Overview of International Financial Institutions (IFIs)
In many parts of the world, international financial institutions (IFIs) play a major role in the social and economic development programs of nations with developing or transitional economies. This role includes advising on development projects, funding them and assisting in their implementation.
Characterized by AAA-credit ratings and a broad membership of borrowing and donor countries, each of these institutions operates independently. All however, share the following goals and objectives:
- to reduce global poverty and improve people's living conditions and standards;
- to support sustainable economic, social and institutional development; and
- to promote regional cooperation and integration.
IFIs achieve these objectives through loans, credits and grants to national governments. Such funding is usually tied to specific projects that focus on economic and socially sustainable development. IFIs also provide technical and advisory assistance to their borrowers and conduct extensive research on development issues. In addition to these public procurement opportunities, in which multilateral financing is delivered to a national government for the implementation of a project or program, IFIs are increasingly lending directly to non-sovereign guaranteed (NSG) actors. These include sub-national government entities, as well as the private sector.
Canada is a partner and shareholder in the World Bank, which is the major global IFI, and in several regional development banks. This membership permits Canadian firms and individuals to compete for procurement opportunities in bank-funded projects and programs.
Canada's Offices of Liaison with International Financial Institutions (OLIFIs) can help you learn about IFIs, including information on where and how funds are spent, and how to find and pursue these opportunities. To find out more, refer to OLIFI.
Working with IFIs
During recent years, IFIs have made considerable progress in harmonizing the way they procure goods and services. In many cases, they are now using similar policies and procedures, although the interpretation of these approaches may still vary at the level of the individual institution. In the sections that follow, we'll look at the common features of IFI procurement and how it works. Skip directly to the section on:
- Country Strategies
- The Project Cycle
- The Procurement Process
- Project and Procurement Information
- Suppliers of Goods, Works, Equipment and Non-Consulting Services
- Consultants and Consulting Services
- Corporate and Institutional Procurement
- Private Sector Lending
- Trust Funds
- Business Approach
All IFIs use country strategy documents, as these are fundamental to establishing an IFI's lending priorities for a particular country. Based on the country's own vision for its long-term development and written by the IFI, the document lays out the IFI's support program for the nation.
A country strategy begins by analyzing the causes of poverty within the population and identifying key areas where the IFI's assistance can reduce it most effectively. This establishes a foundation for the IFI's future activities in the country, which can range across the entire spectrum of economic and social needs.
The development of the country strategy involves extensive discussions with many stakeholders, including government authorities, representatives of civil society, non-government organizations, development agencies and the private sector. These discussions are crucial to the success of the strategy because they promote collaboration and coordination among the various national partners.
Country Strategy Documents
- African Development Bank (AfDB) - Country Strategy Papers
- Asian Development Bank (ADB) - Country Planning Documents
- Caribbean Development Bank (CDB) - Country Strategies
- European Bank for Reconstruction and Development (EBRD) - Country Strategies
- Inter-American Development Bank (IDB) - Country Strategy, available via Country pages
- World Bank (WB) - Country Partnership Framework (CPF) (also called in some cases Country Partnership Strategy or Country Assistance Strategy)
The Project Cycle
All IFI-funded projects are implemented by the borrowing countries, not by the IFI providing the funds. However, all borrowers must follow the IFI's rules and procedures throughout the entire project cycle. This is intended to guarantee efficiency and transparency in the use of IFI funds.
The project cycle, which has similar stages for all IFIs, is the framework for the design, preparation, implementation, completion and evaluation of a project. Business opportunities occur throughout the cycle, so becoming familiar with it will increase your chances of identifying an opportunity and securing a contract.
You should be aware, though, that project cycles can often last for several years, so being involved in a project from start to finish can require a substantial long-term investment on your part. However, the smaller components within a given project cycle can provide many shorter-term opportunities.
In general, the project cycle consists of the following stages:
The IFI and the borrowing country identify projects that are appropriate for the country's development strategy and suitable for IFI support. Pre-feasibility studies are often required at this stage.
Once a proposed project has entered the project pipeline, the borrower and IFI technical staff study and define it further. The actual design and preparation of the project are the borrowing country's responsibility. During this stage, the borrower and/or the IFI frequently hire consultants to help with feasibility studies, detailed project design and the assessment of the project's environmental and social effects.
IFI staff conduct in-depth assessments of the technical, financial and economic elements of the project. The appraisal phase is the IFI's responsibility and culminates in a project plan.
