leveraging the private sector to eradicate extreme poverty and … · 2013. 11. 14. · catalyzing...

IFC ROAD MAP FY14-16

Leveraging the Private Sector to Eradicate Extreme Poverty

and Pursue Shared Prosperity

INTERNATIONAL FINANCE CORPORATION

Version redacted and disclosed in accordance with IFC’s 2012 Access to Information Policy

following discussion by IFC’s Board on April 9, 2013

WORLD BANK GROUP GOALS

• Eradicating extreme poverty

• Pursuing shared prosperity

Taking into account the need to promote environmentally sustainable development

IFC’S PURPOSE

To create opportunity for people to escape poverty and improve their lives by

catalyzing the means for inclusive and sustainable growth, through:

- Mobilizing other sources of finance for private enterprise development

- Promoting open and competitive markets in developing countries

- Supporting companies and other private sector partners where there is a gap

- Helping generate productive jobs and deliver essential services to the poor and

vulnerable

To achieve its Purpose, IFC offers development-impact solutions through firm-level

interventions (Investment Services, Advisory Services, and the IFC Asset

Management Company); promoting global collective action; strengthening

governance and standard-setting; and business-enabling-environment work.

IFC’S VALUES

Excellence, commitment, integrity, teamwork and diversity

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TABLE OF CONTENTS

EXECUTIVE SUMMARY ......................................................................................................................................................... 5

I. CONTEXT .......................................................................................................................................................................... 8

II. NEEDS AND OPPORTUNITIES ........................................................................................................................................... 9

MACRO-ECONOMIC GROWTH OUTLOOK AND CAPITAL FLOWS ............................................................................................................. 9

DEVELOPMENT CHALLENGES AND CLIENT NEEDS .............................................................................................................................. 10

THE EVOLVING DEVELOPMENT FINANCE LANDSCAPE ......................................................................................................................... 11

IMPLICATIONS FOR IFC ................................................................................................................................................................ 12

III. A STRATEGIC FRAMEWORK FOR IFC’S RESPONSE ......................................................................................................... 12

WBG GOALS ............................................................................................................................................................................. 12

IFC’S FIVE STRATEGIC FOCUS AREAS .............................................................................................................................................. 12

BROAD-BASED GROWTH AND MORE DIRECT APPROACHES ................................................................................................................ 13

SUPPORT FOR PRIVATE SECTOR JOB CREATION ................................................................................................................................. 15

AN INTEGRATED RESULTS MEASUREMENT SYSTEM ............................................................................................................................ 18

IV. LEVERAGING THE PRIVATE SECTOR FOR HIGH IMPACT ................................................................................................. 19

AREAS OF INCREASED STRATEGIC EMPHASIS .................................................................................................................................... 20

AREAS OF MAINTAINED STRATEGIC EMPHASIS ................................................................................................................................. 24

ADVISORY SERVICES CONTRIBUTION TO STRATEGIC FOCUS AREAS ........................................................................................................ 27

MOBILIZATION AND PARTNERSHIPS ................................................................................................................................................ 28

V. WORLD BANK GROUP COOPERATION FOR HIGH IMPACT ............................................................................................. 30

STRATEGIC FOCUS AREAS ............................................................................................................................................................. 30

REGIONAL COOPERATION ............................................................................................................................................................. 32

IFC/MIGA ............................................................................................................................................................................... 34

VI. STRATEGIC SCENARIO ................................................................................................................................................... 34

PROGRAM SCENARIO ................................................................................................................................................................... 34

ADVISORY SERVICES PROGRAM ..................................................................................................................................................... 39

VII. FINANCIAL SUSTAINABILITY......................................................................................................................................... 39

Annex I. Regional Strategies ...................................................................................................................................................... 42

Annex II. Regional Examples Of World Bank Group Cooperation .............................................................................................. 54

Annex III. Preliminary Thinking: Applying Michael Porter’s Five Forces Model......................................................................... 58

Annex IV. IFC Development Goals – Going Forward .................................................................................................................. 59

Annex V. IFC Program in IDA Countries and Frontier Markets .................................................................................................. 60

Annex VI. IFC Corporate Scorecard ............................................................................................................................................ 61

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Box 1: Finding of IFC Jobs Study................................................................................................................................................. 16

Box 2: IFC Development Goals ................................................................................................................................................... 18

Box 3: Nigeria Joint IDA-IFC-MIGA Energy Business Plan………………………………………………………………………………………………… ..... 33

Box 4: Components Of Capital Adequacy .................................................................................................................................. 40

Table 1: A Differentiated Approach To Engagement in FCS ...................................................................................................... 21

Table 2: Investment Projections FY14-16 ................................................................................................................................. 35

Table 3: Advisory Services Program (Client-Facing Project Spend) ........................................................................................... 39

Figure 1: Investment Projections FY14-16 ................................................................................................................................. 35

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EXECUTIVE SUMMARY

1. The basis for IFC’s strategy is threefold: (i) the broad recognition of the role of the private sector as a critical driver of economic growth, and creator of the majority of jobs, in developing countries; (ii) IFC’s unique offering to the private sector operating in those countries including through its global knowledge and reach, combination of Investment Services (IS), Advisory Services (AS) and the IFC Asset Management Company (AMC), role as part of the World Bank Group (WBG), and combination of both development and financial goals; and (iii) the opportunity for the WBG to be transformational through collaborative approaches that support, leverage, and complement private sector activity.

2. While the worst of the economic crisis appears over for now, the World Bank foresees continuing fragility of the global economy in 2013, with global growth rates remaining low and unchanged overall. Developing countries are expected to continue to lead global growth, even while also grappling with poverty and inequality, long-term development challenges such as unemployment, food insecurity, and climate change, and country-specific challenges ranging from conflict and fragility to the middle-income trap.

3. There is continued strong demand for IFC services in developing countries. While overall net capital flows to developing countries are expected to recover in 2013 after a reduction of about 20% in 2012, net private bank flows in 2013 will still be only slightly over a third of the 2008 levels, and the deleveraging process in European banks will continue. At the same time as the flow of private sector finance to developing countries is facing constraints, the need for finance for the private sector, especially in difficult markets, is growing and continues to exceed by far the supply from international development finance institutions (IFIs). IFC is seeing a robust increase in demand for its financing and integrated solutions to development challenges through the private sector, and is well-placed to respond with its unique offering. That response recognizes that a well-functioning public sector has an important role in supporting private sector development, and that by working together the public and private sectors can be most effective at addressing developing country needs.

4. Strategic Focus Areas. The WBG goals are to eradicate extreme poverty and pursue shared prosperity, taking into account the need to promote environmentally sustainable development. In support of this, IFC’s five Strategic Focus Areas constitute the framework for prioritizing its activities across IS, AS and AMC:

• Strengthening the focus on frontier markets – IDA countries, Fragile and Conflict Situations (FCS), and frontier regions in non-IDA countries;

• Addressing climate change, and ensuring environmental and social sustainability;

• Addressing constraints to private-sector growth in infrastructure, including water; health, education, and the food supply chain;

• Developing local financial markets through institution-building, the use of innovative financial products and mobilization, focusing on micro, small and medium enterprises (MSMEs); and

• Building and maintaining long-term client relationships with firms in developing countries, using the full range of IFC’s products and services, and assisting their cross-border growth.

IFC also continues to place a strong emphasis on gender as a cross-cutting theme. Following the 2013 World Development Report (WDR) on Jobs and the IFC Jobs Study, IFC is also putting a special emphasis on jobs, which the majority of poor people consider their most likely pathway out of poverty.

5. Leveraging the private sector for development. By helping to create a strong and sustainable private sector in developing countries, IFC plays a critical role in enabling the WBG to leverage the private sector for development. To help achieve the overarching WBG goals, IFC’s activities promote both broad-based growth, which benefits the poor and contributes to shared prosperity indirectly, as well as more direct approaches.

