies
worldwide.

68 BEGINNING WITH INNOVATION

Korea:Equipment testingat IFC client Gold
Star, forerunner oftoday's consumer
electronics giant LG
Electronics, 1975.

kept them from making significant new private sector

On IFC’s recommendation, a distribution agreementloans. LG thus wanted to establish relations with

was reached with Sears, the leading retailer in theforeign lenders and begin accessing the international

United States at the time, taking advantage of LG’s

capital markets.

position as a low-cost producer of a popular consumer
product. Branded under the Sears name, the TVs soon

Having few international partners at the time, LG turned

found an eager new market in the world’s largest

to IFC, which had an investment staff with extensive

economy.

global knowledge of industries and markets—attractive assets to clients in developing countries at a time

Before 1974 was out, IFC had provided $17.3 million inwhen information was much harder to come by thanlong-term financing for the new factory that LG could

it is today.

not obtain from local banks—including $5 million mobilized from foreign lenders. In the process IFC became

An IFC team came from Washington in 1974 anda shareholder in LG. This single project doubled theassessed LG’s ambitious proposal for a new $30.9

company’s total assets. But even more important weremillion television tube factory. After running thethe additional introductions IFC provided to its partners

numbers on the growth potential of the Korean TV

in the financial world. These newfound commercial

market and comparing them with similar ventures inbanks would then become the source of much extra

Japan, the IFC team saw that the domestic market

funding over time. The export business soon took off,

could never absorb the new factory’s entire output

building new customer loyalty that could then be takenin the early years. They recommended a major shift

up to the next level.

in strategy for production of LG’s popular black-andwhite TVs: adding an export component.

69 IFC: THE FIRST SIX DECADESKorea: Gold Star
assembly line, 1975.

In the next three years, the Korean company’s sales“That’s the wonderful part of the work we did,” hewould grow by an extraordinary 53 percent per year.

recalls. “We succeeded in a number of countries

By 1978, LG’s annual exports were up to $100 million,

because we were operating around the world in amaking it one of the first emerging market multina-

range of industries and could take this experiencetionals to succeed on the global stage. A long-termand spread it around, like honeybees cross-fertilizing

partnership with IFC was soon underway, leading toplants. Even though we had never worked in consumer

several subsequent transactions that helped build theelectronics before, we could advise LG on things likefirm into the success it is today.

sourcing machinery, market risk, and capital costs,
and that proved very important to them.”

Over time, LG built a high-value brand—one that now
generates more than $38 billion in sales each year
and allows it to employ 66,000 people worldwide. An
estimated 86 percent of these sales now come in theforeign markets that LG first entered with IFC support.
As he looks back at the story today, former IFC VicePresident Makarand Dehejia feels the key was IFC’s
special combination: knowledge and finance.

70 BEGINNING WITH INNOVATIONLESSONS OF EXPERIENCE
Ch. 4: Building Global and Regional LeadersEngaging with local entrepreneurs andstrengthening their capacity are integral toprivate sector development and essential
for economic growth.

HDFC
PIONEERING HOUSING
FINANCE IN INDIA“Catalytic role” is one of the most importantphrases in the IFC lexicon, defining the way IFC
uses its ideas and capital to kick-start private sector
initiatives that help create opportunity and improve
people’s lives.
Consider the example of 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 line of business in housing finance thattoday represents more than $1 billion in committed
exposure.
IFC has long since sold its equity stake in HDFC.
However, a strong working relationship with thefirm remains, building on IFC’s original catalyticrole. “It was all a case of structuring it correctlyfrom the outset,” recalls IFC’s investment officer on
the original transaction, Promodh Malhotra. “Andthere’s a lesson in this. If IFC just does it ‘right’ atthe beginning, then points the way for others in
the market and gives the right signals, the market
in a developing country will take care of the rest.”

India: HDFC-financed
housing units underconstruction, 1980.

71 IFC: THE FIRST SIX DECADESLONG-LASTINGPARTNERSHIPSA KEY TO IMPACT

From its early years, IFC has focused on building long-term rela-them in local firms that stand to benefit from their capital andtionships with clients and partners—working closely over time,

expertise.

together achieving both strong business results and significant
IFC has also had long-term relationships with many key

development impact.

development partner agencies and foundations that have helped
Beginning in the 1960s and continuing to today, this approach

identify emerging needs, shape priorities, and co-fund advisoryoften involves support for rising players in emerging markets. In

services programs. Many partners have supported this work,

these cases, IFC provides its full range of products and services

but the 10 most active to date have been the United Kingdom,

to guide clients’ development and assist in their cross-border

Switzerland, the Netherlands, Canada, the United States, Japan,

growth.

Australia, the European Commission, Austria, and Norway.

More recently, IFC has also built strong relationships with global

Whichever the case, the goal is always the same: increasing theplayers based outside of emerging markets, co-investing withprivate sector’s role in development. Examples include:

DEVELOPMENTPARTNERS

1985

1990s

2010

2016

IFC launches FIAS,
its largest multidonor
program, to promote
investment climate
reforms.

IFC expands
its network
to include
more than 30
development
partners.

IFC development
partners contribute
more than $1 billion
to fund futureadvisory andconcessional
finance programs
addressing theimpact of the global
financial crisis.

IFC development partners
contribute to major funding
increases for two blended
finance initiatives, theGlobal Agriculture andFood Security Program(GAFSP) and the Global
SME Finance Facility.

INFRASTRUCTURE

1990s

2009

2016

IFC begins financing infrastructure improvements to expand
capacity of the Panama Canal
Zone, a linchpin of global trade.
This includes financing theconstruction of the Manzanillo
International Terminal on the
Atlantic coast, the Corredor Sur
toll road connecting Panama
City and the airport, and therevitalization of the Panama
Canal Railroad Company.

Amid the global financial
crisis, IFC partners with fourother development banks
to provide $2.3 billion in
financing for a major upgradeof the canal itself—the largest
project at the canal since its
opening in 1914.

The canal completes its$5.5 billion expansion
financed in part by IFC,
doubling capacity andmaking global seaborne
trade less costly andmore efficient.

72 BEGINNING WITH INNOVATIONINDUSTRY

2000

2008

2010

2016

IFC makes its firstinvestment with
Turkish industrial
and financial leader
Sabanci Group,
helping its financial arm, Akbank,increase access tofinance for SMEs.

IFC builds a financial
framework for Sabanci’senergy joint venture
Enerjisa, helping it
become one of Turkey’s
largest private generationcompanies, with 7.9 million
customers. This includes
a more than $700 million
syndication—at the time,
IFC’s largest ever.

Kordsa, Sabanci’s
industrial fiber
company, expands
globally in three
emerging markets—
Argentina, Egypt,
and Brazil—with
IFC’s support.

The 16-year IFC
relationship is part of
the growth of Sabanci,
which now has a presence in 16 countries and$17.6 billion in global
combined revenue.

FINANCIALINSTITUTIONS

2002

2006

2007

2016

IFC begins its relationship with microfinance specialist
LFS Financial
Systems of Germany,co-investing with it
and others to foundAzerbaijan’s firstcommercial microfinance institution.

To scale up and leverage
LFS’ success and expertise in microfinance,
IFC invests in AccessHolding, a new commercial microfinance holding
company created with LFS
and partner development
finance institutions toinvest equity in new andearly-stage microfinanceinstitutions (MFIs) inother countries.

IFC provides
additional direct
investment andadvisory services
to AccèsBanque
Madagascar, the firstnew start-up createdby Access Holding.

Access Holding now
holds stakes in 10 MFIs
with a total of 570,000
borrowers. In addition
to multiple investmentsin the holding company
and the earlier banksin Azerbaijan andMadagascar, IFC has
invested directly in theones in Georgia, Liberia,
Nigeria, Rwanda,
Tajikistan, Tanzania,
and Zambia.

SOVEREIGNWEALTH
FUNDS

1986

2005

2010

2013

The Abu Dhabi
Investment
Authority invests
in the IFC-initiatedEmerging Markets
Growth Fund.
It would subsequently become
one of the firstinvestors in an IFC
Asset Management
Company (AMC)
fund.

Singapore’s Temasek
Holdings co-invests
alongside IFC in the
BioVeda China Fund, thefirst international venture
fund directed at the life
sciences in China.

AMC launches the
IFC African, Latin
American and
Caribbean Fundwith the Abu
Dhabi Investment
Authority, theKorea Investment
Corporation, andthe State Oil Fundof the Republic ofAzerbaijan as anchor
investors.

Singapore’s GIC
becomes an anchor
investor in the IFC
Global Infrastructure
Fund (GIF). GIC, IFC,
and GIF go on to invest
in several transactions
together.

73 IFC: THE FIRST SIX DECADESGhana,2013

DECADES 4–5
1990s–2000s

INCREASING
INFLUENCEAs the world grew increasingly open to market-based
solutions, IFC’s influence also grew.
It supported the growth of rising local companies,
pushed the frontiers of privatization, and developed
the most comprehensive framework then in existence
to manage projects’ environmental and social risks.

CHAPTER 5

BROADENING
THE PRIVATESECTOR'S ROLE

1992: Russia's first
fully transparent
public privatization
auction, supported
by IFC in the city of
Nizhny Novgorod.

By 1996, IFC had been operating for 40 years

public-private partnerships, which could unleash

and had much valuable experience to share.

the power of the private sector to increase efficiency
and innovation, supporting sustainable and inclusive

The core ideals of private sector growth that it had

development by benefiting society widely, rather thanalways championed were no longer considered outside

just helping a few. Shareholding countries put IFC at

the mainstream of development thinking. Government-

the center of the process.

dominated models were no longer seen as sufficient.
New formulas for public-private cooperation had to

It was challenging work, especially in post-communist

be found.

countries with little tradition of private enterprise or
accountability, and where weak capital markets at first“For many, the lesson of recent years has been thatmade it hard to find buyers. But IFC brought much tothe state could not deliver on its promises,” the World

the table—not only its commitment to innovation in

Bank’s flagship World Development Report stated theprivate sector development, but a track record datingnext year. “Transition economies have had to maketo the mid-1980s of advising governments in thea wrenching shift toward the market economy, andprivatization of state-owned companies, especially inmuch of the developing world has had to face up to theLatin America and Asia. A key focal point was thefailure of state-dominated development strategies.”

new Corporate Finance Services Department, createdin 1989 to provide fee-based advisory services“Understanding the role the state plays in this environ-and financial assistance in corporate restructurings

ment, for example in its ability to enforce the rule of law

and privatizations.

to underpin market transactions,” the report continued,“will be essential to making the state contribute more

At first this growing knowledge-based side of IFC

effectively to development.”

mainly supported individual transactions rather thanwholesale divestments of government assets. But

This was the context of much of IFC’s work in thewith the fall of the Berlin Wall in 1989, a much larger

1990s. Emerging markets had grown disillusioned withchallenge emerged. Central and Eastern European

past models of state-driven development and needed

countries shook off Soviet control and looked to build

viable market-based ones.

new market-based economies quickly—a daunting
task. Having demonstrated its expertise in this special-

Nowhere was the need greater than in the sale ofized field elsewhere, IFC sent a number of project teams

state-owned enterprises and the creation of new

to the region to help.

