The International Finance Corporation, a member of the World Bank Group, is the largest global development institution focused exclusively on supporting and developing the private sector in developing countries.

The Corporation also uses its products and services – as well as the products and services of the World Bank Group’s institutions – to provide development solutions that suit the needs of its clients. It uses its financial resources, technical expertise, global experiences and innovative ideas to help its partners overcome financial, operational and political challenges.

The Foundation works to provide investments, expertise and build long-term partnerships that can help overcome obstacles to development in areas such as finance, infrastructure, the regulatory environment, and improving the skills of workers.

The Foundation is also one of the main bodies that can mobilize resources to implement its projects, as its desire to work in difficult environments and its pioneering role in providing financing to the private sector enables it to strengthen its footprint and achieve a development impact that goes beyond its direct resources, as well as enjoying its financial and legal independence. Emphasizes that it works to encourage investment in developing countries by supporting the private sector, developing local markets, and building relationships with its clients in developing markets. It employs more than 3,800 employees, 41% of whom work at headquarters in Washington. 

Incorporation

The International Finance Corporation was established in 1956, and it has 184 member states who collectively decide their policies and approve their investments.

To join the International Finance Corporation, the country in question must first be a member of the International Bank for Reconstruction and Development (IBRD) – . The powers granted to the Foundation are vested in the Board of Governors, in which member countries appoint representatives.

Headquarters

The Foundation has more than 3,800 employees, about 59% of whom work in field offices, and 41% at headquarters in Washington.

Objectives

One of the Foundation’s goals is to support the focus on high-risk markets, address climate change and ensure environmental and social stability, in addition to addressing the constraints that hinder the private sector in the areas of infrastructure, health and education.

The organization also makes the development of local markets a priority, and building relationships with its clients in developing markets.

It examines achieving this through mobilizing sources of financing for the development of the private sector in particular, and encouraging open and competitive markets, as well as supporting companies and helping to create productive job opportunities.

Member countries provide the corporation’s equity paid-up capital, and voting is made in proportion to the number of shares held by each member country.

It is the largest multilateral source of financing through loans and equity in private sector projects in developing countries. Encouraging viable private sector development is mainly through:

Financing private sector projects located in developing countries.

Helping private companies in developing countries to mobilize financing resources from the international financial markets.

Providing advice and technical assistance to businesses (companies) and governments.

The IFC’s advisory work with governments helps create conditions that stimulate an influx of savings and private foreign and domestic investment alike.

The International Finance Corporation does not participate in an investment unless it is able to make a special contribution that complements the role of market players. It therefore plays a catalytic role, stimulating and mobilizing private investment in developing countries by demonstrating that investments there can be profitable.

IFC offers a complete variety of financial instruments and services to companies in member countries, including but not limited to the following:

Long-term loans in major and local currencies at fixed or variable interest rates.

Investments in equity capital.

Equity equity investment vehicles (such as non-preferred loans, preferred shares, income bonds and convertible debt).

Group loans.

Risk management (such as brokerage in currency and interest rate swaps, and the provision of hedging facilities).

Financing intermediary institutions.

IFC can provide single financial instruments or in any combination necessary to ensure adequate funding for projects from the start.

It can also help in structuring financial programs, by coordinating financing from banks, foreign and domestic companies, and export credit agencies. The corporation charges the prevailing market interest rates in exchange for its instruments and does not accept government guarantees.

To be eligible for IDA financing, projects must be profitable to investors, benefit the host country’s economy, and adhere to strict environmental and social guidelines.

The Foundation finances projects in all types of industries and sectors, including, for example:

– Transformative Industries.

– Infrastructure.

– tourism.

Education.

– Healthcare.

Financial services.

Financial services projects represent a significant share of new project approvals, ranging from investments in the emerging leasing, insurance and mortgage markets, to student loans and credit facilities for local banks that in turn provide microfinance, or commercial loans to small and medium enterprises.

Although the International Finance Corporation is mainly considered a financier of private sector projects, it can provide financing to a company in which the government has a stake, provided there is participation from the private sector and the project is managed on a commercial basis. It could finance locally owned wholly owned companies as well as joint ventures between foreign and local shareholders.

In order to ensure the participation of private investors and lenders, the Corporation records the total amount it provides for any one project from its own account in the form of debt financing or equity contributions.

For new projects, the cap is 25% of the total estimated project costs, or up to 35% for small projects, on an exceptional basis.

As for expansion projects, the corporation can provide up to 50% of the project cost, provided its investments do not exceed 25% of the project company’s total capitalization (i.e. its market value).

On average, investors and other lenders provide more than $ 5 for every dollar of the institution’s financing.

The IFC investment usually ranges between $ 1 million and $ 100 million. It can use its funds to finance permanent working capital or to cover foreign or domestic expenditures in any IBRD member country to purchase fixed assets.

Resource mobilization

Given the IFC’s record of success and its private status as a multilateral institution, the institution can act as a catalyst for private investment, as its participation in a project increases investor confidence and attracts other lenders and shareholders.

The corporation mobilizes financing resources directly for healthy companies in developing countries by organizing group loans with international commercial banks, ensuring underwriting of investment funds and corporate issuances of securities, and undertaking the private placement of securities.

Consulting services

The International Finance Corporation advises businesses in developing countries on a wide variety of matters – including – physical and financial restructuring, business plan formulation, identification of markets, products, technologies, financial and technical partners, and mobilization of project financing resources.

It can provide advisory services as part of an investment or independently for a fee, in line with market practices.

It also advises governments in developing countries on how to create an enabling business environment, and provides guidance on attracting foreign direct investment.

For example, it assists in the development of local capital markets, and it also provides assistance in areas such as the restructuring and privatization of state-owned enterprises.

Structuring

The Executive Vice President and Chief Executive Officer is responsible for implementing the general strategic directions of the International Finance Corporation, while the President of the World Bank Group is the President of the International Finance Corporation.

The management team runs the institution’s affairs under the supervision of the CEO, while the independent evaluation group evaluates the institution’s projects and programs.

The institution enjoys its financial and legal independence, but this does not prevent it from coordinating its activities with the institutions of the World Bank Group.

The Foundation operates under the direction of the member states through the Board of Governors and the Board of Directors, with each country appointing one representative and an alternate representative.

Sources and references:

IFC Website, About IFC.

Aljazeera.net Encyclopedia, an article about the International Finance Corporation.