The IFI and the borrower negotiate the funding agreement and the project implementation plans. Negotiations result in a loan or funding document that is presented to the appropriate IFI board(s) for approval. The funding becomes effective after board approval and after the country has signed the documents. Funds can now be disbursed, thus commencing the implementation stage of the project.
Implementation and Supervision
Implementation of the project, including procurement, is the responsibility of the borrower and is carried out with minimal IFI assistance. However, the IFI does oversee all major procurement decisions made by the borrower. Most of the funds are spent during this phase, which provides the bulk of the procurement opportunities for contractors.
This final phase is an assessment of the project and of the results achieved. It is performed after the project has been completed and all funds have been disbursed.
- AfDB - Project Cycle
- ADB - Project Cycle
- EBRD - The Funding Process
- IDB - Project Cycle
- WB - How the Project Cycle Works
The Procurement Process
Before you pursue a contract related to an IFI-funded project, be sure you understand the respective responsibilities of the IFI and the project's executing agency. The IFI and the executing agency do share some of the work of project preparation but the executing agency is responsible for all phases of project execution and procurement, which must comply with IFI regulations. These regulations and their related procedures are similar for all IFIs.
Project and Procurement Information
The best sources of project information are contacts, partners and IFI staff in the donor and borrowing countries. Often, however, project-related documents, procurement notices and contract awards are available as well on IFI websites. Reviewing this information in the context of the country strategy document will help you monitor the progress of active projects and assess future developments (and therefore opportunities) in the borrowing country.
IFI Online Project Information
- AfDB - Project Portfolio
- ADB - Projects
- CDB - Projects
- EBRD - Project Summary Documents
- IDB - Advanced Project Search
- WB - Project Database
Procurement notices represent the actual business opportunities in IFI-financed projects. These are generally posted on the IFI's website, and on independent websites that consolidate project information from major IFIs, UN agencies and foreign governments. These websites offer advanced search features and some will automatically notify you of opportunities that match your interests. Some are by subscription only, but most are free.
IFI Online Procurement Information
- AfDB - Project related Procurement
- ADB - Consultant Management System and ADB - Procurement Notices
- CDB - Procurement Notices
- EBRD - Project Procurement
- IDB - Procurement Notices
- WB - Procurement Notices
- Development Executive Group (Devex and DevelopmentAid) Projects & Tenders*
- dgMarket and DevelopmentAid - Tenders and Procurement Opportunities*
- UN Development Business Online and DevelopmentAid online*
* indicates subscription required
Suppliers of Goods, Works, Equipment and Non-Consulting Services
For the procurement of goods, equipment, civil works and non-consulting services such as transportation and maintenance, most opportunities occur during the implementation stage of the project.
Most IFIs require the borrower to draft a procurement plan, which states in general terms what products and services will be needed, when they will be required, their approximate costs and the procurement methods to be used. The procurement plan is published on the IFI's website and is updated regularly.
International competitive bidding (ICB) is the preferred method when procurement involves large monetary values and/or complex needs. The objective of ICB is to provide all eligible firms with timely notification so that they all have an equal opportunity to bid. Borrowers must issue bid invitations or prequalification invitations in at least one local publication and in UN Development Business Online. In some cases, invitations will also appear on the IFI's website.
Before bidding, always familiarize yourself with the procurement guidelines of the IFI that is providing the loan. These guidelines define the policies, procedures and procurement methods that have been agreed on by the borrower and the IFI.
Be aware, however, that the relationship between the supplier (you) and the borrower is governed by the bidding documents and your contract with the borrower, not by the IFI's procurement guidelines.
Guidelines for Procurement of Goods and Works
- AfDB - Policies and Procedures - Rules and Procedures for Procurement of Goods and Works
- ADB - Procurement Guidelines
- CDB - Procurement Publications - Guidelines for Goods and Works
- EBRD - Procurement Policies and Rules
- IDB - Project Procurement Policies - Policies for the Procurement of Goods and Works financed by the IDB
- WB - Procurement Regulations for Procurement in Investment Project Financing (IPF) (for projects approved after July 1, 2016)
- WB - Procurement of Goods, Works and Non-Consulting Services (for projects approved before July 1, 2016)
Prequalification of bidders is often required if:
- procurement is for large and complex civil contracts;
- procurement is for custom-designed equipment, specialized services or technologies;
- the anticipated cost of preparing a bid would be very high or would discourage competition; or
- goods of an inferior quality would have an unfavourable impact on the project (for instance, in pharmaceutical procurements).