79 IFC: THE FIRST SIX DECADESPOLAND
A key starting point was Poland. In 1990 its economy

With these initial steps in place, in May 1991 a total of 1.9

began experiencing the painful effects of a rapid

million shares in SFM were made available on the newlytransition, seeing GDP contract by 12 percent

revived Warsaw Stock Exchange in a two-week public

and real income drop by nearly a third. Knowing it

offering that raised the equivalent of approximately

soon needed to show success, the new Solidarity$10 million. They were completely subscribed on thegovernment sought IFC’s help in designing afirst day. Some 36 percent went to small investors andprivatization program for its entire economy, dubbed

16 percent to employees, leaving about 40 percent for

the Multi-Track Privatization Program. IFC helped

large investors. Foreign investment was at 24 percent,

set the legal and institutional framework for privat-

another sign of confidence. IFC received 3 percent ofization and selected early candidate enterprises forthe shares as compensation for its services. And it

sale. Among them was leading furniture manufacturer

became the subject of a business school case study,

Swarzedzkie Fabryki Mebli (SFM).

illustrating how to restructure, value, and privatizecompanies in a transition economy.

SFM had a high profile, exporting the majority of its
output to IKEA and other clients in Western Europe.

More important than the sum raised was the template

Yet it was hobbled by inefficient operations andit set for future sales. Two more companies went

excessive debt. After a detailed appraisal, IFC's teampublic a few weeks later. Similarly, their shares soldrecommended a pre-sale operational and financial

out quickly, building critical early confidence in the

restructuring as an essential first step in building

privatization process. In the end, the SFM sale wasinvestor confidence. This included the government

a “win-win” for all sides. It did more than put an inef-

assuming most of the 3,200-employee firm’s debt,

ficient enterprise under private ownership. It also

which would then be retired by proceeds from ademonstrated the merits of free-market economics

planned public offering. SFM’s management also

to Poles and pushed their capital markets forward as

implemented IFC’s recommendations for a series ofa tool in financing development.

quick technical improvements to factory efficiency
and logistics.

Subsequently, IFC helped Polish authorities achieve
other high-profile successes in banking, cement, andA local bank with a newly developed computerizedother industrial-sector privatizations. By the mid-1990s,

share sale and distribution network then came on

the government’s macroeconomic reforms, combined

board, bringing 200 branches that could help spreadwith successful broad-based privatization, had jump-

the word about privatization. The next challenge wasstarted the Polish economy, putting it on the roadsetting up a valuation for the company in a local

not just to recovery, but to steady long-term growth.

environment where markets were still too weak to
use book or liquidation value and where economic
uncertainty made it difficult to project sales.

80 INCREASING INFLUENCE

Poland:
Launched with IFC's
support in 1991,
furniture company
Swarzedzkie Fabryki
Mebli's IPO was thefirst of its kind in
post-communist
Eastern Europe.

81 IFC: THE FIRST SIX DECADESRUSSIA
There were even greater challenges in the former Soviet
Union. There, IFC made a difference with small-scale
privatization. This activity began in the city of Nizhny
Novgorod, Russia’s main trade and commercial center
before the 1917 Revolution, but until recently a city that
had been completely closed to outsiders.
Assembling a team of consultants from Poland,
auctioneers from Czechoslovakia, and lawyers from
Sweden and the United States, IFC devised a processthat emphasized speed, transparency, and efficiency
in the first sales of small state-owned businesses.
Starting in April 1992, the Nizhny Novgorod city
government worked with IFC’s concepts, runningweekly auctions open to the public. By the end of theyear, more than 2,000 businesses had been sold. The
transfer of ownership was immediate, with new owners
taking control within two days of the auction. The work
went smoothly, establishing a framework for auctionsin 28 other Russian cities, helping to boost local
entrepreneurship and build a market-oriented culture.

1992: IFC supports
privatization in
Nizhny Novgorod,soon after the fallof the Soviet Union.

82 INCREASING INFLUENCE

1993:IFC widens its
privatization workin Ukraine, helping
local people bid tobuy small shops
via auction.

UKRAINE
Impressed, Ukrainian officials invited IFC to repeat thein business and management who could run theprocess in their own country, where local conditions

operations more efficiently. By 1996, 45,000 small

were quite different. While auctions may have been thestate-owned enterprises had gone public in Ukraine,most efficient way to get a fair price for local shops andyielding $200 million in revenue for the government.

small businesses, local officials and citizens believed

Instead of the dilapidated, poorly stocked retail stores

these would unduly favor rich citizens, and asked forthey remembered from the past, Ukrainians could now

other ideas.

shop much like their counterparts in the rest of Europe.

IFC’s team showed flexibility and worked with the

As in Nizhny Novgorod, the program laid the ground-Ukrainians on an alternative, devising a plan to give

work for changing the mindset of most Ukrainians.

employees the right of first refusal. The process

Instead of seeing capitalism and entrepreneurship

started with the city of Lviv in 1993. Things went well.

as something that would benefit only the elite, they

Overall, nearly 80 percent of the businesses werelearned it was an engine for a dramatic expansion

sold to employee groups. Many of these groups laterin consumer goods and a gratifying improvement in

resold the businesses to entrepreneurs with expertisecustomer service.

83 IFC: THE FIRST SIX DECADESPRIVATELY FINANCEDINFRASTRUCTURE
Throughout the 1990s, IFC was at the vanguardof financing a new wave of privately funded infrastructure, helping clients in power, water, transport,
and telecoms find profitable models of bolstering
these essential services to support economic growthand development.
Two early trendsetters were Build-Operate-Transfer
projects in the Philippines, a nation with an external
debt burden that severely limited the government’s
ability to invest in infrastructure projects:• An $8.9 million combined debt and equity financ-ing package for International Container Services,
Inc., the private manager of a new shipping
terminal being built in Manila.
• An $11 million debt and equity financing bundle toHong Kong–based Hopewell Holdings, developerof a 200 MW power plant supplying the national
utility.

In both cases, IFC’s financing allowed thePhilippines a way to carry out necessary infrastructure investments quickly and efficiently withprojects that would also be profitable for theirsponsors, without relying on constrained national
budgets. This model would be repeated many times
over in the coming years. “The need is enormous,”
Hopewell founder Sir Gordon Wu later said. “What
IFC, the World Bank, and MIGA can do is to play
the catalytic role, rather than finance everythingthemselves, which they just cannot. The need isjust too big. But if they play the role of the catalyst,
then that will facilitate greater cross-border flows
of money.”
Demand increased as reforms swept the developingworld during the decade, leading IFC to increase its
specialized capacity in the sector with the creationof a new Infrastructure Department in 1990.
In the power sector alone, IFC financed 57 projects
in 37 countries with total costs of $14.4 billion in
the 1990s, up from seven projects with total costsof $703 million in four countries in the previous
three decades. But other sectors were critical aswell, with IFC playing an important role in several
projects with high demonstration effect.
In telecom, in 1994 IFC invested $5.6 million in asmall start-up mobile operator in Uganda that four
years later became a new regional company, Celtel

Transport: Improved
infrastructure brings
goods to market fasterand more affordably.

84 INCREASING INFLUENCE

Uganda: IFC's
1994 financingof Celtel helped
spark Africa's
mobile phone
revolution.

International. No one else was willing to finance it at
the time, but IFC took the risk. At the time, Uganda
had only 23,000 telephone lines for a population of
17 million, with fewer than 50 percent of its calls
going through. Headed by Mohammed Ibrahim,
Celtel would soon become the pioneer mobile phonecompany in Africa, contributing considerably tothe region’s dramatic growth in mobile phone use,
increased competition, and lower prices. This is now
considered one of the most transformational eventsin the continent’s development history.
Later sold to Kuwaiti investors for $3.4 billion in
2005, and then purchased by Bharti Airtel of India
in 2010, Celtel worked closely with IFC for several
years to open widespread access to mobile phoneservice in Africa. By 2014, Africa had 608 million
mobile connections, providing people at every
income level not just with better communication,
but with improved access to health care, education,
financial services, and delivery of public services.

85 IFC: THE FIRST SIX DECADES

IFC was also very active in water. In 2000, IFC
teams advised the Bucharest municipal government
on privatizing its troubled water utility RGAB,
which was losing nearly half of its output throughill-functioning distribution systems. Under the fair
and transparent bidding that IFC oversaw, Veolia
subsidiary Apa Nova won rights to the utility undera 25-year concession and quickly began turning it
around. A 2011 independent evaluation found thatthe new operators had improved service considerably, while keeping price increases 33 percent lower
than would have been expected under a standard
public sector model.
While not all projects were so successful, theoverall changes brought by private participation
in infrastructure during these years were a truegame-changer in development—altering the scopeof private investment in emerging markets, while
also yielding major improvements in the deliveryof basic public services.

A Milestone
Transaction:
IFC chronicled its
experience in theprivatization of
Kenya Airways ina 1996 case study.

86 INCREASING INFLUENCE

KENYA
Test cases needed to be undertaken not just in Central

valuable transaction-based knowledge widely andand Eastern Europe, but in the rest of the world. A major

contributing to policy dialogue, IFC launched a newmilestone was the privatization of Kenya Airways.

Lessons of Experience publication series that year,

Like Poland’s SFM and many other businesses soldsumming up its findings on the principles and practices

with IFC’s help, Kenya Airways required extensiveof effective privatization in the inaugural edition as

operational and financial restructuring before it could

follows: “The key dimension at each stage of privat-

attract buyers. But the airline had the added dimension

ization is political transparency, which maximizes theof being a highly symbolic national asset: Africa’s first

popular perception that the playing field is level andflag carrier to be privatized. Retained as the Kenyan

strengthens support for privatization.”government’s adviser on the planned transaction in
1994, IFC soon saw that the airline needed to partner

The lessons were clear: Most of the enterprises in whichwith a major international carrier in order to regain

IFC involvement was part of the privatization process

stability and profitability after losing money over its

had experienced poor performance under government

entire 17-year existence.

ownership. Most became profitable as newly privatecompanies, providing improved delivery of goods andFollowing the restructuring moves, IFC’s team helped

services. The report concluded that when government

the government conduct a fair and transparent

played its proper role as facilitator, enabling a fair selling

selection process in which Dutch airline KLM acquired

process, “IFC’s experience shows that privatization is

26 percent of Kenya Airways in January of 1996

well worth the effort in the majority of cases.”

for $70 million. While KLM took over operationaloversight of the airline and integrated it into its global

While not successful in every case, the privatizations of

network, total foreign ownership was limited to

the 1990s were important not just in boosting the flow

49 percent, and Kenyans held the senior managementof private-sector investment into developing countries,

positions. A subsequent 1996 public offering on the

but in improving people’s lives. The privatizations

Nairobi Stock Exchange enabled 113,000 Kenyans

also greatly expanded IFC’s playing field in helping

to participate, helping ensure political support for

to promote development, leading to a considerable

the move.

expansion of activities in the 2000s.