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6. Jobs are the key pathway out of poverty, and IFC will operationalize the findings of its Jobs

Study (a complement to the WDR on Jobs) across IS and AS to help the private sector create more,

and better quality, jobs. Findings include key challenges for different types of companies and countries, such as access to finance, particularly for small and medium enterprises (SMEs), a reliable power supply for companies in low-income countries, informality in middle-income countries, and training and skills development for larger businesses and companies in high-income countries; and employment challenges specific to women and youth. The Jobs Study showed how removing these obstacles can result in significant job growth. It also found that the quality of jobs is as important as the quantity, and underscored the important role of larger companies. While MSMEs generate the most jobs in developing countries, larger companies provide more sustainable jobs, are typically more productive, offer higher wages and more training, and support a big multiple of the direct jobs they provide through their supply chains and distribution networks (which in particular provide opportunities for the poor).

7. While IFC will continue strategy implementation in all five Strategic Focus Areas, it will put

more focus on certain geographies, sectors and themes in the near to medium term. These are:

• FCS and other challenging IDA countries;

• South Asia, with the intent to increase this region’s share of IFC’s own-account commitments to about 15% and of IFC’s AS program to about 18% by FY16 (increased focus in addition to Sub-Saharan Africa (SSA) and the Middle East and North Africa, which continue to be priority regions);

• Agribusiness and the food supply chain, and infrastructure, especially in SSA; and

• Climate change, with the intent that at least 20% of annual long-term finance (LTF) and at least 10% of annual short-term finance (STF) commitment volumes will be climate-related by FY15.

8. In implementing its strategy, IFC will continue to focus on development impact and financial sustainability, as well as on providing additionality to projects. A strong focus on managing towards results will be important, and IFC will continue to strengthen and expand its existing results measurement system. In this process, it will continue to roll out the IFC Development Goals (IDGs), which are important tools to help drive implementation of IFC strategy and the alignment of activities across IS, AS and AMC; it will also expand the system to demonstrate how its activities are contributing to the WBG goals. In addition, as IFC pushes further into more frontier markets such as FCS, it will become even more critical to focus on profitability and financial soundness. IFC’s unique offering and comparative advantages compared to commercial financing underlie its additionality and value proposition to clients, including financial and non-financial risk mitigation, willingness to engage in difficult environments, long-term partnership, high standards of due diligence (which help bring in other investors and enhance company reputations), strong advisory services to improve the investment climate and enhance company performance and impacts on communities, and global and sectoral knowledge and standard-setting.

9. IFC and other WBG entities will continue to build on increased strategic and project-level

cooperation, and actively pursue collaborative approaches for transformational impact. Collaborative approaches across the WBG to leverage private sector activity are essential to achieve the WBG goals. Teams are now applying a more concerted effort to identify areas and opportunities where effective collaboration can add significant value. This includes joint work at the regional, country, sectoral and thematic level, such as joint business plans, and joint initiatives such as the Agribusiness in Africa Special Initiative (AGASI).

10. IFC will also continue to increase impact through mobilization and partnerships, including with other IFIs and through extensive client networks. In particular, it proposes to create more structure around and operationalize the concept of clients as Partners in Development.

11. For the FY14-16 period, IFC would deliver greater impact through increased support of private-sector-led growth and job creation in pursuit of the WBG goals. IFC would grow more strongly as it

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responds to increasing demand for its products and services, in particular for LTF and equity. IFC would also aim to significantly increase its operations in FCS and other challenging IDA countries with a main focus on access to infrastructure (especially power), access to finance and access to markets. IFC’s business projections for FY14-16 include the following elements1:

• 5-6% annual growth in LTF commitment volume for own account; 5-6% annual growth in STF volume for own account; and 12-13% annual growth in mobilization volume;

• A significant step-up in IFC’s IS business in FCS by FY16 and greater emphasis on other challenging IDA countries, including through a critical mass of investment staff dedicated to FCS, placed closer to where the needs are; and through enhanced risk cover, supported by increased operational flexibility, for higher risk projects, which would be scalable to give IFC the ability to adjust depending on available resources, and to work with other members of the WBG to support the private sector in these countries. IFC envisages that by FY16 investments in FCS would increase by at least 50% above FY12 levels;

• A significant step-up in IFC’s AS program in FCS by FY16. IFC envisages that AS in FCS would reach 20% of total AS program;

• A budget increase of around 4% in real terms in FY14, to support the special effort in FCS and other challenging IDA countries, the additional investment program growth, and increases in information technology (IT) expenses and other non-discretionary items; and

• Reallocation of resources, including to AGASI and South Asia.

Capital Impact. Standard & Poor’s new methodology for rating multilateral lending institutions puts increased focus on IFC’s financial strength in order to maintain IFC’s AAA rating. In this light, the effect of IFC’s proposed program on its capital position and on its financial sustainability has been taken into consideration.

12. Advisory Services will contribute to all IFC priorities in FY14-16 with emphasis on agribusiness and the food supply chain, infrastructure, climate, SMEs and gender. It will continue to deliver in IDA countries as a main priority (more than 60% of the program), with a special focus on FCS.

13. AMC, which now has $4.7 billion of assets under management across five funds, is projecting that assets under management will continue to grow and that annual investment commitments will approach $1 billion in the next several years.

Conclusion: The private sector is critical to development, not least because it is a key driver of growth and the main provider of jobs in developing countries. IFC is the largest development finance institution focused on the private sector, with a global track record of significant achievements, leadership and strong development results. Development challenges are large and growing, and private sector needs for finance and integrated solutions to development challenges are also growing, especially in difficult markets. This provides an opportunity for IFC to step up its partnership with the private sector, and for the WBG as a whole to be transformational through collaborative approaches that support, leverage, and complement, private sector activity. IFC will make this key contribution to the achievement of the WBG goals, while at the same time efficiently managing its capital and budget resources.

1 All growth rates in this section are for FY13-16.

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I. CONTEXT

1.1 The basis for IFC’s strategy is threefold: (i) the broad recognition of the role of the private sector as a critical driver of economic growth, and creator of the majority of jobs, in developing countries; (ii) IFC’s unique offering to the private sector operating in those countries through its global knowledge and reach and combination of investment services (IS), advisory services (AS) and the IFC Asset Management Company (AMC), its role as part of the World Bank Group (WBG), and its combination of both development and financial goals; and (iii) the opportunity for the WBG to be transformational through collaborative approaches that support, leverage, and complement private sector activity.

1.2 Over the last few years, the Road Map has described the role of the private sector in development in some detail, including as a critical driver of economic growth (which contributes significantly to poverty reduction and to higher living standards for poor people), provider of 90% of jobs in developing countries and of critical goods and services and most of the taxes that support government operations, and as an efficient allocator of credit that fosters effective private sector activity. The private sector is thus a powerful force for addressing the pressing needs of society. A well-functioning public sector also has an important role in supporting private sector development, and by working together the public and private sectors can be most effective at addressing developing country needs.

1.3 IFC aims to achieve a transformational role – by helping the private sector better create jobs and opportunity in developing countries, in ways that ensure prosperity for all. It does this by working with and supporting private sector clients – helping them thrive and operate in a sound environment, and leveraging their success to address ultimate WBG development goals.

1.4 IFC’s distinctive approach to clients is based on its unique positioning in the world of development and finance. IFC is the largest development finance institution focused on the private sector, with a global reach, allowing it to leverage lessons of experience across regions while diversifying risk. It has the most developed global footprint among private-sector-focused international development finance institutions (IFIs) and a unique combination of three complementary and aligned lines of business – IS, AS and AMC – and is part of the WBG. IFC is also a leading mobilizer of third-party resources for its projects through several mechanisms, including syndication, credit enhancement, local currency capabilities and AMC. Finally, IFC is a leader in measuring, evaluating, and reporting on development results.

1.5 IFC’s comparative advantages compared to commercial financing include willingness to engage in difficult environments beyond the risk tolerance of commercial funders, high standards of due diligence, including on environmental, social and corporate governance (ESG) matters, which help bring in other investors and enhance company reputations, and strong advisory services to improve the investment climate and enhance company performance and impacts on communities.