All firms that prequalify by meeting the specified criteria for eligibility, financial capacity and experience are then invited to bid. Interested firms can obtain bidding documents from the borrower. These documents contain:
- instructions to bidders;
- the form of the bid;
- the form and condition of contract;
- specifications and relevant technical data;
- a list of goods or bill of quantities;
- delivery times or schedules of completion;
- the amount and form of bid security; and
- the basis for bid evaluation and selection.
Contracts are awarded to the lowest-evaluated bid, based on the evaluation criteria. Note that the lowest-evaluated bid may not be the lowest-priced bid, since other factors such as performance, training, maintenance and operating costs are often taken into account. Additionally, a margin of preference may be granted to bidders from the borrowing country, or for manufactured goods with a minimum percentage of domestic content.
Other Bidding Methods
When ICB is not the most appropriate method, other methods may be used; among these are national competitive bidding (NCB), shopping and direct contracting. The option chosen will depend on the scope, nature and complexity of the contract in question. NCB is considered the appropriate method for contracts that are not expected to attract foreign bidders.
Invitations for such bidding may be limited to domestic publications, and bidding documents may be only in the national language. However, the process is not restricted to domestic firms; if foreign companies want to bid, they can do so.
Consultants and Consulting Services
IFIs use the term "consultant" for a wide variety of public and private entities that provide consulting services. These include consulting firms, engineering firms, management firms, procurement agents, auditors, commercial banks, universities, research institutions, governmental agencies, NGOs and individuals. Note that IFIs distinguish consulting services from non-consulting services such as maintenance, the latter being procured in the same way as goods and equipment.
Opportunities for consultants occur during most of the project cycle. The following list provides some examples and the points at which they occur:
- The preparation stage can include sector studies, master plans, (pre)feasibility studies, project design and environmental and social impact assessments.
- The implementation stage can include procurement assistance, project management, training and construction supervision.
- Advisory services, which can be required throughout the project cycle, can include strategy and policy, regulation, institutional reform, capacity building, information technology and technical assistance.
Selection of Consultants
To select consultants for an assignment, the borrower publishes a procurement notice on UN Development Business Online, dgMarket and/or the IFI's website. The notice will ask suitable firms to submit Expressions of Interest (EOIs). For further information, please refer to our market information guide on Preparing an Expression of Interest (EOI).
Using the EOIs received, the borrower prepares a shortlist of six companies or individuals and sends a Request for Proposal (RFP) to them. The RFP includes the instructions to consultants, the Terms of Reference (ToR) for the project and the proposed contract. Technical and financial proposals may be requested at that time, but will be evaluated separately using a two-envelope system, in which the financial proposals are opened only after the technical scores have been assessed.
Before submitting an EOI, always familiarize yourself with the selection guidelines of the IFI that is disbursing the loan. These guidelines define the policies, procedures and selection methods that have been agreed on by the borrower and the IFI.
Be aware, however, that the relationship between the supplier (you) and the borrower is governed by the RFP and the contract, not by the IFI's procurement guidelines.
The heaviest emphasis in selecting a consultant is on the quality of the services to be provided, and the most common selection method is Quality- and Cost-Based Selection (QCBS). The weight given to quality and cost will depend on the complexity and nature of the assignment although it is usually around 80 percent for quality and 20 percent for cost.
However, the borrower may also use Quality-Based Selection (QBS) if the scope and complexity of the assignment is highly specialized and/or difficult to define, or the assignment will have a major impact on the later stages of the project. In QBS, technical proposals are submitted for evaluation first, and financial proposals submitted only after the technical evaluation has taken place.
Guidelines for Procurement of Consulting Services
- AfDB - Policies and Procedures - Rules and Procedures for the Use of Consultants
- ADB - Guidelines on the Use of Consultants by ADB and Its Borrowers
- CDB - Procurement Publications - Guidelines for Consultants
- EBRD - Procurement Policies and Rules
- IDB - Project Procurement Policies - Policies for the Selection and Contracting of Consultants Financed by the IDB
- WB - Procurement Regulations for Procurement in Investment Project Financing (IPF) (for projects approved after July 1, 2016)
- WB - Selection and Employment of Consultants (for projects approved before July 1, 2016)
Corporate and Institutional Procurement
IFIs also generate business opportunities through corporate or institutional procurement, when they purchase goods or services for their own internal needs. They buy a wide variety of goods and services including:
- information technology;
- communications equipment and services;
- office equipment and supplies;
- graphic design and publications; and
- printing services.
IFIs also hire a broad variety of individual consultants and consultancy firms to provide technical expertise that they do not have in-house.