Under private ownership, the airline rebounded andbegan a major expansion of both international anddomestic flights. By 1999 the improvement was clear:
Kenya Airways had become the market leader both inflights between Europe and Africa and within Africa.
By the time the Kenyan work got underway in 1995,
IFC’s Corporate Finance Services Department had
been at the forefront of privatization for a decade,having carried out 70 advisory assignments andfinanced 88 projects. Committed to sharing this87 IFC: THE FIRST SIX DECADESLESSONS OF EXPERIENCE
Ch. 5: Broadening the Private Sector's Role

Early success in privatization comes transaction by transaction, laying the basis for larger
cumulative impact.

88 INCREASING INFLUENCE

AFRICA:A STRATEGIC FOCUS
PAYS OFFIFC has been helping build the private sector in
Africa steadily since its earliest years. But in thepast decade, these efforts have scaled up significantly—our total investments have more thantripled, climbing to $2.4 billion in 2016.
In fiscal 2016 alone, in Africa IFC clients:• Generated power for 18.4 million people

With this greater local presence and expanded
advisory services, staff, and resources, IFC wasable to work closely with development partners
and employ staff in some of Africa’s most difficult
markets. That helped IFC launch special initiatives in
key sectors such as infrastructure and agribusiness.
As a result, IFC has been able to work with a wider
range of clients and build a more robust pipelinein Africa since the mid-2000s.

• Reached 1.25 million farmers• Served 1.36 million health care patients

They also provided nearly $9 billion in micro, small,and medium enterprise loans.
The turning point came in 2003, when IFC put arenewed focus on Africa to take on a much greaterrole—increasing its resources for the region, opening
more local offices, and providing a wider range ofadvisory services.

Bridging theInfrastructure Gap:
Just one part of IFC'slarger strategic focus
on Africa.

89 IFC: THE FIRST SIX DECADES

Today, IFC has a broad strategic commitment toAfrica and the resources to make a difference. It is
helping bridge the continent’s infrastructure gap,
increase productivity in agribusiness and other key
industries, and lead inclusive business approaches
that will help Africa’s private sector create jobs,
raise living standards, and reduce poverty.
With the right strategy and resources, IFC has
demonstrated its ability to leverage its knowledge
and deliver results in Africa.

CHAPTER 6

SETTING
STANDARDS FORSUSTAINABILITY

Sustainability:
IFC has learned
from its experience,sharing the results
for wider impact.

hroughout the 1990s, IFC began assessing

to improved environmental and social guidelines thatits operations with a wider lens, putting an

became standard practice not just for IFC, but for theincreased focus on sustainability.

global commercial banking industry as a whole.

In looking at ways to build up an economy’s productive

LESSONS FROM CHILE

capacity, project teams in extractive industries, infrastructure and other sectors recognized the need to

The Pangue project began in 1989, when executives

watch closely for effects on the environment and local

at Chile’s main electric company, Endesa, approachedcommunities, both positive and negative. What could

IFC for financing. Needing to increase power supply

be done to promote local participation, protect nearby

for a fast-growing economy, the recently privatizedareas from harm, encourage the use of international

utility wanted to build a new $367 million run-of-river

best practices, and ensure that residents shared in thehydroelectric station on the Bio Bio River in the foothills

benefits of these large investments? Answering theseof the Andes. Seeking to attract capital from privatequestions more comprehensively than before would

investors, Endesa wanted the stamp of approval of anot only help IFC make better investment decisions,

respected international organization.

but would also promote stronger, more inclusive
development outcomes.

After a lengthy appraisal process that included considerable environmental and social review, in 1992 IFC

A key turning point came with the lessons learned

worked closely with Endesa and put together a $125

from IFC’s support for Pangue, a controversial 450

million package for the 450 MW project. The package

MW hydropower station in Chile that opened in 1996.

consisted of a $20 million equity investment along

That project initially subjected IFC to an avalanchewith $55 million to be lent directly by IFC plus anotherof outside criticism, culminating in an independent$50 million mobilized through loan syndications.

report commissioned by the President of the World

While lacking today’s extensive internal capacity inBank Group. Controversial, yes, but the lessons fromsustainability, IFC did make important contributions

Pangue and other projects proved invaluable, leading

to the project during the appraisal. Those included

91 IFC: THE FIRST SIX DECADES

decisions with Endesa that acceptable environmental

international NGO partners who questioned privat-

and social assessments and mitigation plans would

ization’s ability to foster sustainable development.

subsequently be completed and made public, andthat the recommendations would be adopted. IFC's

IFC’s financing for the project was approved in

involvement also resulted in the establishment of the

December 1992, and the project was built over thePehuen Foundation, an innovative, Endesa-funded

next four years. But Chilean and international NGOs

mechanism for bringing project benefits to the local

protested so vigorously that in 1996 World Bank

indigenous people.

Group President James Wolfensohn commissioned an
independent review from conservationist Jay Hair, theBut the world was changing fast in 1992, with govern-

former president of the National Wildlife Federation

ments, companies, and development organizationsin the United States. Hair’s review identified several

now being held to higher standards of accountability.

shortcomings in how IFC had carried out World Bank

The proposal unleashed a firestorm of protest in

guidelines for environmental and social protection. In

newly democratic Chile. Civil-society organizations

response, IFC conceded that some of its processes had

were putting new emphasis on the environment andbeen flawed but stressed that the project had been

indigenous peoples and expressing concern about thesubstantially improved from the environmental andcumulative impacts of Endesa-sponsored projects thatsocial standpoints as a result of IFC’s involvement. With

would follow Pangue. As the country’s first big private

lessons of the review learned, IFC moved on, using theinfrastructure project in this new era, Pangue became

lessons as an opportunity to strengthen the approach.

a rallying point for local advocacy groups and their
In the end, Pangue sparked a significant increase in
IFC's capacity to formulate robust environmental andsocial project review procedures, a mainstay of its

Sustainability: The
foundation of the future:
in Chile, and globally.

business ever since. IFC hired its first social scientist,
began new work on ways to increase local participationin development decisions, and, in 1998, adapted theWorld Bank’s Environmental and Social Safeguard
Policies for IFC use. By 1999 IFC had also greatly
strengthened its transparency and accountability in
two key ways: first by launching an improved publicaccess to information policy that set a new standard
for development finance institutions focused on
the private sector, and second by establishing an
independent Compliance Advisor/Ombudsman’s
office to address the concerns of individuals or communities affected by IFC projects and enhance the socialand environmental outcomes.

92 INCREASING INFLUENCE

Chile: Bio Bio River (below), site of an
IFC-financed hydroelectric project.
The learning it generated on social andenvironmental impact assessment
became a landmark in IFC history.

93 IFC: THE FIRST SIX DECADES

THE BTC PIPELINE
By the early 2000s, this stronger expertise in environmental and social issues had become an essential
part of IFC’s own value proposition—helping clients
see that sustainability factors were not just risks to
be managed, but could also become a key source ofcompetitive advantage.
As a result, IFC began providing leadership on muchlarger and more complex projects, such as the$4 billion Baku-Tbilisi-Ceyhan (BTC) pipeline running
through Azerbaijan and Georgia to a terminal facilityon the Turkish Mediterranean coast. Able to transport
1 million barrels of crude oil every day, the 1,768 km
pipeline is one of the longest of its kind in the world.
Its route passes through a wide range of land-use
types, affecting over 17,700 parcels of land used byhouseholds in 515 villages, and therefore involving acomplex set of social and environmental issues.
The project was developed by BTC Co., a company

Showing how far IFC has come since the early days

formed by the affiliates of 11 national and internationalof Pangue, BTC is now considered a landmark among

oil producers with BP as the majority shareholder andprojects of its type and size regarding the extent ofoperator. Construction began in spring 2003, withlocal stakeholder consultation and the amount ofexports from the new terminal at Ceyhan commencing

information disclosed as part of its environmental andin June 2006. Approximately 70 percent of the projectsocial impact assessment. Its construction program

costs were funded by a group of lenders including

has been widely credited with exceeding expectations

IFC, which provided a loan of up to $125 million fromin terms of environmental and social management,

its own account and a loan of up to $125 million insetting new benchmarks in transparency and envi-

commercial syndication.

ronmental and social standards for construction
programs, and developing innovative practices along

Before agreeing to provide financing, IFC and thethe way. The BTC project demonstrates that sustain-

wider lender group worked closely with the sponsor

ability is good business.

in designing an oversight mechanism to address thepotential environmental and social impacts of the
project and to monitor performance. This included

LESSONS OF EXPERIENCE

the development of a comprehensive environmental

Ch. 6: Setting Standards for Sustainability

and social action plan, the design and implementationof a transparent land acquisition and compensation
program, local employment and training, community
investment programs, and NGO capacity building.

94 INCREASING INFLUENCE

Sustainable business is good business.

The BTC Pipeline:
A $4 billion,
three-country
project, widely
recognized
for its positiveenvironmental
and social impact
analysis.

Energy Investment:
Contributing to aregion's future.

Stakeholder Dialogue: IFC
leads consultations with local
communities in Azerbaijan
affected by the BTC pipeline as
IFC noted in a 2006 case study.

95 IFC: THE FIRST SIX DECADESIFC'SSUSTAINABILITYFRAMEWORK
Sustainability is critical to companies’ businesssuccess. It’s critical, too, for their customers, surrounding communities, and broader stakeholders.

client practice and the Performance Standards
in order to agree on a plan of action to improveoutcomes over time.

Building on its experience with the Environmental
and Social Safeguard Policies that had been adopted
in 1998, IFC launched a thorough revision of its
environmental and social policies and proceduresin 2003. The aim was to produce an outcomeoriented set of standards and emphasize theirintegration in a company’s management system toensure ongoing review and performance. The newpolicies, introduced in 2006, were called the IFC
Performance Standards on Environmental and Social
Sustainability and were the first to be developed
specifically with the private sector in mind.

In challenging contexts, IFC helps clients understand and manage the risks they face, partneringwith industry and other stakeholders to findinnovative solutions that open up opportunities
for economically, socially, and environmentally
sustainable private investment—which contributein turn to jobs and inclusive growth. This may
include leveraging the capacity of the World Bank
Group to address environmental, social, andgovernance challenges that are beyond the abilityor responsibility of a company to solve alone.