1.6 This unique positioning provides IFC with the depth of skills and services to craft innovative client solutions. Private companies operating in developing countries frequently face critical constraints in areas such as finance, infrastructure, employee skills and the regulatory environment. Clients see IFC as a provider and mobilizer of scarce capital, knowledge and long-term partnerships, not readily available from others, that can help address these issues. IFC’s pioneering investments often demonstrate to others the viability of new approaches which lead to expanding impact through replication by others.

1.7 IFC’s positioning provides it with the means to help companies succeed, expand their positive impacts on society, and thus address the WBG goals of eradicating extreme poverty and pursuing shared prosperity. IFC’s focus on particular clients is driven by country development priorities, as it coordinates with the country, the World Bank and other development partners in identifying interventions that best contribute to development. IFC’s corporate sectoral focus in such areas as agribusiness, infrastructure, small and medium enterprises (SMEs) and the financial sector reflect some of the areas which have been found to

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have applicability for development needs in a wide range of countries. Advanced results measurement systems are also critical to demonstrating development impact and providing learning needed to better tailor interventions for results.

1.8 IFC also engages with individual companies to strengthen their impacts on society. IFC has actively invested with clients in projects that create new markets in previously unserved or underserved sectors, that reach underrepresented members of society, that pioneer participation in areas historically reserved for the state, and that enhance the environmental and social (E&S) aspects of businesses. IFC also attempts to strengthen impacts along the value chain, especially to enhance employment opportunities.

1.9 IFC activities also help strengthen private sector contributions to development through the setting of widely accepted global standards, for example its E&S Performance Standards (PS) with broad reach through the Equator Principles, or its corporate governance standards, which help facilitate greater participation by outside investors.

1.10 The concept of “Shared Value” capitalism was recently presented to the WBG by Michael Porter. Shared Value for companies includes policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates2. This is very much coincident with IFC’s philosophy and approach. Together with our clients and other WBG institutions we can strongly contribute to successful businesses as engines for societal progress, shared prosperity and poverty reduction.

1.11 Working with other WBG institutions is central to being transformational and reaching WBG goals. Collaborative approaches are often needed on a range of complex issues, for example regulations, training, and supporting institutions, as well as in direct investments. The WBG is unique in being able to bring leading-edge capabilities in all these areas together to address development challenges through the private sector.

II. NEEDS AND OPPORTUNITIES

2.1. The following pages contain a brief analysis of the external environment – macro-economic outlook and capital flows, long-term development challenges and the needs of clients, and the IFI landscape – followed by implications for IFC. This is broadly aligned with Michael Porter’s “Five Forces” model (please see Annex III).

MACRO-ECONOMIC GROWTH OUTLOOK AND CAPITAL FLOWS

2.2. The World Bank foresees that global growth rates will remain largely unchanged for 2013, at 2.4% compared to 2.3% in 20123. Developing countries are expected to continue to lead global growth, at levels slightly higher than in 2012, with developed economy growth expected to further decelerate in 2013. Growth in Europe and Central Asia (ECA) is expected to accelerate from 2012, but will remain rather weak due to large external and domestic imbalances and the impact of continuing deleveraging in some European countries. Economic growth is also expected to remain weak in the Middle East and North Africa (MENA), given ongoing uncertainties and domestic unrest, with oil exporters performing better than oil importers. The outlook for other regions is more encouraging, even if growth remains below pre-crisis levels.

2.3. The worst of the economic crisis appears over for now. The European Central Bank has so far intervened to eliminate the worst case scenario by providing ample funds for sovereigns and banks.

2 “Creating Shared Value: How to reinvent capitalism and unleash a wave of innovation and growth”, Michael E. Porter and Mark R. Kramer, Harvard Business Review Jan-Feb 2011. 3 The World Bank projections are reflected in the Global Economic Prospects January 2013, and substantively concur with the International Monetary Fund (IMF)’s projections in the January 2013 update of the World Economic Outlook.

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However, the deleveraging process in European banks will continue, albeit at a slower pace. In the United States, the fiscal situation is evolving. Other risks related to the global outlook, such as a hard landing in an economically important developing country or the risk of social unrest, have also diminished as a result of easing market tensions.

2.4. However, the World Bank foresees continuing fragility of the global economy in 2013. The fundamental problems of lack of growth and large debt and fiscal issues remain challenging in many developed countries, contributing to low growth. As demand continues to be subdued in developed countries, developing countries will focus on domestic-led growth – addressing structural reforms, improving governance, and investing in infrastructure, education, and health care – and South-South trade. Developing countries that continue the process of reform will probably be able to better weather potential market corrections in the coming year. Tensions in the MENA region remain a risk that could have a big impact on the global economy.

2.5. As inflation expectations seem to be anchored around 2-2.25% in developed markets, unconventional monetary programs (quantitative easing) are likely to continue this year, pushing liquidity to developing nations. After falling about 20% in 2012, overall net capital flows to developing countries are expected to recover in 2013 as result of improved equity flows (both foreign direct investment (FDI) and portfolio flows) and bank lending. However, net private bank flows in 2013 will still be only slightly over a third the 2008 levels. Reduced deleveraging pressures and pre-financing of future borrowing needs may lead to a decline in bond issuance as bank credit becomes more available. China, followed by Brazil, will continue to be the most favored FDI destination. A large share of the projected increase in overall capital flows, including FDI, is expected to be directed to ECA (however still not reaching pre-crisis levels in that region) and to South Asia.

DEVELOPMENT CHALLENGES AND CLIENT NEEDS

2.6. Persistent poverty and rising inequality. Even as aggregate global poverty has been reduced, 48% of the population of Sub-Saharan Africa (SSA), 36% of the population of South Asia and 14% of the population of East Asia and Pacific (EAP) are still living below the $1.25 poverty line4. More than 70% of people living on less than $1.25 per day are estimated to reside in middle-income countries (MICs)5. According to the World Bank, despite reduced inequality across countries over the last 25 years, within-country inequality has generally increased in most developing countries since 19806.

2.7. Long-term development challenges. Last year’s IFC Road Map described in detail several of the pressing long-term development challenges which affect progress to reduce poverty and inequality, all of which remain relevant areas for IFC to help address in FY14-16. To mention just a few: 200 million people globally are currently unemployed (for more detail see Chapter III); food security remains a burning issue, with nearly one billion hungry in the world7, the United Nations’(UN) Food and Agriculture Organization (FAO) Food Price Index still elevated in 20128, and the need to increase food production (net of food used for biofuels) by 70% to feed nine billion people by 20509; and climate change, which also exacerbates other challenges related to water, food, health, and conflict, and disproportionately affects the poorest countries.

4 http://data.worldbank.org/topic/poverty. 5 IFC calculations, based on Andy Sumner, “Global Poverty and the New Bottom Billion: What If Three-Quarters of the World’s Poor Live in Middle-Income Countries?”, Institute of Development Studies, September 2010. 6 Box 1.5 p. 33, World Bank Global Monitoring Report 2011. 7

FAO's “State of Food Insecurity in the World 2012” cites 868 million chronically undernourished in 2010-2012, virtually unchanged from 867 million in 2007-2009. These estimates are based on revised methodology using dietary energy supply. 8 FAO: Food Security Indicators http://www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/. 9 FAO: “How to Feed the World in 2050” http://www.fao.org/isfp/about/en/.

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2.8. Country-specific needs. In addition, developing countries have a range of needs depending on their country classification – the basis for IFC’s additionality framework10 – and stage of development11. A differentiated approach aligned with different situations in-country is thus key, for example: in IDA countries where capital is scarce and countries are moving up the developmental path, IFC continues to support a broad range of transactions. In Fragile and Conflict Situations (FCS), already acute development challenges have been exacerbated, and IFC would apply a differentiated approach depending on country context. In MICs, some of which may find themselves in the so-called middle income trap, innovation, inclusive business, climate change, and South-South investments provide great potential for IFC additionality (see Chapter III). IFC continuously refines its strategic thinking and improves its delivery capability to meet country-specific needs.

