The International Finance Corporation (IFC) empowers economic growth by providing private-enterprise investment financing for developing countries worldwide. It’s dedicated to boosting private sector advancement in nations that may lack the necessary infrastructure or liquidity for securing business financing.
Key Takeaways
- A member of the World Bank Group, the International Finance Corporation (IFC) provides crucial financing for private enterprise investments in developing countries.
- The IFC focuses on eliminating poverty through developmental economics, yet some critics argue its priority lies with profits rather than people.
- In fiscal year 2021, the IFC invested $31.5 billion across various financing initiatives.
How the International Finance Corporation (IFC) Works
Established in 1956 as part of the World Bank Group, the IFC positions itself as the largest global development institution centered on the private sector within developing nations. The IFC aims to ensure easy access to markets and financing for private enterprises.
Its contemporary goals emphasize the development of sustainable agriculture, enhanced accessibility to microfinance for small businesses, infrastructure support, and initiatives in climate change, health, and education. Governed by its 184-member countries and headquartered in Washington, D.C., the IFC is steering global economic reform.
IFC Global Financing
To generate capital, the IFC issues bonds in different markets worldwide. As of 2021, it had issued bonds worth $10.553 billion across 178 bonds in 20 currencies.
In fiscal year 2021 alone, the IFC invested $31.5 billion in both long- and short-term finance, which included $10.8 billion mobilized from other investors.
$14 Billion
This sum represents fast-track financing to support private companies and developing nations affected by the COVID-19 economic downturn. The initial $14 million stemmed from an $8 million increase proclaimed in March 2020.
Inspiring Investment: An IFC Case Study
The IFC invested $145 million to aid FrieslandCampina, one of the world’s largest dairy producers, in acquiring a 51% controlling stake in Engro Foods, Pakistan’s leading dairy processor. Despite Pakistan being the fourth-largest milk-producing nation, its demand has consistently outpaced supply due to insufficient infrastructure and an outdated supply chain, with small subsistence farms contributing nearly 80% of the industry’s output.
FrieslandCampina committed to sharing its experience and best practices with smaller farmers who supply Engro Foods, thus improving productivity and reducing waste. This project is anticipated to benefit 200,000 farmers and 270,000 distributors, along with generating 1,000 new jobs in the dairy supply chain.
Criticism of the IFC
As the IFC’s stature and influence have grown, it has faced scrutiny. Despite its stated goal of poverty reduction through economic development, critics argue that the IFC increasingly resembles a private investment bank concentrated on corporate profit, occasionally ignoring the environmental and social ramifications of its projects.
Related Terms: World Bank, microfinance, economic development, sustainable investment, private enterprise financing
References
- International Finance Cooperation. “About IFC”.
- International Finance Corporation. “Green Bonds”.
- International Finance Corporation. “IFC Financial Report 2021”.
- Internatonal Finance Corporation. “IFC Increases COVID-19 Support to $8 Billion to Sustain Private Sector Companies and Livelihoods in Developing Countries”.
- International Finance Cooperation. “IFC Financing Package To Support Development of Pakistan’s Dairy Industry”.