These Performance Standards help clients avoid,
mitigate, and manage risk as a way of doing businesssustainably. They assist clients in devising solutions
that are good for business, good for investors, andgood for the environment and communities.
The Performance Standards guide IFC’s environmental and social due-diligence process, which
integrates the client’s assessment of environmental
and social risks with an understanding of the client’s
commitment and capacity to mitigate and manage
these risks. This review identifies any gaps between

96 INCREASING INFLUENCEIFC
PERFORMANCESTANDARDS
1.Assessment and Managementof Environmental and Social
Risks and Impacts
2. Labor and Working Conditions
3.R esource Efficiency
and Pollution Prevention
4. C ommunity Health,
Safety, and Security
5. Land Acquisition andInvoluntary Resettlement
6. Biodiversity Conservationand Sustainable Managementof Living Natural Resources
7. Indigenous Peoples
8. Cultural Heritage

97 IFC: THE FIRST SIX DECADES

THE EQUATOR
PRINCIPLES
Soon after IFC’s new Environmental and Social
Safeguard Policies took effect in 1998, they began
attracting interest from several global commercial
banks that realized they too needed to expand theirdue diligence related to financing large projects
with significant environmental and social risks
and impacts.
Dialogue continued for several years, and in 2003,
10 major banks met at IFC headquarters to launch
an environmental and social risk management
framework that they called the Equator Principles.
IFC’s Environmental and Social Safeguard Policies
were incorporated in the Equator Principles as therelevant standard for project finance in developing
countries.

Since their introduction, the Equator Principles havebecome the de facto standard for environmental
and social principles throughout the project financeindustry and have provided significant benefits toall stakeholders. Each adopting financial institution
implements its own policies and procedures to reflect
the principles, allowing for project-specific flexibility
and efficiency.
IFC played a pivotal role in establishing and updating
the Equator Principles’ sustainability architecture.
IFC supported the Equator Principles banks in thedrafting and implementation of the framework, withcareful consideration given to large, complex, andexpensive installations of high environmental andsocial impact projects, such as power plants, pipelines, and transportation and telecommunications
infrastructure. IFC continues to support the community of implementing institutions with training,
guidance and advice. Today 84 financial institutionsin 35 countries have officially adopted the principles,
covering over 70 percent of international project
finance debt in emerging markets.

The Equator Principles:
A sustainability framework for project
finance that helps members rely on
IFC’s Performance Standards wheninvesting in emerging markets.

99 IFC: THE FIRST SIX DECADESKNOWLEDGE AT IFC:
CREATING, CAPTURING,
AND SHARING EXPERTISE
IFC is a knowledge-driven, knowledge-sharing
institution. IFC learns from its clients.
Driven by a longstanding commitment to innovation
in increasing the private sector’s role in development,
IFC captures the key lessons of its work, learns
from them, and then shares them widely for greater
impact worldwide.
In 2006—just three years after overseeing the creationof the Equator Principles—IFC and two Brazilian
partners organized a groundbreaking seminar inSão Paulo for Latin American financial institutions.
Based on dialogue and interaction, the event showed
how the Equator Principles were fast becoming a
new force for sustainability in the financial sector,
transforming markets in Latin America. Every
year since, IFC has held similar Community of
Learning knowledge-sharing events for Equator
Principles financial institutions and others, allowing
attendees to draw on IFC expertise in applying its
Performance Standards and benefit from exposure
to the experience of a wide network of practitioners.

The annual events are part of IFC’s commitment toreflect on what it knows, then share that knowledge
widely in the marketplace of ideas. Other initiatives thathave been active now for more than 10 years include:• SmartLessons: short papers written by IFC pro-fessionals for other practitioners, sharing firsthand, practical lessons useful for colleagues doing
similar work or facing comparable issues elsewhere. Written in case-study format, they capture
practical lessons from IFC’s work for a wider
public audience.
• FT/IFC Transformational Business Awards: an
11-year collaboration with the Financial Times
highlighting groundbreaking, commercially viable
solutions to today’s greatest development challenges.
Held each year in London with both a conference and awards ceremony, the high-profile event
celebrates achievement in a wide range of areas.
• Sustainability Exchange: an annual event addressing
economic, environmental, and social challenges
and opportunities that face the infrastructure andnatural-resource sectors in emerging markets. Eachyear it brings together more than 200 global executives and practitioners from companies, NGOs, thepublic sector, international development agencies,
and academia.

Recognition: The annual
FT/IFC Transformational
Business Awards honor
cutting-edge private
sector contributions todevelopment.
100 INCREASING INFLUENCE

Dissemination: The
2015 SheforShieldreport identified newopportunities in thewomen's insurance
market—an emerging
high-growth, highimpact industry.

In addition to capturing and sharing its own knowledge, IFC also at times creates knowledge—identifying
gaps in global learning on the private sector’s rolein emerging markets, and starting new vehicles that
help fill them. Among them:• Handshake, launched by IFC, is the World Bank

Group’s journal on public-private partnerships.
Its features, interviews, and columns offer uniqueinsights into PPP projects in every region of theworld, showcase best practices in PPPs, and sharelessons that can benefit future PPP initiatives acrossa variety of sectors.
• Better Work is a collaboration between IFC andthe International Labour Organization. Since
2007, it has worked to improve garment workers’
lives by striving to secure safe, clean, equitable

101 IFC: THE FIRST SIX DECADES

working environments. The initiative does this bybuilding strong relations between managers andworkers at the workplace who, with its support,
can then take ownership and responsibility forcontinuously improving working conditions andeventually competitiveness at the factory. Better
Work has helped more than one million workers
while promoting and boosting business benefits.
• SheforShield is a groundbreaking study publishedin 2015 by IFC, AXA Group, and Accenture. It
found the insurance industry in emerging markets
has largely overlooked a key consumer segment:
women. By 2030, according to the study, theinsurance industry is expected to earn $1.7 trillion
from women alone—half of it in just 10 emerging
economies.

Nepal,2011

DECADE 6
2010s

DEMONSTRATIOANDIMPACT

N

Working on a larger scale than ever before, IFC now
creates integrated solutions that extend the private
sector's reach in development.
It has devised new models to provide new solutions in
the face of new challenges.
Building on its history, IFC is taking steps to increase
the private sector’s role in global development—setting
a demonstration effect and increasing the impact.

CHAPTER 7

INNOVATINGFOR INCLUSION

Inclusive
Development:
Driven by private
sector innovation.

In 2013 the World Bank Group launched an ambi-

finding new ways to bring the benefits of growth to atious new strategy based on two goals:

much wider segment of society than before.

•Ending extreme poverty by reducing the share of

It was always understood that the path to develop-

people living on less than $1.25 a day to less than 3

ment and poverty reduction must be sustainable—

percent of the global population by 2030

environmentally, socially, and fiscally.

•Boosting shared prosperity by improving the living
standards of the bottom 40 percent of the popula-

IFC had a critical role: unleashing the power of thetion in every developing country

private sector in pursuit of these goals. With most of its
staff now in the field, IFC could now work more quickly

Designed to help countries meet their most difficultand closely with local clients, offering them a broader

development challenges, the strategy enabled theset of both investments and advisory services, often

World Bank Group’s member institutions—IBRD, IDA,

combining them into integrated solutions for increased

IFC, MIGA, and ICSID—to work together more closely inimpact. Fully leveraging its resources and relationships,

pursuit of this shared vision. At its core was a drive for

IFC was able to catalyze results at significant scale ingreater inclusiveness—in other words, a commitment

several key areas of the inclusiveness agenda.

to addressing deep-rooted poverty and inequality,

107 IFC: THE FIRST SIX DECADESCODEVIJOB CREATIONIN HAITI
Textile plant CODEVI is Haiti’s largest private sector
employer, with a workforce that has grown from
300 employees in 2006 to more than 7,000 today.
Located just across the border from the Dominican
Republic, it brings skilled manufacturing jobs toan area where other income opportunities are
scarce. Indirect benefits may be even higher—
30,000 people in its community of Ouanaminthe
also derive their livelihoods from jobs associatedwith CODEVI’s operations: cooks, shop owners,
mechanics, and others. And since municipal
authorities are unable to provide many essential
services, IFC and CODEVI have also worked withsocial entrepreneurship NGO Ashoka to fill thegap, empowering local entrepreneurs to distributewater filters, solar lamps, and eyeglasses.
Producing garments for top brands sold in
the United States, CODEVI is rooted in IFC’s
long-standing relationship with sponsor Grupo M
of the Dominican Republic. IFC financed the initialconstruction of the Haitian factory in 2003, thenco-led a debt restructuring in 2006 that kept the
project alive when Grupo M ran into financial
hardship. Since the 2010 earthquake, IFC has
provided an additional $25 million that is helping
increase the efficiency of the plant, which is on
target to have 9,000 workers on its payroll in thenext three years.

Haiti: The CODEVI
garment sector
plant is now thecountry's largest
private sector
employer.

108 DEMONSTRATION AND IMPACT

FINANCIAL INCLUSION
Two billion people in developing countries lack access

In 1997, IFC began working with one of the world’s

to formal financial services—a powerful instrument

largest poverty-fighting NGOs, Bangladesh’s BRAC,

for reducing poverty, enabling them to build assets,

which now reaches 138 million people in 12 countries.

increase incomes, and reduce their vulnerability toeconomic stress. This is the reason that over the last

With IFC’s support, BRAC started Bangladesh’s firsttwo decades, IFC has placed priority on increasing

stand-alone home loan institution, Delta BRAC Housing

access to financial services for micro, small and

Finance Corporation, which has since helped thou-medium enterprises, the backbone of the private

sands of local families buy their own homes. In 2004,

sector in country after country. IFC’s global network

IFC followed by becoming a founding shareholder inof more than 800 financial institutions in more than

BRAC Bank, a start-up targeting Bangladesh’s then

100 developing countries—microfinance institutions,largely untapped SME market. IFC’s investment andcommercial banks, leasing companies, private equity

ongoing advice in IT systems, marketing, and new

funds, and others—is an invaluable tool for doing so.

product development helped the bank more thandouble its loan portfolio between 2006 and 2008.