2.9. The needs of the private sector operating in developing countries. IFC plays a significant role in supporting the private sector in developing countries, providing not only much-needed financing, but also knowledge and partnerships, and helping manage risks and catalyzing the participation of others. For example, the most recent IFC Client Survey cites “long-term partner”, “financing not available elsewhere”, “loan maturity”, “stamp of approval”, and “resource mobilization” as clients’ top five reasons for working with IFC. IFC and the World Bank also help to create favorable conditions for private investment and help address private sector development constraints in areas such as finance, infrastructure and employee skills.

THE EVOLVING DEVELOPMENT FINANCE LANDSCAPE

2.10. The private sector financing activities of the IFIs (multilateral and bilateral development finance institutions) have continued to grow in recent years, although at a slower rate than the very rapid growth through 2007. Total IFI own-account private sector financing was $44 billion in 2011, up from $41 billion in 2010. While overall IFI volumes increased, there were variations among IFIs, with particularly strong showing from IFC, the European Bank for Reconstruction and Development and Inter-American Development Bank among multilaterals, and Deutsche Investitions- und Entwicklungsgesellschaft mbH (DEG) and Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO) among bilaterals. Preliminary numbers for 2012 indicate that volumes are likely to stay near the 2011 levels.

2.11. Following the pattern of previous years, the private sector operations of IFIs continue their strong focus on the financial sector and infrastructure, and additional areas of emphasis remain the Middle East, renewable energy (RE), and food security.

2.12. Collaboration among IFIs also continues to expand. Ongoing areas of IFI cooperation include the Busan Initiative12 follow-up, corporate governance, gender, and climate change. Joint efforts on development indicator harmonization, concessional finance, local currency finance, and integrity issues continue to be led by IFC. Since January 2012, IFC has been leading an outreach campaign in Europe to promote the themes of the report International Finance Institutions and Development Through the Private Sector13. In January 2013 IFC presented the key highlights of its Jobs Study where 28 IFIs presented a joint communiqué on “Contributing to Creating More and Better Jobs”14. Most recently, the Asian Development Bank (ADB)

10 As referenced in last year’s IFC Road Map (page 22). 11 The WDR 2013 on Jobs, in particular Chapter 6: “Diverse Jobs Agendas” offers the following stages of development from a jobs perspective: agrarian economies, conflict-affected countries, urbanizing countries, resource-rich countries, small island nations, countries with high youth unemployment, formalizing economies, and aging societies. 12 The Fourth High-Level Forum on Aid Effectiveness in Busan, South Korea, held at the end of 2011, recognized the central role of the private sector in achieving effective development cooperation and set out actions to achieve better public-private sector cooperation. 13 Published in 2011, a joint report of 31 multilateral and bilateral development finance institutions that have significant programs to promote private sector investment and assistance. http://www.developmentandtheprivatesector.org/. 14 http://www1.ifc.org/wps/wcm/connect/5588d5804e3463c6839dab7a9dd66321/Joint+IFI+Communique+-+Creating+More+and+Better+Jobs+With+Logos.pdf?MOD=AJPERES.

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invited all IFI heads to attend the 7th annual Corporate Governance meeting held in February, 2013 in Manila, Philippines.

2.13. Donors and other stakeholders increasingly recognize the role of private sector development. Non-traditional donors, including private foundations and philanthropies, continue to come to the fore, and the G-20 continues to be an increasingly important partner of development institutions.

IMPLICATIONS FOR IFC

2.14. Even with continued strong IFI private sector financing, the need for support for the private sector, especially in difficult markets, continues to exceed the supply. IFC is seeing a robust increase in demand across all regions – for its financing, and its integrated solutions to development challenges through the private sector – and it is well-placed to respond with its unique offering, which includes being part of the WBG.

2.15. In these circumstances, there is an opportunity for IFC to step up its partnership with the private sector to deliver greater impact, especially in difficult markets such as FCS, and for the WBG as a whole to be transformational through collaborative approaches that support, leverage, and complement, private sector activity. IFC’s leadership among private-sector focused IFIs in areas such as E&S and corporate governance, its track record of achievements and strong development results, as well as its global knowledge and footprint, place it in a good position to make a strong contribution to WBG efforts to eradicate extreme poverty and pursue shared prosperity.

2.16. At the same time, with continuing fragility in the global economy, IFC will remain vigilant and be ready to step in again with counter-cyclical approaches should the situation deteriorate, learning from the tools it developed and its experience over recent years.

III. A STRATEGIC FRAMEWORK FOR IFC’S RESPONSE

WBG GOALS

3.1. The WBG goals are to eradicate extreme poverty and pursue shared prosperity, taking into account the need to promote environmentally sustainable development. The goal of eradicating extreme poverty focuses on those living below $1.25 per day, leaving only residual frictional poverty – a few people falling in and out of extreme poverty. The shared prosperity goal will signal a need for action when growth of the bottom 40% in a country is lower than the average, recognizing that growth needs to be inclusive.

3.2. Eradicating extreme poverty and pursuing shared prosperity can only succeed through growth processes that are environmentally sustainable. Climate change and other environmental challenges threaten not only future poverty reduction but also the sustainability of past gains, achieved through decades of poverty reduction efforts.

IFC’S FIVE STRATEGIC FOCUS AREAS

3.3. As IFC works towards achieving the two WBG goals, IFC’s five Strategic Focus Areas (in place since 2004, with some evolution) constitute the framework for prioritizing its activities across IS, AS, and the AMC:

• Strengthening the focus on frontier markets – IDA countries, FCS, and frontier regions in non-IDA countries;

• Addressing climate change, and ensuring environmental and social sustainability;

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• Addressing constraints to private-sector growth in infrastructure, including water; health, education, and the food supply chain;

• Developing local financial markets through institution-building, the use of innovative financial products and mobilization, focusing on micro, small and medium enterprises (MSMEs); and

• Building and maintaining long-term client relationships with firms in developing countries, using the full range of IFC’s products and services, and assisting their cross-border growth.

3.4. IFC also continues to place a strong emphasis on gender as a cross-cutting theme.

3.5. Following the 2013 World Development Report (WDR) on Jobs and the IFC Jobs Study, IFC is also putting a special emphasis on jobs, which the majority of poor people consider their most likely pathway out of poverty (see Support for Private Sector Job Creation below).

BROAD-BASED GROWTH AND MORE DIRECT APPROACHES

3.6. IFC works towards the WBG goals through activities that support private-sector-led inclusive and sustainable growth, with care for the environment, across all five Strategic Focus Areas. It does so by harnessing IS, AS and the AMC to provide solutions that contribute to shared prosperity and benefit the poor both indirectly, through broad-based growth, and through more direct approaches. IFC’s work to create a strong and sustainable private sector in developing countries, acknowledged as a critical driver of growth and poverty reduction, complements the World Bank’s work with the public sector.

3.7. The following paragraphs describe how IFC is working across its five Strategic Focus Areas to contribute to the WBG goals, both indirectly and more directly. A broader discussion of its activities in each of the five Strategic Focus Areas can be found in Chapter IV. The subsequent section in this chapter will focus on the findings and implications of IFC’s Jobs Study.

3.8. IFC will continue its priority focus on frontier markets, where there is significant poverty and perceived riskiness deters the private sector from investing to support inclusive and sustainable growth. It will aim to have 45-50% of investment projects per year in IDA countries during FY14-16, and will increase its focus on FCS and other challenging IDA countries. In addition to the priority regions of SSA and MENA, IFC is proposing to increase its focus on South Asia, where a large share of the world’s poor reside. As IFC continues to learn more about its poverty impact, it will be better informed on how to best serve the needs of the poor regardless of location, such as in urban areas in non-IDA countries.

3.9. IFC’s focus on E&S sustainability and climate change directly contributes to environmentally sustainable development. IFC’s PS on Environmental and Social Sustainability also include protection for poor and vulnerable groups.

