International Finance Corporation
The International Finance Corporation (IFC) is the private sector arm of the World Bank Group. IFC advances economic development and reduces poverty by investing in projects and private sector firms in developing countries. IFC focuses on investing, providing advice and mobilizing finance for developing countries.
IFC does this through:
- loans, equity, trade finance, structured finance, syndication
- advisory services (advice, problem-solving, training)
- asset management (mobilizing and managing third-party capital for investments in developing markets)
IFC’s 3.0 strategy is split into two pillars. The first focuses on IFC’s role “Upstream”, creating markets and increasingly getting involved earlier in the project development cycle to seed investment opportunities, and in some cases working to create markets where none existed. This approach creates the conditions for bankable projects in developing countries.
The second pillar is to mobilize more private capital for development purposes, particularly in low-income countries and those affected by fragility and conflict.
Climate is a strategic focus for IFC, and the World Bank Group. IFC is committed to growing its climate-related investments to an annual average of 35 percent of its own-account long-term commitment volume between 2021 and 2025 and, working with financial institutions to finance projects that will support mitigation and adaptation.
IFC is also committed to gender equality and reducing gaps between men and women in the private sector, including financial support for women entrepreneurs and women-led SMEs.
In FY22, IFC committed a record $32.8B to private companies and financial institutions in developing countries. This includes $4.4B in climate financing and $9.7B in trade finance, IFC’s highest level ever. Of this amount, 75% was invested in International Development Association (IDA) countries and conflict-afflicted situations.
Private sector financing
IFC offers a wide variety of financial products for private sector projects in developing countries, but it will not completely fund a new project. IFC can provide up to 50% of capital – which is a standard practice across most Development Finance Institutions (DFIs). It is therefore advisable that the project developer have relationships with other funders where IFC would play a catalytic role. Equity investments by the IFC are also limited, particularly for infrastructure projects.
IFC provides loans, equity, trade and supply chain finance, syndications, derivative finance, structure finance, local currency products, blended finance and asset management to both the private and public sector.
To be eligible for IFC funding, a project must meet certain criteria, including environmental and social safeguards. A company or entrepreneur seeking to establish a new venture or expand an existing enterprise can approach IFC directly by submitting an investment proposal. Note however that the IFC won’t fund new ventures outside of its limited VC funding, which is largely through intermediaries. After this initial contact and a preliminary review, IFC may proceed by requesting a detailed feasibility study or business plan to determine whether or not to appraise the project. IFC's project/investment cycle illustrates the stages a business idea goes through as it becomes an IFC-financed project.
Eligibility for funding includes: being a private sector entity that is located in a developing country that is a member of IFC; project is technically sound and projected to be profitable; project is beneficial to the local economy; project is environmentally and socially sound; and project satisfies IFC and host country standards.
IFC does not lend directly to micro, small, and medium-sized enterprises, or individual entrepreneurs, but many of the IFC’s investment clients are financial intermediaries that then lend to smaller businesses.
Providing advice is a critical part of IFC’s strategy to create markets and mobilize private investment. This work creates the conditions that will attract private capital, thus enabling the private sector to grow. IFC’s strategy is to link the Advisory Services program to the needs identified in World Bank Group Country Partnership Frameworks and Sector Strategies.
IFC provides advice and market insights to private investors and partners, in order to mobilize more private capital. IFC also advises investors and partners on good practices and standards to increase competitiveness and productivity. In addition, IFC advises governments on reforms that encourage private investment and how to structure public-private partnerships to improve people’s access to high quality infrastructure and basic services.
In FY22, IFC advisory portfolio totaled US$1.4B, and included program expenditures of US$251 million, with a strong focus on IFC’s priority areas: IDA eligible countries (51%), fragile and conflict-affected situations (21%) and climate change (25%). IFC’s PPP transaction advisory work mobilized $3.56B of private capital.
Firms interested in pursuing IFC consulting services, including advisory and investment projects, should review the World Bank Procurement Portal RFx Now. While registration is not required for bidding, firms and individuals must register before signing a contract. Note that procurement is a small part of IFC’s business as private sector financing remains its main source of revenue.
Frequently asked questions
What is the difference between IFC and the World Bank?
IFC is a member of the World Bank Group, which consists of five closely associated institutions that play an important role in eradicating poverty and improving lives. IFC promotes economic and social development through working directly with the private sector.
Working with business partners and other development finance institutions (DFIs), IFC invests in sustainable private enterprises and projects in developing countries. This direct lending to businesses is the primary difference between IFC and World Bank, which lends to sovereign governments.
IFC also offers advisory services to support private sector development. Most of these activities are funded in partnership with donor countries, and many involve close collaboration with the World Bank.
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