A pioneer in commercial microfinance since 1996,
IFC is now the industry’s largest investor, with a more

In 2013, IFC took a $10 million equity stake in BRAC

than $2 billion portfolio. The work in expanding accessBank’s new mobile financial services subsidiary,

to microfinance is an important part of reaching thebKash. Using a branchless banking model, it leverages

World Bank Group target of achieving universal accessBangladesh’s ubiquitous mobile phones as a low-cost

to finance by 2020, especially in opening up private

platform for providing secure financial services tosector–led innovation and investment in areas such

low-income people, including many in rural areas.

as mobile money accounts that help drive financial

Alongside the investment, IFC assisted bKash withinclusion.

its corporate governance, which would be critical forthe company to attract private sector investors in the

Equally important is the emphasis on small andfuture. Its country’s digital finance pioneer, bKash

medium enterprise finance. At its September 2009

today has 23 million users, standing as a global leader

Pittsburgh summit, the G20 countries named IFC its

in increasing financial inclusion—providing services

SME finance adviser, citing its decades of experiencethat are convenient, affordable, and reliable.

as an international agenda-setter in the field.
Today these two worlds of micro and SME finance havecome together in a larger global financial inclusion
agenda, requiring IFC’s leadership in the developmentof technology, financial products, and policy to help
financial institutions reach a greater number of people
in a more cost-effective way. As in everything IFC does,
client relationships have been the key.

109 IFC: THE FIRST SIX DECADESbKash: Accessto finance for 23
million people in
Bangladesh.

GENDER
Since 2004, IFC has also provided investment andComplementing these efforts is SheWorks, a global

advisory solutions to create equal opportunity in theprivate-sector partnership focused on increasing

private sector for women, who are a powerful engine

women’s employment that IFC helped launch inof economic growth, whether as entrepreneurs,

2014. It brings together 10 leading companies that

employees, suppliers, or corporate leaders. In 2005

have pledged to implement measures proven toit became the first development-finance institution

enhance women’s employment opportunities—suchto support the Global Banking Alliance for Women,

as mentorship programs, flexible working arrange-a knowledge-sharing industry group that now brings

ments, and leadership training to increase diversity

together 44 financial institution members committed

in management.

to reaching and extending the women’s market for
finance in 135 countries.
Beginning with a combined investment and advisory
package for Nigeria’s Access Bank in 2006, IFC thendeveloped its Banking on Women program, which has
since helped 38 emerging market financial institutions
enter the women’s market, providing $1.1 billion in
new financing for women entrepreneurs. In 2014, IFC
formed the Women Entrepreneurs Opportunity Facility
in partnership with Goldman Sachs' 10,000 Women
program and raised additional external capital through
AMC’s Women Entrepreneurs Debt Fund.
In Pakistan, this same program helped IFC's longtime client HBL—one of the country’s largest banks,with 1,700 branches worldwide—launch customized
women’s banking products in 2015. In the West Bank"Gender equality is smart
economics.
"It has a multiplier effect on
impacts across a spectrumof development outcomes.
A country can’t grow if it
doesn’t give opportunity
to half of its population."
PHILIPPE LE HOUÉROU,
THEN-VICE PRESIDENT FOR SOUTH ASIA,
THE WORLD BANK
2014

and Gaza, another longtime client, Bank of Palestine,
has used the program's advisory services over the past
two years to introduce an innovative suite of financial and non-financial products designed especiallyfor women. These include a mini-MBA-like training
program that provides established women-owned businesses with the critical skills they need to grow. Those
who have gone through the program are automatically
pre-approved for the women’s business support loans.

110 DEMONSTRATION AND IMPACT

Gender Balance:
A cornerstoneof sustainable
development.

DOING BUSINESSIn 2003, IFC and the World Bank together launched
Doing Business, a series of annual reports investigating the regulations that enhance businessactivity and those that constrain it.
The reports have been highly influential from theoutset, serving as a useful tool in encouraging countries to promote more efficient business regulation.
Offering measurable benchmarks for reform, theyalso serve as a resource for academics, policymakers, journalists, business leaders, and others
interested in the investment climate of each country.
Today the reports present quantitative indicators
on business regulations and the protection ofproperty rights that can be compared across 185
economies—from Afghanistan to Zimbabwe—andover time.

The Doing Business reports have now inspired
hundreds of regulatory reforms worldwide. In
the past 12 years, more than 2,600 reforms havebeen recorded globally in the areas they measure.
Ongoing support from IFC and World Bank teams
has helped reform-minded governments make these
improvements to their investment climates.
Globally, Georgia is the country that has improved
the most in the areas measured by Doing Businessover the years. During this period, output percapita in Georgia increased by 66 percent, driven
in part by a series of investment climate reforms
the government enacted: eliminating the paid-in
minimum capital requirement for starting a business, introducing electronic systems for paying
taxes, adopting an insolvency law introducing
both reorganization and liquidation proceedings,
and many others.
Other regions also have specific nations that standout for their most-improved status in the areas
measured by Doing Business: Rwanda in SubSaharan Africa, Colombia in Latin America andthe Caribbean, Egypt in the Middle East and North
Africa, China in East Asia and the Pacific, and India
in South Asia.

111 IFC: THE FIRST SIX DECADESPhilippines: The
Asian School of
Hospitality Arts
(ASHA) builds
students' skills,
and job prospects,
in the hotel
and restaurant
industries.

112 DEMONSTRATION AND IMPACT

India: NephroPlus
provides affordable,
innovative health care.

HEALTH AND EDUCATION
For more than 20 years, IFC has also helped client

IFC also helps build capacity in private education tocompanies expand access and improve quality in bothcreate more opportunities for children, youth, andhealth and education.

working adults. This makes a difference across thedeveloping world, where employers often have posi-

In this time IFC has become the world’s largest multi-

tions to fill but can’t find enough qualified people tolateral investor in private health care in emerging

take them due to skills shortages in the local economy.

markets, holding an active portfolio worth about$1.3 billion in health services, including hospitals,

IFC’s $775 million portfolio of education projects

diagnostic chains and HMOs, and life sciences likedevelops skills and enhances employability in more

pharmaceuticals, vaccines, and medical technology.

than 25 countries, including the Philippines, where
youth represent 80 percent of the unemployed. ThereIn the most recent fiscal year, IFC-supported healththe Asian School of Hospitality Arts (ASHA) has

projects provided care for 31.8 million patients world-

used $36 million in financing from IFC to expand its

wide, often through innovative delivery models thatcourses and apprenticeship programs in hotel, restau-

bring quality care to lower-income groups that previ-

rant, and hospitality management. Since 2006, nearly

ously could not afford them. In India, more than 90

10,000 students have obtained a degree or certifica-

percent of the 230,000 people newly diagnosed withtion from ASHA, resulting in a 95 percent employment

chronic kidney disease each year die within months due

rate within 60 days of graduation.

to lack of treatment. Reaching patients in lower income
brackets presents a particular challenge, given the
reluctance of established providers to reduce prices.
So in 2014, IFC made its first healthcare venture capital
investment in South Asia, taking a $7 million stake in
NephroPlus, whose low-cost business model allows
it to offer dialysis services at prices 30 to 40 percent
below market prices. Today it has 61 low-cost dialysis
centers across India, sharing IFC's global commitment
to overcoming obstacles to the development of accessible and affordable healthcare facilities.

113 IFC: THE FIRST SIX DECADESLESSONS OF EXPERIENCE
Ch. 7: Innovating for Inclusion

Broad-based access to financial services andother needs is critical for building long-term
prosperity and fighting poverty.

CHAPTER 8PROVIDINGNEW PLATFORMS

IFC investment platforms
mobilize private sector
capital for today's greatest
development challenges.

D

emand for IFC’s products and services

got a major boost in April 2008, when World Bank

increased dramatically in the mid-2000s,

Group President Robert Zoellick publicly proposed

leading to a significant increase in investment

a “one-percent solution,” calling on sovereign wealthvolume and advisory services engagements. Many

funds to put one percent of their assets into African

viable models with proven track records of increasing

countries, and asking for IFC to set up new structures

the private sector’s role in development were now into encourage them.

place and ready to mobilize outside capital at evenhigher levels than before, if efficient new platforms

The urgency for this new platform—and also the

could be created.

challenges—increased as 2008 went on. The global
financial crisis, centered in the wealthy countries,

It was time to put new focus on a large and growing

threatened to shrink the available pool of capitalsource of capital that development finance institutions

that might flow to the developing world. Setting up

until then had largely left untapped: institutional

the right kind of platform became even more urgent.

investors.

IFC ASSET MANAGEMENT COMPANY

The response came in early 2009 with the creationof IFC’s Asset Management Company (AMC), a newvehicle for mobilizing and managing third-party funds

By 2007, sovereign wealth funds alone held more

to invest in private enterprise in IFC’s client countries,

than $3 trillion in assets. Pension funds in wealthy

now with more than $7 billion of external capitalcountries also had accumulated large balances. Yetraised. Set up as a wholly owned subsidiary, with aboth were investing very little in the countries most

responsibility to its investors, AMC manages funds

in need of capital—emerging and frontier markets.

with dedicated investment teams that can choose

Leveraging its own extensive footprint and its invest-

to invest in any specific IFC project that fits a fund’s

ment approach, policies, and Performance Standards,

investment parameters. AMC relies extensively on

IFC began to explore ways to create a credible new

IFC’s broad pipeline of potential projects, and draws

vehicle to attract these investors. The early efforts

on valuable synergies with other IFC staff.

115 IFC: THE FIRST SIX DECADESAMC uses a private equity approach that complements

has high development impact. IFC and ALAC supported

IFC’s longtime syndication efforts with financial insti-

Saham’s ambitious growth strategy, including

tutions, where outside investors elect to participate inacquisitions in key markets such as Angola, Kenya,loans on a project by project basis, while relying on IFC

and Nigeria. In 2016 IFC and ALAC sold their sharesto do most of the due diligence and loan structuring.

to the Sanlam Group, a South Africa-based global

AMC operates differently, raising the capital upfront

insurance company, realizing an attractive return forand managing the funds actively from beginning to end.

investors. Meanwhile, Saham is well positioned to

In its first seven years, AMC has raised billions of dollars

integrate its recent acquisitions into a truly pan-from a wide variety of institutional investors, including

African insurance platform with the critical support

sovereign wealth funds, pension funds, and develop-

and operational knowledge Sanlam can provide as anment finance institutions, across 12 regional, sectoral,

experienced global insurance operator.

and special purpose funds, including equity, debt, andfund-of-funds products.

The capital AMC has raised helps bring private sector
solutions to many of today’s great development

How did AMC raise so much money in the wake of thechallenges. In Brazil, more than 100 million people—

financial crisis? There are several reasons it was able

about half the population—lack wastewater collec-

to do so. Important seed financing for its first fundtion services, and only a third of sewage is treated

was provided by the Japan Bank for International

nationwide. The country’s 5,500 municipalities have

Cooperation (JBIC). Furthermore, IFC itself has typi-been tasked with drawing up sanitation improvement

cally invested in each fund, helping to provide an align-plans in order to inform policy decisions and invest-

ment of interest and good fund-raising momentum.

ment needs.