3.10. Physical infrastructure is essential for sustained poverty reduction. While specific impacts may vary by type of investment, by country, and time period, there is broad support in the literature15 for the positive relationship between the provision of infrastructure and economic growth. IFC’s Jobs Study (see below) confirmed that access to power is a key enabler for job creation, and other infrastructure services also significantly contribute to job creation. A range of infrastructure activities also support food security. In practice infrastructure investments also provide a range of more direct benefits to the poor and underserved16,

15 The poverty literature review on infrastructure highlights that the direct and indirect impact of different sectors vary. For example, investments with strong network effects, including investments in energy and telecom, have stronger positive impacts on growth. Further, while all infrastructure investments tend to have a larger impact on growth in poorer countries, transport investments in road and ports have a particular impact in developing countries. Rural roads and modern mobile networks show evidence of consistent impact on the poor. However, the strength of these impacts depends on the quality of implementing institutions, the regulatory environment and the degree of competition. 16 For a more detailed discussion about infrastructure benefits, please refer to Annex 2 to last year’s Road Map.

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and access to basic infrastructure services is often considered in broader definitions of poverty. Mobile telephony has both more direct benefits, such as increased access to communications, financial and other services, and a positive impact on economic welfare more broadly, including through job creation, improved productivity, and tax revenue. While supporting food security, a focus on the food supply chain also provides an opportunity to economically integrate poor farmers and SME suppliers. Health and education, as well as skills development, provide an opportunity for people to escape from poverty and otherwise improve lives, and also provide opportunities for countries to escape the middle-income trap.

3.11. Empirical evidence17 shows that improved access to finance supports broad-based growth as well as inclusion, thereby reducing income inequality and poverty. It is a problem particularly for SMEs (see Jobs Study below) which may account for up to four-fifths of job creation and two-thirds of employment in developing countries18. IFC is also a leading investor in microfinance.

3.12. IFC’s focus on South-South reflects the increasing importance of South-South capital flows, investment and other partnership activities to support sustainable growth and regional integration. IFC also aims to provide specific opportunities for poverty reduction for and through women. As IFC’s Job Study illustrated, providing opportunities for women not only benefits them, but also their families, companies and society.

3.13. While the bulk of IFC’s investment portfolio has a heavier emphasis on promoting broad-based growth, which indirectly benefits the poor and contributes to shared prosperity, IFC is also doing significant work through IS and AS emphasizing more direct approaches, such as access to finance for micro/individual and SME clients, access to mobile phones, the integration of smallholders in the food supply chain, and Inclusive Business Models. IFC’s Job Study demonstrated that many opportunities are created through the supply chains and distribution networks of its clients, particularly benefitting the poor. The deployment of the tool of blended finance, albeit in a very selective fashion in specific sectors and within a strictly defined framework, also supports a keener focus on the poor. IFC’s AS work plays an important role to create the right enabling environment for investment and private sector activity and build capacity in private sector companies to be more effective in poverty eradication and the pursuit of shared prosperity.

3.14. IFC will continue to engage in MICs where it can have a strong contribution to the WBG goals of shared prosperity and the eradication of extreme poverty. Broadly, IFC’s five Strategic Focus Areas apply to MICs as well as IDA countries, as they represent important areas where IFC can work with the private sector to achieve key impacts. Within this overall context, what distinguishes MICs from IDA countries is the generally greater access to external capital and the greater sophistication of the local markets. Thus, IFC engagements in MICs are distinguished by areas where the Corporation can still provide high levels of additionality within this environment. These areas were identified in the MIC strategy developed by IFC in 2010, and, as implemented over the last two years, cluster around five areas:

• Innovation, projects supporting new industries, products or processes to help achieve growth, job creation, and food security;

• Inclusion, for example, projects that address excluded groups – the poor, women, farmers, youth, SMEs;

• Frontier regions, projects in lower income states within MICs;

• Climate change, including RE, energy efficiency (EE) and related finance; and

• South-South/regional integration, for knowledge transfer, regional development, and growth.

3.15. Beyond this, the overall greater level of economic activity in MICs and greater alternatives to IFC mean IFC needs to be particularly selective in choosing engagements where there is the likelihood of high

17 Thorsten Beck, Asli Dermirguc-Kunt, Patrick Honohan, 2008. 18 Meghana Ayyagari, Asli Dermirguc-Kunt, Vojislav Maksimovic, 2011.

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levels of additionality and development impact. This includes the potential for transformational change, leveraging AS and IS and the WBG, and the potential to leverage other investors through mobilization. Finally, there is a higher bar for profitability in MICs, as the conditions for both strong development impact and strong returns are usually present.

3.16. IFC continues to sharpen its poverty focus as it implements its Poverty Action Plan (PAP). The poverty literature reviews conducted in FY12 provided IFC with a clearer understanding of the direct and indirect transmission links to poverty reduction of IFC’s activities for selected sectors and products across IFC’s investment and advisory operations19. That learning was used as guidance for regional and industry strategy formulation, and IFC is also working to incorporate the findings in project design to maximize impact, and in project documentation through appropriate articulation of expected poverty impacts. The reviews highlighted, among other things: (a) the potential of stronger impact when IS and AS are integrated; (b) evidence that indirect transmission links to the poor, that is through economic growth, productivity improvements, and indirect and induced employment generation, play the most important role for most sectors; and (c) that there are significant gaps in external evidence about impact on poverty in the current literature, which confirms the need for IFC’s evaluation strategy to fill these gaps. In FY13, a review for manufacturing was completed and additional reviews are being explored for climate change, retail and insurance.

3.17. The PAP also envisioned that IFC’s Development Outcome Tracking System (DOTS) would be strengthened to ensure that the emerging poverty links are better captured whenever it is appropriate to use targeted tracking indicators. The challenges in capturing poverty effects, including job creation, were discussed in detail in Annex 2 of last year’s Road Map. During FY13, IFC has been leading a process of harmonizing development outcome indicators for investment operations in the private sector with 20 other IFIs. The process is taking due account of whether poverty reduction outcomes can be systematically tracked through indicators.

3.18. At the same time, to help develop a better understanding of the poverty impact of the private sector, IFC is assessing the potential to scale up the use of the Simple Poverty Scorecard20 by private sector clients in a few strategic sectors, initially in agribusiness, education and access to finance for MSMEs. Intended for clients who already have in place systems to capture information about their consumers and suppliers, this additional monitoring and evaluation tool establishes a baseline of households’ poverty rates that can be tracked over time. The WBG/G-20 Global Agriculture and Food Security Program (GAFSP, see Chapter V) private-sector window, for example, has proposed to use these scorecards in its projects.

SUPPORT FOR PRIVATE SECTOR JOB CREATION

3.19. Jobs are the key pathway out of poverty, as illustrated both by interviews of over 60,000 people for “Voices of the Poor”21 and by the 2013 WDR on Jobs. Currently, 200 million people are unemployed globally, the unemployment rate for youth is more than 2.5 times higher than that of adults, and over 620 million young people are neither working nor in training. In addition, by 2020, 600 million jobs must be created in developing countries – mainly in Africa and Asia – just to keep employment rates constant. The private sector provides 90% of jobs in developing countries, and therefore plays a key role in creating the

19 There were 11 poverty literature reviews: Farmer and SME Training – FAST; Environmental, Social & Trade Standards – EST; Financial Infrastructure; SME Finance; Microfinance; Housing Finance; Infrastructure; Investment Climate; Manufacturing; Agriculture; and Tourism. 20 The Simple Poverty Scorecard is an easy-to-use, objective set of a few questions/indicators, developed with data from the Living Standards Measurement Survey (LSMS) for each country. It was developed by Marc Schreiner and adopted by the Grameen Foundation. Applying the Scorecard is easy because it comprises ten simple, verifiable indicators that can be collected in less than ten minutes. The Scorecard estimates the probability that the income of a household is below a given reference value. The Scorecard can be used not only to measure income levels at a point in time, but also—by applying it at two points in time—it can also estimate changes in income over time. 21 “Voices of the Poor”, WBG, 1999.

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new jobs needed. It is therefore crucial to understand the constraints that prevent the private sector from growing and generating jobs, and moreover, quality jobs.

3.20. IFC’s Jobs Study complements the WDR by focusing on practical experiences and examples on what can be done to support the private sector’s job creation activities. Findings are described in more detail in the box below.

BOX 1: FINDINGS OF IFC JOBS STUDY

1) Over 45,000 enterprises in 106 countries consider Access to Finance, Infrastructure, Investment Climate, and Skills &

Training as critical constraints. IFC’s Jobs Study illustrated how these constraints also significantly hinder job growth.