Procurement over a certain threshold is carried out competitively and is advertised on the IFI's website and/or on UN Development Business Online and dgMarket. Some IFIs have developed electronic notification and procurement systems for their corporate procurement, which enables potential suppliers to receive notifications, express their interest and bid electronically. Most IFIs require suppliers and consultants to register as a vendor.
Corporate Procurement Websites
- AfDB - Corporate Procurement
- ADB - Institutional Procurement
- EBRD - Corporate Procurement
- IDB - Corporate Procurement
- WB - Corporate Procurement
Private Sector Lending
In recognizing the important role of the private sector to catalyze positive economic development, the IFIs have in recent years, increased their focus on direct financial lending to the private sector. Some of the IFIs also lend directly to non-sovereign guarantee actors such as municipal or local governments and other financial institutions.
IFIs offer this lending through a variety of financial instruments including direct financing and private equities, as well as other innovative financing mechanisms. These opportunities are typically identified and supported through distinct private sector units found within the respective IFI, whose main objective is to oversee the developmental impact of the financing. The exceptions to this would be the World Bank and the Inter-American Development Bank, which have distinct organizational entities, the International Finance Corporation (IFC) and the Inter-American Investment Corporation (IIC), to support their global private sector lending operations.
The share of lending allocated to the “public” versus “private” sectors varies significantly among the IFIs. At the AsDB, AfDB and the IDB, it has ranged from 10-25% in recent years whereas, it makes up the majority of the lending at the EBRD. Typically, the bulk of private sector lending at the IFIs is channelled towards infrastructure projects including those in the energy, power, transport, telecommunications, and water sectors.
Private Sector Lending Info
- AfDB - Private Sector Department
- ADB - Private Sector (Nonsovereign) Financing
- EBRD - Project finance
- IDB - Private Sector Loans
- (IDB) IIC - How to Apply for Financing
- (WB) IFC - How to Apply for Financing
IFIs complement their resources through trust funds. These funds are financial and administrative arrangements with external donors, and are intended to finance high-priority development needs such as research, technical assistance, advisory services, debt relief and post-conflict transition. The funds come from donor countries, foundations, the private sector and sometimes the IFI's own grant resources. The IFI is responsible for administering and allocating the funds.
Until recently, many consultant trust funds (CTFs) were donor-based and tied, which meant that they could only be used to hire consultants who were nationals of the donor country. Currently, however, almost all IFIs have phased out tied trust funds or are doing so. Most new trust funds are untied, are sector- or theme-specific, and are either multi- or single-donor funds. Their main purpose is to advance international development by providing targeted grants for key strategic needs.
For Canadian consultants, the loss of the tied Canadian CTFs is far outweighed by the dramatic increase in the number of funds they can access worldwide, and the large amount of available financing that has resulted from untying the funds.
Trust Fund Information
- AfDB - Initiatives and Partnerships
- ADB - Trust Funds
- CDB - Programmes
- IDB - Trust Funds
- WB - Trust Funds and Partnerships
You should consider IFI-funded business opportunities as just one element of your larger international marketing strategy, rather than an entry point into a new market. That said, if you have already exported successfully to a particular market, you can expect that your strategy would adapt well to IFI project opportunities there.
All IFIs assign project officers to each project and these individuals serve as the managers and supervisors who implement the project on behalf of the IFI. They are key contacts for seeking opportunities, and they will be much more interested in your company if you can offer them expertise or technologies that will help them solve problems and contribute to their projects' success.
As soon as you identify a project, you should review the project documents to identify the key decision makers and contact them to express your interest in participating. Visits to the borrowing country are essential for consulting and engineering firms, and can be very fruitful for exporters of goods and equipment as well.
Whether you are meeting with IFI staff or with representatives of the executing agency, be well prepared and have specific topics to discuss; making general inquiries about business opportunities or asking for readily available information will be seen as a waste of time. You should be prepared to clearly demonstrate what you or your company can do to help the project officers advance their project, and provide appropriate information about your experience, capabilities and the solutions you intend to propose.
Working with a local partner is usually advisable. Such partnerships can give you the local presence and expertise that will help with any necessary follow-up and having someone on the spot may help you reduce costs. In most cases, moreover, local content is one of the evaluation criteria for a contract, and demonstrating that your bid has such content can make the difference between winning and losing a contract.
Some of the subscription services that provide procurement notices also provide databases of local firms interested in IFI projects. There are also opportunities to participate in IFI-funded projects by subcontracting with prime contractors that have been awarded contracts in a project. Subcontracts are not governed by IFI procurement regulations and interested firms should contact prime contractors directly.
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