Investors were also attracted by AMC’s governancestructure and by IFC’s financial track record, espe-

In 2012, IFC provided a corporate loan to Aegea

cially the strong performance of its equity invest-

Saneamento, one of Brazil’s leading providers of water

ments in the preceding decade, which was well above

and sanitation services, to help it expand throughout

industry benchmarks.

the country, including to frontier regions in thenorth and northeast of Brazil, while following IFC’s

Certainly AMC had to overcome investors’ qualms

Performance Standards. Then in 2014, the $1.2 billion

about working with an international development

IFC Global Infrastructure Fund (GIF), which poolsorganization. Wouldn’t financial returns always be

investment capital from 10 sovereign wealth funds

secondary to development goals? The answer was

and pension funds, became a shareholder. GIF andthe same as IFC had been giving for decades: The

IFC have each invested approximately $40 million

best way to achieve sustainable development is toof equity in Aegea over several rounds of funding.

help build profitable, growing businesses.

Aegea is using this capital to significantly accelerate
its growth and improve services, all with industry

For example, in 2012 the $1 billion IFC African, Latin

leading financial performance. The company now

American and Caribbean Fund (ALAC) invested

operates water concessions in 44 Brazilian municipal-$47 million in Saham Finances (Saham), a Morocco-ities in eight states, and provides water and sanitation

based insurance company with operations in Moroccoservices for nearly 3.7 million people. This includes

and several countries in Sub-Saharan Africa. As

water supply and sewage treatment in Barcarena, in

Sub-Saharan Africa has one of the lowest insurance

Pará state, where less than 2 percent of sewage wasdensity and penetration rates in the world, broadening

treated when Aegea took over the concession.

access to insurance protection to the underserved

116 DEMONSTRATION AND IMPACT

In Asia, the $3 billion IFC Capitalization Fund has
invested $40 million in longtime IFC client ACLEDA
Bank, Cambodia’s largest provider of microfinance.
This capital injection is supporting the bank’s
domestic growth and regional expansion into Lao
People’s Democratic Republic and Myanmar, allowing
it to serve more businesses. It is an important part ofa long-term partnership with IFC that has enabled
ACLEDA Bank to reach more than 2.5 million of thepoorest people in Cambodia and support micro andsmall businesses throughout the Mekong region.
With strong governance, dedicated investment teams,
and the ability to select diversified portfolios from IFC’s
pipeline, AMC provided an attractive value proposition
to its investors even in the wake of the financial crisis.
Its achievement in combining commercial capital with
development needs soon led to the best success of
all—other asset managers from the private sector
increasingly looking to attract institutional investors
into emerging markets.
The significant amounts of third-party capital
AMC raised in turn had a major effect on IFC itself,
increasing its ability to fund larger projects, take amore active portfolio management approach, andexplore other ambitious ideas for directing private
capital toward development needs.

IFC Asset Management Company
provides growth capital toemerging-market companies,
including Brazilian watercompany Aegea Saneamento
and Cambodian micro, small
and medium enterprise lender
ACLEDA Bank.

117 IFC: THE FIRST SIX DECADES

Ethiopia:
Afriflora iscreating 5,000
jobs in theflower exportindustry.

CO-LENDING PROGRAMS
IFC also found new ways to expand capital support

co-lending partners to include investors that do notfor its loan program.

have the capacity to invest on a deal-by-deal basis.

The loan-syndications program—unveiled in 1959—

In Turkey, SAFE partnered with IFC, development

has now mobilized approximately $50 billion from morefinance institutions, and commercial banks on athan 500 financing partners for over 1,000 projects in€433 million senior loan package for the development

more than 115 emerging markets. At the end of fiscal

of a 1,550-bed health campus in Adana. The project is

2016, IFC’s syndications portfolio totaled $16.6 billion.

part of a public-private partnership program launchedby the Turkish government. In Ethiopia, SAFE and IFC

To make it easier for others to join in these investments,

together provided €90 million to the country’s largest

in 2009, IFC established the Master Cooperationrose producer and exporter, Afriflora, which will use

Agreement to standardize steps that lenders need

the funding to expand production by 60 percent,to take when co-financing IFC projects in developing

install water recycling systems, and create jobs forcountries. Since then, 28 development finance insti-

5,000 more people.

tutions have become signatories. They have provided$2.3 billion to IFC clients over the past six years.

Working through MCPP, SAFE also contributed$20 million to a $60 million debt facility for Canadian

In 2013, the Managed Co-Lending Portfolio Program

Solar Inc. to finance manufacturing operations in(MCPP) was set up to attract funds from investors

Vietnam and potentially in other countries in Asia

looking to diversify in emerging markets. Similar to aand Latin America. This investment will support cleanpassively managed index fund, MCPP lets investors

energy generation and climate technology transfer

participate in IFC’s future loan portfolio based onwithin emerging markets and is expected to create

pre-agreed investment criteria. The program got off

1,000 direct and indirect jobs in local communities.

to a strong start in 2013 with a $3 billion pledge from
China’s State Administration for Foreign Exchange

Tapping into these kinds of new funding sources—such(SAFE). Rather than lending directly in developing

as sovereign wealth funds, pension funds, insurance

countries, through MCPP, SAFE leverages IFC’s broad

companies, and others—is critical to the future offootprint and existing expertise.

development finance. IFC is uniquely positioned
to intermediate these funds, given its successful

Under MCPP’s structure, outside investors provide

experience with all these platforms, and will continue

capital on a portfolio basis, which can be deployed

to investigate new opportunities for large-scale mobi-

by IFC in individual investments across all regions

lization in the future.

and sectors in tandem with IFC’s flow of business.
MCPP investor approval is sought pre-mandate;project appraisal, approval, commitment, and super-

LESSONS OF EXPERIENCE

vision are managed directly by IFC, with the MCPP

Ch. 8: Providing New Platforms

investor passively following IFC’s decisions. MCPP
complements IFC’s existing B Loan and Parallel Loan

If the conditions are right, institutional

platforms. Through MCPP, IFC can expand its base ofinvestors can join banks as major sources ofgrowth capital for emerging markets.

119 IFC: THE FIRST SIX DECADESIFC AND TRADE
Trade is the lifeblood of the world economy, driving
economic growth and creating jobs. Trade financeplays a crucial role in making international transactions happen, yet is out of reach for too many
emerging market firms.
This is why in 2005 IFC started its Global Trade
Finance Program (GTFP). IFC’s backing extends
and complements banks’ capacity to deliver
trade finance, providing risk mitigation on a pertransaction basis through a growing network of
issuing and confirming banks. The program gives
priority support to trade flows that promote criticalsectors such as agriculture and energy efficiency,
while focusing on SME importers and exporters,
and trade between emerging markets—particularly
in lower-income countries.

Burkina Faso:
IFC support helps
small-scale farmers
export cotton.
120 DEMONSTRATION AND IMPACT

In 2005, the GTFP network had just 20 banks
supporting $300 million in trade. It now covers
more than 500 banks in 150 countries, and last year
supported more than $6 billion in trade.
IFC continues to adapt its trade products to meetmarket needs and in difficult times. When the2008 global financial crisis broke—threatening theliquidity of banks in the developing world—IFC
responded at the London G-20 meeting, creating
the $4 billion Global Trade Liquidity Program.

The product suite now has expanded to include the
Global Warehouse Finance Program, Commodity
Finance Solutions, Structured Trade, as well as
Supplier Finance—all helping to boost growth inemerging markets.
To date, IFC’s trade solutions have supported over$130 billion in global trade, all directly linked tothe movement of specific goods across emerging
market borders.
In landlocked Burkina Faso, 80 percent of the people
depend on agriculture, with cotton a major export.
Amid political instability in 2014 and 2015, IFC andSociété Générale put together a $77 million facility
so Sofitex, the largest local processer and exporterof cotton, could continue to buy from smallholder

121 IFC: THE FIRST SIX DECADES

farms, securing livelihoods and economic stability
at a difficult time.
IFC’s Climate-Smart Trade Program makes it easierfor emerging market companies to purchase green
technology. In June 2015, IFC and Bank Al Habib
supported the import of a $32 million, 50 MW
German wind turbine by Pakistani power company
Yunus Energy, providing a reliable, sustainablesource of electricity boosting the country’s generation of clean energy and supporting cross-border
trade; critical for economic growth.
In these and many other cases, IFC’s support for
global trade is making a difference in lives aroundthe world. IFC is adapting to engage the future,
responding to the WTO’s call for more support
for global trade.

NEW PLATFORMS FOR:SOLAR POWER
The sun has enormous potential as an energy sourcein frontier regions. In Sub-Saharan Africa, forexample, two-thirds of the population lacks access toelectricity, while grid-based power generation capacity is far short of what is needed. Many countries
have abundant potential, but they have struggled
to develop utility-scale solar power plants due tochallenges such as lack of scale, lack of competition,high transaction costs, and high perceived risks andcosts of capital, among others.
In response, in 2015 IFC launched Scaling Solar,
bringing together a suite of World Bank Group
services under a single engagement aimed at creating viable markets for solar power in client countries. The “one-stop shop” program aims to makeprivately funded grid-connected solar projects
operational within two years and at competitive
tariffs. Now being implemented across multiple
countries, it is creating a new regional market forsolar investment.
The program’s integrated platform reduces risks
for investors and cuts costs for customers throughcompetition and simplified procurement. The
package of advice, finance, insurance, and risk
management has been proven to help attract private
sector interest. Its first bidding auction, held in
May 2016 in Zambia, led to some of the world’s
lowest-priced solar power to date. Major U.S. andEuropean firms are now building new solar plants
to boost Zambia’s power supply by 5 percent. Basedon this early demonstration effect in Africa, Scaling
Solar is now being rolled out in other regions.

122 DEMONSTRATION AND IMPACT

Utility-Scale Solar:
A clean energy
solution, and major
IFC priority.

Bangladesh:
A focal pointof IFC work to
support garment
sector clients inimproving working
conditions.

SUSTAINABLE SUPPLY CHAINS
The garment and textile industry employs 60 million
people around the world—many of them young
women with few other opportunities to earn theirown income and be independent. Ensuring strong
environmental and social performance in thisintensely competitive sector can be a challenge,
especially in places where laws and governanceare weak, leading some companies to disregard fireand building safety and worker rights. Audits andsupervision are important, but suppliers also needfinancing to invest in factory upgrades and financial
incentives to encourage them to make investments
in better working conditions.
IFC offers a direct financial incentive to improve
environment and social standards in the garment
industry through its $500 million Global Trade
Supply Finance program. The program provides
short-term finance to emerging-market suppliers

123 IFC: THE FIRST SIX DECADES

at more favorable interest rates than are typicallyavailable in local markets. Launched in 2010,
it operates on an electronic platform called GT
Nexus, an online system that allows multiple buyers,
suppliers, agents, cargo forwarders, and otherlogistics providers to collaborate and manage theflow of goods, funds, and trade information. For
some buyers, such as Levi Strauss and Co. andPuma, IFC offers suppliers tiered pricing of credit,
creating incentives for SME suppliers to improve
environmental and social sustainability. In 2007,
IFC also joined forces with the International Labour
Organization to launch the Better Work program,which mobilizes global brands, factory owners,
and workers to address poor working conditions
and improve competitiveness in the garment sector.
Today the program is active in seven countries andhas reached more than 1.5 million workers.