- Access to Finance is a problem particularly for SMEs (but also for larger enterprises). Improving access to finance, for

example through bank loans, can increase annual job growth by over 3%.

- Infrastructure: A reliable power supply is the most important issue for companies in LICs. In those countries, power from

a generator could add over 4% to annual job growth – and given that power from generators is very expensive, it is likely

that reliable power from the grid could have even greater impacts.

- Investment Climate: Informality is a key issue in MICs and for SMEs; taxation is also important. Simplifying regulations

could have significant job effects. For example, businesses benefitting from business entry reforms in Mexico grew

almost 3% faster, and combining entry reforms with other reforms is even more effective.

- Skills & Training is a key challenge for larger businesses and businesses in high-income countries, and SMEs tend to

invest much less in training than larger enterprises. What is most effective is to engage the private sector in identifying

skills needed, and to combine formal with on-the-job training.

2) The Jobs Study provides evidence of the significant job-creation effects that can come from removing constraints to these

factors, and identifies the specific conditions and activities necessary for the private sector to generate jobs.

3) Job creation effects are often much larger in supply chains and distribution networks of IFC clients (“indirect” jobs) than

“direct” jobs created in IFC client companies. These indirect jobs often provide opportunities for the poor. Only focusing on

direct jobs can be misleading. However, indirect jobs (as well as second-order growth-related jobs from improved services)

are difficult to measure. Better data and comprehensive methodologies are needed to create a more complete picture of job

creation resulting from specific activities and to clearly attribute the new jobs to these activities.

4) Company size matters. In general, while MSMEs tend to have higher rates of job growth in developing countries, larger

companies provide more sustainable jobs, are typically more productive, offer higher wages and more training, and support a

big multiple of the direct jobs they provide through their supply chains and distribution networks (which in particular provide

opportunities for the poor).

5) Higher labor productivity can be associated with faster employment growth.

6) Special attention must be paid to women and young people. Women and youth face specific and multifaceted employment

challenges, which need to be addressed through a comprehensive strategy. Women face particular obstacles, such as legal

and regulatory barriers, often a bigger burden from infrastructure constraints, less access to finance and at higher costs, and

often less access to the relevant education (to prepare students for private sector jobs) and higher-paying jobs. Removing

these constraints not only benefits women, but also their families, companies and their economies.

3.21. Implications for IFC and other IFIs include:

• Using a job lens in country, regional or sectoral strategies can help identify key constraints to job creation in specific contexts, since jobs challenges differ. Typically, the more severe a constraint, the bigger the job-creation effect from removing it. To maximize job creation effects it is often necessary to combine multiple approaches across the WBG. The jobs lens should consider – and attempt to strengthen – employment effects throughout supply chains and distribution networks, and take into account the creation of opportunities for women and youth issues in particular.

• A comprehensive approach is needed to decrease the mismatch of skills and employment, in particular for youth, and this requires partnerships among IFIs, the private sector, governments, education providers at different levels, and youth themselves.

• Training and skills development programs can be part of this comprehensive approach, and vocational training systems, which combine classroom with on-the-job training, show better results. It will be important to assess private sector needs for training and skills, and support private providers’ programs, particularly where education is combined with work experience. SMEs appear

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to invest too little in training compared to larger companies, but training (upgrading the skills of managers and workers) is important to help them move up the value chain to more productive activities and grow.

• Helping to strengthen client companies’ linkages to domestic suppliers and distribution networks is an effective way to reach the unskilled and reduce poverty.

• Supporting financial institutions (FIs) that serve MSMEs has proven to be efficient in reaching underserved and unserved groups. Microfinance plays a critical role in offering opportunities for self-employment; even though in many cases it will not result in significant job growth. SME finance, on the other hand, can result in significant job growth. Particularly in low-income countries (LICs) and lower-middle income countries (LMICs), credit to private enterprises, and particularly SMEs, is extremely scarce.

• Making it easier to establish or run a business, and relatively modest incentives to foster formalization, can help reduce informality, but only some informal enterprises will formalize. A key area for further analysis is to understand better how best to reduce obstacles and improve incentives to formalize, and which informal enterprises are most likely to formalize under the right conditions.

• The quality of jobs is as important as the quantity, both for companies and their supply chains. Improving conditions for workers also help companies improve productivity and product quality, and reduce risks and staff turnover.

3.22. The Jobs Study confirms that key elements of IFC’s overall strategy – on investment climate, infrastructure, access to finance, and training and skills – are crucial to support private sector job generation. Particularly in the areas of investment climate, access to finance and infrastructure, IFC already has a track record, and in the area of training and skills, IFC has started to scale up and take a more comprehensive approach, for example through the E4E Initiative for Arab Youth (E4E), in collaboration with the World Bank and with donor support.

3.23. IFC is also a standard-setter on quality jobs, for example IFC’s PS (in particular PS2 on labor and working conditions) have helped raised standards in emerging markets, and its Better Work Program collaboration with the International Labor Organization have helped improve supply chain standards in the garment sector. Through the Equator Principles, so far adopted by 79 FIs which currently cover the majority of project finance in emerging markets, PS2 has had reach well beyond IFC.

3.24. IFC has already started to deepen its jobs focus in activities combining IS and AS, such as through E4E, its work with supply chains, and gender programs, and with work on a value-added jobs strategy in manufacturing, and is following up on the jobs study with additional case studies to better understand employment creation impacts in key value chains. There are many areas, however, where a more job-focused approach could yield better results, and where collaboration among different actors – within IFC and beyond – is crucial.

3.25. IFC has therefore put in place a small team to focus exclusively on implementing the findings from IFC’s Jobs Study in three broad areas: (1) support for operations, that is helping teams implement findings, for example by applying a jobs lens to various activities, or working on strengthening value chains; (2) support for further analysis and data, both at the macro and micro (company) level; and (3) enhancing collaboration, both within the WBG and with other institutions, by sharing information and harmonizing methodologies among IFIs, and by working jointly to help create more and better jobs. There is significant interest in collaboration within the WBG and among the broader IFI community. At the conference to launch the IFC Jobs Study in January 2013, 28 IFIs issued a joint communiqué pledging to collaborate to create more and better jobs (see footnote 16).

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AN INTEGRATED RESULTS MEASUREMENT SYSTEM

3.26. IFC aims to remain a leader among IFIs as it continues to refine its integrated results measurement system for private sector development, which incorporates the IFC Development Goals (IDGs), DOTS for monitoring development results, and more systematic and strategic evaluations of results for both IS and AS. This will continue to be complemented by efforts to better monitor and articulate IFC’s additionality. IFC’s results measurement system will continue to be part of a feedback loop into operations and strategy. IFC’s work to strengthen the integrated results measurement system will continue within the context of broader WBG work to operationalize the overarching WBG goals and targets. In this process, IFC will expand the existing system to demonstrate how its activities are contributing to the WBG goals.

3.27. IFC will continue to roll out the IDGs. In FY11, IFC started testing IDGs to help drive implementation of strategy and business decision-making alongside other measures. The IDGs have also become an important tool to help drive alignment of activities across IS, AS and AMC. In FY13, IDG2 (improved health and education services) and IDG3 (increased access to financial services for micro/individual and SME clients) went live, that is were included in departmental scorecards and management’s performance objectives.

3.28. IFC continues to test three additional IDGs with the objective to go live in FY14: IDG1 – increased or improved sustainable farming opportunities, IDG4 – increased or improved infrastructure services (in utilities, transport and telecom), and IDG6a – greenhouse gas (GHG) emissions reduction.

3.29. IFC is also working on complementary metrics for agribusiness and climate change. It is also exploring the development of two more IDGs – initial work has started on goals for IFC’s contributions to economic growth and for firms benefiting from trade and regulatory services (see Annex IV).