Mongolia,
2013CHAPTER 9

WORKING IN
THE FRONTIERS

Yemen: Amid fragility andconflict, IFC's Business
Edge training program
has helped 15,000 local
entrepreneurs build their
management skills.

ith a $52 billion portfolio in more thanadvisory services. By catalyzing the powerful forces of

100 countries, a powerful global client andentrepreneurship and finance, its efforts help create

partner network, and deep knowledge of bothjobs, modernize infrastructure, and spur the economic

global industries and local markets, IFC is now well

growth needed to increase stability and reduce thepositioned to increase the private sector’s role in somerisks of sliding back into conflict.

of today’s most pressing challenges, starting withfragility, conflict, and climate change.

In supporting these countries, IFC draws from thesame menu it has built for other emerging markets:

It is a difficult, demanding agenda—but one where

improving their investment climates; increasing access

IFC’s role in bringing together private investment andto finance (especially for small businesses); and mobi-

development remains urgent and essential, and where

lizing domestic and international investment for job

great opportunities and untapped potential remain.

creation, productivity growth, and poverty reduction.

The lessons from six decades of experience give theinstitution the basis it needs to go forward.

In the early decades, the destroyed infrastructure,
weakened government institutions, social trauma,

FRAGILITY AND CONFLICTand political instability of fragile states often made it
hard for IFC to engage in fragile states. But by working
closely with its donor partners in the late 1990s andBy 2030, half the world’s poor will live in fragile andearly 2000s, it made some early moves that brought

conflict-affected areas. IFC is an integral part oflonger-lasting results.

the international effort to move these fragile statesaway from the margins.

One of IFC’s first investments in fragile states came in1996 in Bosnia and Herzegovina—less than a year after

In partnership with the World Bank Group, development

the signing of the Dayton Accords that ended Europe’s

partners, and clients, IFC stimulates private investment

bloodiest conflict since the end of World War II. There,

and growth in fragile states, often leading the way with

IFC helped the German development company IPC

127 IFC: THE FIRST SIX DECADES

Iraq:An IFC-financed power
plant strengthenselectricity supply in the
Kurdistan Region.
launch the country’s micro and SME finance pioneer,

As Myanmar’s conditions improved, IFC began

now ProCredit Bank. From there, IFC went on to invest

engaging with the country as part of a coordinatedin the bank’s parent company ProCredit Holding, which

World Bank Group effort in 2012. In the past year IFC

has since built a 17-country, €4.5 billion microcredit

made its first investment in the country’s transpor-

portfolio and 20 percent of its advisory services andtation sector, with an initial $40 million convertible

continues to grow.

loan to upgrade the Myanmar Industrial Port, a key
trading center that handles 40 percent of the coun-

Then in 2001, three years after Cambodia returned totry’s container traffic. Elsewhere in the country, IFC

stability, IFC introduced a set of Khmer-language SME

also agreed to $150 million in loans to help Ooredoo

management training products based on a model it

Myanmar roll out a mobile telecommunication network.

had been using in Vietnam.

IFC has also worked with the central bank to develop
a credit-reporting system, helped to finance commer-

In that first year, Cambodian entrepreneurs built theircial banks in making small loans, and supported theskills by buying more than 7,000 inexpensive self-

reviving tourism sector.

study workbooks and attending workshops offered incooperation with a leading business school in Bangkok.

In Iraq, where the power sector is critically underdevel-

This was the start of IFC’s Business Edge program,

oped and the national grid is able to supply only fourwhich accredited local partners have since used toto five hours of power a day, this year IFC arranged a

train 159,000 people across 67 countries.

$375 million financing for Iraqi power investor Mass
Global Energy Sulimaniya Limited (MGES). The financing

Over the years, IFC’s work in fragile states has taken

will go toward MGES’ conversion of an existing 1,000 MW

on new importance. Today it represents more thangas-fired power plant in the Kurdistan Region to a

3 percent of IFC’s investment portfolio and continues

more energy-efficient 1,500 MW plant, and will help

to grow. From 2012 to 2015, IFC invested $2.5 billion

MGES finance a 3,000 MW power plant near Baghdad.

in fragile states, roughly half from its own account

IFC has also partnered with Lafarge Cement in Iraq,

and half from outside investors. By 2016, 19 percent

providing a $70 million loan that financed Lafarge’sof its advisory work was also in fragile states, valued atacquisition and rehabilitation of the Karbala cement$16 million. One out of five IFC-supported public-

plant, bolstering the construction sector, which is alsoprivate partnership transactions was in these coun-a key source of jobs.

tries, supporting critical sectors such as power,transport and health.

128 DEMONSTRATION AND IMPACTIn addition to these large-scale transactions, IFC
uses customized solutions that stimulate new private
sector activity. Its Conflict-Affected States in Africa
Initiative (CASA) is supporting private sector growthin 13 countries, helping them strengthen their businessenvironments and attract investment. Supported
by donor partners in Ireland, the Netherlands, andNorway, CASA has been expanding through a combination of market intelligence, funding, and knowledge
management, while increasing its focus on supporting
women in business.
Complementing these upstream efforts is the SME
Ventures program, created in 2008 with a $100 million
allocation from IFC. The program invests in fundmanagers in fragile states and provides risk capitalfor high-growth SMEs. With this model, IFC is demonstrating to global financiers that local companies havehuge potential to grow, even in tough markets. SME
Ventures has created four funds, which work in countries such as Liberia, Sierra Leone, and the Democratic
Republic of Congo, and provides technical assistanceto entrepreneurs in management skills and industry
knowledge to place them on surer footing for growth.

129 IFC: THE FIRST SIX DECADES

Sierra Leone:
IFC's SME Ventures program
helps the economy bounceback from conflict, investingin job-creating companies likebottled water producer Grafton.

CLIMATE BUSINESS
Along with the rest of the World Bank Group, IFC has

starting to track the climate-smart components of its

also joined the growing international consensus in

investments and advisory services in 2005, IFC has

favor of aggressive climate action. IFC first beganprovided more than $13 billion in long-term financing

working on climate change in the early 1990s, atfor climate-related projects.

the same time it was increasing the overall focus
on sustainability and adding more environmental

IFC’s track record in supporting climate-smart

specialists to its staff.

projects across emerging markets is significant. In
Panama, it helped bring to life Penonome, currently

In the 1990s and early 2000s, IFC worked with clientsthe largest wind farm in Central America and theon a wide range of projects, from compact fluorescentlargest grid-connected wind farm in the country,

lighting to solar panels, and helped build a market for

generating roughly the equivalent of 5 percent ofcarbon emission credits. Advisory services were a key

Panama’s total energy demand. IFC’s support forpart of helping clients deploy the new technology andseven simultaneous solar photovoltaic plants inbusiness models.

Jordan will boost the country’s use of renewables
and help transform its energy sector. The seven plants

These efforts have increased dramatically in the newhave a combined capacity of 102 megawatts, and will

millennium. Starting in 2006–2007, IFC was part ofbecome Jordan’s first private industry-scale solar

the World Bank Group’s new focus on climate change

photovoltaic parks, helping cut carbon dioxide emis-

and the transition from clean energy investments tosions by 123,000 tons annually. And in Turkey, IFC

plans tying climate change and development. Since

invested in Odeabank, which will provide a further$160 million in green building mortgage loans for
Turkish homebuyers by 2019.
In 2012, AMC established the IFC Catalyst Fund,
attracting investors to a fund investing in other funds
focused on renewable energy and energy efficiency inemerging markets.
By 2015, two-thirds of IFC’s direct power investments—amounting to $893 million—were in renewable energy, especially solar and wind projects, inaddition to advising governments on regulations
and public-private partnerships in these areas.
Investments in energy efficiency also rose steadily
over the 2010s, reaching $205 million on the industry

130 DEMONSTRATION AND IMPACT

Renewable Energy:
A key to a greener
global economy,
now comprising
the majority of
IFC's power sector
investments.

side alone by 2015. Another $391 million went toFollowing the UN Paris Climate Change Conference

support green building codes, finance green construc-of 2015, where nearly 200 nations pledged to reducetion, and help banks adjust their mortgage policies

their greenhouse gas emissions, IFC pledged toaccordingly.

ensure that climate-related investment will represent
28 percent of all annual financing commitments by

Besides direct financing, IFC worked as usual to2020. As part of this, the institution has announced

develop structures to attract greater private invest-

plans to move into new climate markets, create newment. By 2015, IFC had issued almost $5 billion in

investment vehicles, and increase internal tools andgreen bonds focused on low-carbon projects. It also

support, while also catalyzing $13 billion of external

participated in the Masala bonds issued for Yes Bankfinance in new products to de-risk and aggregate

in India, which raised 3 billion rupees ($44 million) toclimate projects.

be on-lent to climate-related projects. This is on top of
IFC's ongoing investments in financial intermediaries
like commercial banks, which increasingly supported

LESSONS OF EXPERIENCE

climate-related credit lines and trade finance for small

Ch. 9: Working in the Frontiers

and medium-size firms. And supporting all of thiswere efforts to “green” the broader financial markets

The menu of options being used inwith standards and regulations to enable greater

development finance today can beinvestment.

tailored to tougher markets to achieve
lasting development impact.

131 IFC: THE FIRST SIX DECADESBRINGING THE
INTERNET TO THE“OTHER 3 BILLION”
Broadband Internet is a crucial portal to the global
economy. But traditional, land-based cables don’treach much of the world—especially people andbusinesses in many developing countries.
In 2010, for example, people in Africa accounted
for just 1 percent of fixed broadband subscriptions
across the globe.
IFC set out to address that problem—by funding
a landmark satellite-based Internet development
project. O3b Networks had a novel idea: bring
Internet access to the “other 3 billion” by launchingsome of the first commercial Medium Earth Orbit
satellites. Such satellites offered the potential ofdelivering high-speed broadband access, at much
lower cost.
But the initiative faced a critical hurdle: manypotential investors were nervous. Though the project
was initially backed by a number of high-profile
investors—including Liberty Capital, HSBC, andGoogle—many commercial banks deemed theventure too risky. For good reason: 03b’s technology was new, credit markets were volatile, andthe global financial crisis had added significant
uncertainty to the economic outlook.