BOX 2: IFC DEVELOPMENT GOALS

FY12

Targets

FY12 IDG

Commitments

Targets

(FY14-16)***

IDG Results

Delivered****

1 Increase or improve sustainable farming

opportunities for farmers m 0.4 1.0 4.6

2 Improve health and education services for people m 1.7 9.3 11.3

3 a) Increase access to financial services for

micro/individual clients for clients m 15.9 32.8 82.9

3 b) Increase access to financial services for

SME clients for clients m 1.2 1.5 4.6

4 Increase or improve infrastructure

services for people m 19.3 32.8 75.4

4 a) Utilities N/A 20.4 48.2

4 b) Transport N/A 11.2 8.7

4 c) Telecom N/A 1.2 18.5

5 Economic Growth/ Gross Value Added* $ m N/A N/A N/A

6 Greenhouse Gas Emissions Reduced m tCO2 eq/yr 1.7** 1.8 18.4

* IDG5 (Economic Growth / Gross Value Added) currently being piloted with no targets.

** IDG6 (Climate Change) FY12 targets and commitments refer to pilot two pilot regions only.

*** Pending final confirmation.

**** IFC will start reporting actual results delivered under IDG-contributing projects once the first full cohort of projects reports data,

likely at the end of FY14.

3.30. Part of the learning process relating to the IDGs has been establishing how to set appropriate targets. To be useful as an incentive tool, targets need to be reasonably within the power of operational management

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to achieve. Especially during a testing period, staff can be expected to propose targets that will not over-stretch them. At the same time constant overachievement of targets would raise legitimate questions as to their level of ambition. During the IDG testing period, two major challenges were identified in setting targets, including for the two IDGs that have since gone live: lumpiness of contributions, and adjustments to methodology. For example, more than half of the IDG2 FY12 commitment figure in Box 2 below was contributed by one project of an unprecedented size in India, while IDG4 commitments were unusually high as two of the largest concession agreements so far resulting from AS infrastructure mandates were signed in the same year. The target for IDG3a was significantly overachieved as a change in methodology that allowed counting additional financial products was agreed after the target had been set. Subsequent rounds of target-setting have taken account learning from these major challenges. IFC is also exploring whether three-year IDG targets would be more appropriate in the face of lumpy contributions.

3.31. IFC will continue to play the leading role in the process22 to harmonize IFI development outcome indicators for investment operations in the private sector towards a global reporting standard. As the harmonization efforts with other IFIs and the World Bank progress, the feasibility of harmonizing the indicators that underpin the IDGs will be assessed. Such harmonization might present opportunities for joint goals across institutions. In this context, IFC is working with the World Bank to assess the potential for alignment of the IDGs with Tier 2 indicators in the World Bank Corporate Scorecard. IFC and the World Bank are also currently piloting the development of joint results measurement frameworks for a set of joint regional projects.

3.32. DOTS, for IS, AS and AMC, will continue to be the monitoring tool which allows IFC to track progress and report on its clients development results. With the FY12 launch of a DOTS framework for its Global Trade Finance Program (GTFP), IFC has become the first IFI to track and measure the development results of trade finance. By end-FY12, as part of an initial pilot, GTFP DOTS had surveyed over 200 banks and collected over 6,000 data points, and initial results were presented to the Board in September 2012. The baseline data collection phase is on schedule, and IFC also continues to refine the DOTS framework to balance data value with operational feasibility of collection. In the process, it is actively engaging in a GTFP DOTS 360°-review with a cross-departmental team, and incorporating input from IEG.

3.33. IFC’s evaluation strategy, launched in FY12 and currently including around 30 evaluations per year, focuses on projects, products, sectors and programs, across IS and AS. It aims to identify successful practices to maximize impact, and disseminates lessons learnt internally and externally, when relevant. Planned evaluations will include poverty, jobs and gender lenses to improve IFC’s understanding of the impact of investment and advisory operations.

3.34. IFC continues to study the demonstration effects of investment operations. Preliminary findings include a set of projects with clear evidence of these effects, their related enabling factors, and some project design elements that might increase potential for demonstration effects.

IV. LEVERAGING THE PRIVATE SECTOR FOR HIGH IMPACT

4.1. While IFC will continue to implement its strategy in all of its five Strategic Focus Areas, it will put particular emphasis on certain geographies, sectors and themes over FY14-16. They are:

• FCS and other challenging IDA countries;

• South Asia;

• Agribusiness and the food supply chain (especially in SSA);

22The process is aimed at having a common set of core indicators to i) reduce the reporting burden imposed on shared clients by standardizing the information requested; ii) facilitate the learning process among IFIs; and iii) eventually be able to tell a shared development results story.

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• Infrastructure (especially in SSA); and

• Climate change. IFC will also focus on operationalizing the findings of its Jobs Study.

4.2. As it works towards greater impact in all of its Strategic Focus Areas, and in particular in the areas for increased emphasis, IFC will build on its strong performance to-date, take into account lessons learnt from past experience and evaluations (both from the Independent Evaluation Group (IEG) and the monitoring and evaluation activities of its own portfolio), and strengthen collaboration across the WBG and with its other partners.

4.3. In implementing its strategy, IFC will continue to focus on development impact and financial sustainability, as well on providing additionality to projects. A strong focus on managing towards results will be important, and IFC will continue to strengthen and expand its existing results measurement system, as discussed in Chapter III. In addition, as IFC pushes further into more frontier markets such as FCS it will become even more critical to focus on profitability and financial soundness, especially in light of the new rating methodology for multilateral lending institutions being applied by Standard & Poor’s (S&P). For IFC’s additionality and value proposition to clients, see Chapter I above.

AREAS OF INCREASED STRATEGIC EMPHASIS

4.4. FCS and other challenging IDA countries. FCS, an urgent development priority23, will be a key area for increased attention (see Chapter VI). The Harmonized List of FCS for FY1324 consists of 35 countries and territories, 31 of which are IDA-eligible. The majority (18) of FCS are in SSA25.

4.5. In most cases, these countries’ and territories’ already acute development challenges have been exacerbated by asset destruction, business disruption, low government capacity, and political instability. Alleviating the barriers to business growth – specifically access to power, access to finance, access to markets, enabling environments for business, and transparency/rule of law26 – will underpin IFC’s approach in FCS. As FCS include different country types with different challenges and needs, IFC has now developed a differentiated engagement strategy depending on context (Table 1 below). This approach to FCS – which will be implemented in coordination with the World Bank and MIGA – could also apply to certain countries which face similar challenges, but which are not currently on the official FCS list (for example Mali), and in other challenging IDA countries.

4.6. IFC is now on solid footing to deepen its engagement in FCS. It has assigned two IFC directors (one IS, one AS) to guide the mainstreaming of FCS into IFC’s operations, and has appointed a Global FCS Coordinator, supported by a small team. An FCS special initiative budget has been created to fund this effort, which includes support for knowledge management and critical operations, such as the additional expense of security for team missions to Iraq and funding for early scoping for investments in the SME sector in Côte d’Ivoire. IFC’s FCS investment volume and project count increased in FY12 compared to FY11, reversing a decline in recent years: own-account investment volume grew 4% to $537 million and project count grew 5% to 45; thus maintaining a 4% share of IFC own-account volume and 8% share of IFC project count. IFC’s AS program grew 21% to $31.1 million, helped significantly by IFC’s Conflict Affected States in Africa

23 As described in the 2011 WDR on Conflict, Security and Development. 24 The Harmonized FCS List is developed by World Bank in cooperation with the African Development Bank (AfDB) and ADB. The list is updated annually, based on the countries’ Country Policy & Institutional Assessment (CPIA) ratings and presence of peace-keeping and peace-building missions. 25 Following SSA, EAP has seven FCS, MENA six, ECA two, and Latin America and the Caribbean (LAC) and South Asia have one each. 26 According to World Bank Enterprise Survey data, 56% of firms in FCS report access to power as a major constraint to business, and 41% of firms in FCS report access to finance as a major constraint to business. In FCS, 41 days are required to import goods vs. 26 days for the global average (Doing Business 2013); over 70% of FCS rank in the bottom quartile of the Doing Business rankings; and 80% rank in the bottom quartile of Transparency International’s Corruption Perception Index.