132 DEMONSTRATION AND IMPACT

IFC recognized the transformative potential of the
new technology. It rallied support from development
finance institutions to close the project’s funding
gap. By pledging $70 million from its own accountand mobilizing $170 million in parallel loans fromother institutions, IFC helped fulfill the remainderof O3b’s investment goals.
Today, O3b operates 12 satellites that are delivering
Internet access to more than 10 million people and60,000 businesses in 31 countries. Those numbers are
expected to triple as O3b expands its constellationof satellites to 20 in the coming years.
The biggest beneficiaries have been users in sparsely
populated, landlocked, or small island countries
that previously had little or no broadband access—including several fragile or conflict-affected states suchas the Democratic Republic of Congo, Madagascar,
Solomon Islands, Somalia, and South Sudan.

2013:
Launch of theO3b satellite, atransformational force
for communications
in many developing
countries.

133 IFC: THE FIRST SIX DECADESCONSUMER LIGHTINGA HIGH-IMPACT PRODUCTFor more than 20 years, IFC has been working tosupport private sector delivery of environmentallyfriendly lighting products—reducing greenhousegas emissions by accelerating adoption of advanced
technology in emerging markets and creating
vibrant, competitive markets that offer consumers
affordable access to new eco-friendly lighting.
This innovative work began in Poland, where, in
1995, IFC partnered with the Global Environment
Facility (GEF) on a $5 million pilot initiative tolower electricity consumption. Called the Poland
Efficient Lighting Project (PELP), the effort involved
building local consumer demand for compact fluorescent lamps (CFLs), which were already being
manufactured in Poland, primarily for export. Using
short-term manufacturer subsidies combined with
consumer education campaigns, PELP helped giverise to a self-sustaining domestic market for efficient

134 DEMONSTRATION AND IMPACT

lighting technology, yielding considerable economicand environmental benefits. By 2004, roughly halfof all Polish homes were using CFLs, leading to a
reduction of 2.8 million tons of carbon dioxide
emissions through private investment—equivalent to taking nearly 600,000 cars off the road.
Building on this work and based on the PELP
model, IFC set up the $15 million, GEF-funded,
seven-country, four-continent Efficient Lighting
Initiative (ELI). Running from 1999 through 2003,
the initiative worked with governments, manufacturers, distributors and utilities to reduce prices,
expand availability, and increase sales—sparking
the competitive forces that drive market development. In Peru alone, annual sales rose from 250,000
to more than 5 million—sustainable improvementsthat endured after the program.

Kenya: IFC's Lighting
Africa program brings
affordable solar lighting
products to market,
helping students study
at home without relying
on kerosene lamps.
The same approachis now being used in
Bangladesh (oppositepage) and othercountries.

Through such experiences—and a strengthening
partnership with the lighting industry—IFC took
note of the potentially disruptive force of emerging
technologies such as LED lighting, lithium batteries
and cellular telephony. Understanding the environmentally sustainable development possibilities, IFC
then engaged with companies that were developing
these potentially game-changing technologies inAfrica, where more than 1 billion people lacked
access to electricity.
The result was Lighting Africa, a joint IFC andWorld Bank program launched in 2007. The firstprivate-sector-oriented effort that leverages new
LED lighting technologies to build sustainable
markets for safe, affordable, and modern off-grid

135 IFC: THE FIRST SIX DECADES

lighting, the initiative targets African communities
without access to electricity. The program partners
with industry to provide market insights, steer
development of quality assurance frameworks foroff-grid lighting devices and systems, and promotecompetition and consumer awareness. By 2015it had delivered access to clean, affordable, safer
lighting and energy to more than 50 million people
across Africa.
Today, the program operates on a global scale asLighting Global, reaching nine countries in Africa,
Asia, and the Pacific and functioning as the hub of a
dynamic global industry, attracting more than $250
million in investment in 2015 alone and benefitting
over 100 million people to date.

Myanmar,
2016

EPILOGUECREATING
OPPORTUNITY
WHERE IT’S
NEEDED MOST

I

requiring the crafting of new solutions, drawing on

Throughout its history, IFC has gone after the toughest

its long-standing traditions of innovation, influence,challenges and met them by creating new programs,

demonstration, and impact.

platforms, structures, and markets. It started withn its first six decades, IFC provided global lead-

now its partners. But IFC’s experience, expertise, andership in seizing opportunities for private sector

readiness to innovate make it a global leader.

development. Now new opportunities are arising,individual demonstration projects and moved toward
At first, IFC focused on helping multinational compa-

scalable initiatives, often integrating investment andnies set up operations in emerging markets. It also

advice.

worked with governments to make the local investment
climate more favorable. Then as local companies

Globalization and the development of the private sector

grew, IFC helped them gain access to capital andhave been engines of growth and poverty alleviation

improve their operations. In the 1980s and 1990s, as

since World War II. Now the world faces a new set of

disappointment in government-driven development

increasingly complex global challenges—including

models increased, IFC helped to privatize state assets

urbanization, aging populations, displaced people,

and fund privately owned infrastructure. After the turnslowing economies, rising inequality, pollution andof the century, as the goals of global development

climate change, fragility and pandemics, and theshifted toward sustainability and inclusion, thegreater vulnerability of each nation to crises in an

institution further broadened its scope and added

ever-more interconnected world. Achieving today’s

initiatives such as microfinance and reducing carbon

development goals will require significant global coop-emissions. Meanwhile IFC greatly increased the flow

eration, with a central role for the private sector, so thatof investor capital into developing countries throughcountries have the financial and technical support they

the Asset Management Company and syndicationneed to reduce poverty and boost shared prosperity.

programs, while also sharpening its focus on fragile
and conflict-affected states and climate change.

IFC’s mandate remains just as it was in 1956: fueling,mobilizing, and catalyzing the private sector’s

IFC began as a small, untested institution—one withresponse. The level of today’s ambition demands thata bold mandate, and full confidence in its ability tosolutions be developed and resources mobilized thatdeliver on the mission. Today the private sector is now

are commensurate with the scale of the global chal-recognized as the prime engine of economic growth,lenge. Moving ahead, IFC will continue to pioneer new

essential for mobilizing and applying the world’s capital

approaches to private sector development, working

to create the jobs needed to reduce poverty. Other

with its World Bank Group counterparts, clients, andmultilateral development agencies have arisen overother partners.

the years to pursue this goal, including many that are

140 CREATING OPPORTUNITY WHERE IT'S NEEDED MOST

Private Sector Solutions:Supporting sustainable,
inclusive development
worldwide.

141 IFC: THE FIRST SIX DECADES

THE FUTURE VISION
The opportunities of tomorrow lie not just in continued investment via existing approaches, but in
helping create new markets.
This is IFC’s next challenge. Working with a broad
range of partners—other World Bank Group institutions, the International Monetary Fund, local
regulators, clients, co-investors, and others—it canagain help move the needle, finding innovative ways
to steer large-scale private investment to the regions
and industries that need it the most. This approach
will be especially important in infrastructure, where
current investment levels fall far short of the morethan $1 trillion that the World Bank estimates isneeded each year.
Today 1.2 billion people live without electricity. More than 660 million people lack access tosafe drinking water, while more than a third of
the world’s rural population is not served by an
all-weather road. Emerging market governments
cannot afford to bridge their infrastructure gaps
through tax revenues and aid alone. Much moreprivate financing needs to be mobilized.
This will require developing local capital markets
and tapping new funding sources, including institutional investors such as insurance companies,
pension funds, and sovereign wealth funds. In
Latin America, for example, pension funds arean essential source of domestic savings, yet invest
only 1 percent of their portfolio in infrastructure.

142 CREATING OPPORTUNITY WHERE IT'S NEEDED MOST

In Colombia, IFC has invested in a $400 million
infrastructure debt fund designed to mobilizefinancing from local pension funds. Crowding ininvestment sources, this new structure enables
the pension funds to invest in local infrastructure
projects while ensuring the diversification andlow volatility their portfolios require. This type of
instrument will be critical as Colombia embarks
on an ambitious infrastructure program that will
require about $24 billion in financing to upgrade
its precarious network of roadways—the country’s
largest infrastructure investment program undertaken to date.
Using new approaches like this and others—making
good use of advisory services along with capital
markets, disruptive technologies, inclusive businessmodels, and more—IFC can help unlock a newseries of private sector solutions, addressing key
objectives of the global development agenda.

143 IFC: THE FIRST SIX DECADESEDITORIAL AND DESIGN TEAM

PHOTOGRAPHY

Rob WrightAll photos and images are from the collections

Lisa Kopp

of IFC and the World Bank Group Archives,

Joseph Rebello

with the exception of the following:Frances Brennan
Bhattiprolu Balachandra Murti

Iwan Bagus/IFC (pages 8, 117/bottom, and 136-137)

Mame Annan-Brown

Asian Development Bank (page 16, left)

Irena Guzelova

The New York Times/PARS International (pages 26, 34, and 35)

Susanne VallazzaDavid Gill (page 44)

Bianca Simogne Castro

Sailendra Kahrel/IFC (page 47 and 102-103)

Thuy Huong Dinh

Shutterstock (pages 50 and 52-53)
Nyani Quarmyne/Panos Pictures (page 51)

CONSULTANTS

LafargeHolcim (pages 58 and 60)

John Landry

PhotoShelter (page 63 and 64-65)

Ann Moline

Hikma Pharmaceuticals (page 68)

Stanley Thawley

Newmont Ghana Gold (pages 74-75)
NBC News special video (pages 78 and 82)

This book is an initiative of IFC’s 60th Anniversary Committee,

Superstock; Polish Press Agency; Warsaw Stock Exchange (page 81)

chaired by Gavin Wilson and co-chaired by Dimitris Tsitsiragos

Inter-American Development Bank (pages 92-93)

and Bruce Moats.

BP (pages 94-95/top)
Ted Pollett/IFC (page 95/bottom and 96-97)

We would like to acknowledge the extraordinary contributions

Brad Roberts/IFC (page 98)of those who created and shaped this organization in its early

Helene Meurisse/IFC (page 99)

years, as well as those who subsequently developed it into the

FT Live (page 100)

institution it is today. Their dedication to IFC’s founding vision

Vanessa Bauza/IFC (page 108)and ongoing commitment to its mission have given us the tools

bKash (page 109)

to create opportunity where it’s needed most.

The Cravings Group (page 112)
NephroPlus (page 113)
Aegea Saneamento (page 117/top)
Afriflora (page 118)
Olivier Girard/International Center
for Forestry Research (CIFOR) (page 120)
Joseph Rebello/IFC (page 121)
Getty Images (page 133)
Noor Ahmed Gela/IFC (page 134)
Bridge International Academies (page 141/top)
ARCHIVAL RESEARCH SUPPORT
Shiri Alon, Tonya Ceesay and Bertha Wilson/World Bank Group Archives;
Patricia R. Lee/IFC Legal Records and Official Documents Files
PHOTO SCANNING
Franz Mahr/World Bank GroupDESIGN
Design Army
PRINTING
Sandy Alexander

144 IFC: THE FIRST SIX DECADES