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program, established in 2008 as a five-year program in partnership with donors to facilitate, support and accelerate private sector development work on the ground.

TABLE 1: A DIFFERENTIATED APPROACH TO IFC ENGAGEMENT IN FCS

4.7. While there is still room to refine IFC’s current approach, there is also great opportunity to deliver potentially transformational impact, and to significantly step-up its AS and IS programs in FY14-16. The level of increased impact and the potential growth trajectory of the IS and AS program would depend on the level of capital and budget resources that can be devoted to this development priority (see Chapter VI).

4.8. IFC will work closely with its WBG counterparts, which is key given the long-term engagement needed with continued focus on institution-building and public sector policy reforms (see Chapter V). This includes leveraging external partnerships with multilaterals, bilateral donors, and the UN, and, in alignment with the “New Deal” framework 27 , with the g7+ (a group of 18 FCS) 28 . IFC will also build on its relationships with external partners, such as by bringing investments and skills to FCS through existing and new inter-regional South-South partners (for example NBK in Iraq and DTB in Burundi) and combining financing, technology, and skills from MIC firms with IFC’s experience and local presence.

4.9. South Asia. IFC will also place increased emphasis on South Asia given the number of poor people in the region, in particular to grow activity in the frontier, including in Bangladesh, Sri Lanka, Nepal and the Low-Income States and North-East States (LIS) of India, as well as in Afghanistan and Pakistan. IFC expects South Asia to be one of the fastest-growing regions for IFC’s investment and advisory programs, and will aim to grow South Asia’s share of own-account investment volume to about 15% by FY16 (12% in FY12). IFC will also aim to more than double mobilization levels in South Asia from FY12 levels. This growth trajectory requires additional budget resources to support expansion of staff in frontier offices (see Chapter VI). The AS program in South Asia is expected to increase to 18% (from 16% in FY12), with South Asia and SSA at around half of total AS program by FY16 (46% in FY12). (See Annex I for the regional strategy update and Annex II for highlights of WBG collaboration in the region.)

4.10. Agribusiness and the food supply chain remain one of IFC’s top priorities. IFC continues to implement its Agribusiness Strategic Action Plan (ASAP), which is aligned with the 2008 WDR and the WBG Agriculture Action Plans of both FY10-12 and FY13-15, and which has the objectives of enhanced food security, enhanced economic development and inclusiveness, and companies’ integration of E&S

27 The New Deal constitutes a country-led framework for a path out of fragility. 28 g7+ member countries include: Afghanistan, Burundi, Central African Republic, Chad, Comoros, Côte d’Ivoire, Democratic Republic of Congo, Guinea, Guinea-Bissau, Haiti, Liberia, Papua New Guinea, Sierra Leone, Somalia, the Solomon Islands, South Sudan, Timor Leste and Togo.

Country type Mode of Engagement

Pacific Microstates Oversee via Pacific Regional Facility

Overt conflict/dangerous conditions Engage as/when conditions permit

Lacking political will to implement reforms Encourage reform on a limited/opportunistic basis

Weak investment climate (but political will) Focus on increased AS-led engagement

Increasing investment potential Focus on increased AS-IS

Countries not on the list Learn from above approaches

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sustainability as business drivers. In doing so, IFC will continue to pursue an integrated value chain approach, from farming inputs through retail operations, tailored to country needs. This involves a cross-departmental effort with strong alignment of IS and AS and robust collaboration across the WBG (see Chapter V).

4.11. IFC is currently implementing and developing new models for extending reach to farmers and SMEs, including through agri-commodities traders, irrigation and inputs companies, and warehouse finance. Emerging areas include land and water use management, agricultural risk management, supporting infrastructure, innovation around climate-smart agriculture, and more focus on mobilization.

4.12. IFC’s investments in this area are on a growth trajectory, with total volumes having doubled between FY11 and FY12, and IFC aims to continue to significantly increase total volumes through FY16. IFC also expects to significantly increase its agribusiness share of AS program to about 20% in FY16 (13% in FY12), with a specific focus on SSA, ECA, South Asia and EAP. IFC continues to test IDG1, related to increased or improved sustainable farming opportunities, with the objective for implementation in operations in FY14. This goal is currently measured by the incremental number of farmers reached by AS and IS projects signed or committed, and IFC is also working on a set of complementary metrics to capture additional aspects of its work in agribusiness (see Box 2 and Annex IV). In FY16, IFC aims to reach around two million farmers through its signed or committed investment and advisory projects, approximately double the FY12 commitments for IDG1.

4.13. The Agribusiness in Africa Special Initiative (AGASI) will be an important element of IFC’s commitment to this focus area. SSA holds great scope for expansion of food production, but faces several deep-seated challenges such as policy issues, access to infrastructure and finance, and land tenure and degradation. This calls for intensified WBG collaboration, which will include a joint priority country focus through deep dives to address public and private constraints to investment along the value chain (for more detail on WBG cooperation in this Strategic Focus Area, see Chapter V). Assuming a critical mass of dedicated staff in place, IFC aims to reach the AGASI objectives by FY18 (see Chapter VI).

4.14. IFC will continue to sharpen its focus on Infrastructure – expanding access and addressing bottlenecks for sustainable growth where it is needed most, notably in SSA and South Asia, as well as in IDA countries and frontier regions in non-IDA countries. IFC will support infrastructure projects that advance the climate change agenda, make positive contributions to food security and the agribusiness supply chain, and promote inclusive growth. IFC’s approach to infrastructure is an integral component of the WBG infrastructure strategy, which seeks to transform the WBG’s engagement in infrastructure across all sectors in order to respond to demands for more cross-cutting and integrated solutions that can lead to increased growth and more sustainable development.

4.15. IFC expects to substantially increase its share of own-account infrastructure investments to 15-17% by FY16 (11% in FY12). In addition, IFC will seek to mobilize a significant amount of financing from third parties, including through Public-Private Partnership (PPP) Mobilization and the IFC Global Infrastructure Fund (GIF). IFC’s AS program in infrastructure, including on PPPs, is expected to increase its program share to 20% (14% in FY12), with an emphasis on SSA, IDA countries in other regions, and FCS. IFC’s IDG4 – which relates to number of people reached with increased or improved infrastructure services – is now being refined for implementation in operations in FY14 (see Box 2).

4.16. Over FY14-16, IFC will also continue to selectively support extractive industry projects with high impact, notably those with the potential to transform economies. This area opens up several opportunities for WBG collaboration, especially in SSA.

4.17. IFC’s Special Initiative on Infrastructure in Africa (ASI), launched in 2011, is now fully operational. With recruitment nearing completion, current medium-term PPP pipeline-building activities are focused on

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Ghana, Kenya, Mozambique, Nigeria, Senegal, Tanzania, and Uganda. The initiative is a prime example of WBG collaboration, with engagement in upstream sector reform with the World Bank, and dedicated resources for collaboration with IDA on project development efforts.

4.18. Infrastructure is key to mainstreaming sustainability, EE and other climate change mitigation approaches. RE and EE investments accounted for about 70% of IFC’s power sector commitments in FY12, and are expected to remain a core activity. IFC will continue to seek out RE opportunities in grid-competitive wind and solar technologies, as well as in other technologies that become more cost-effective. In addition, it will pursue new climate-related areas such as transport and district heating, fuel conversion to clean natural gas, and intermediaries and corporate structures to wholesale small RE.

4.19. Having been specifically added to the five Strategic Focus Areas last year, water remains an important area of focus and future growth, and IFC continues to work towards broader transformation in the water and waste sectors through its Water and Waste Sector Business Plan. IFC expects to significantly increase investment volumes in water over current levels. The 2030 Water Resources Group (WRG), supported by bilateral development agencies, regional development banks and private sector companies and housed at IFC for the last year, has elevated awareness about the challenges and risks of water scarcity, supported the formation of PPPs, and provided hydro-economic analysis in Jordan, Mexico, South Africa and the Indian state of Karnataka. Then WRG now plans similar activities for Mongolia, Peru, Tanzania, and Bangladesh in FY13-14.

4.20. In telecommunications, IFC will continue to focus on high impact and innovative areas, such as broadband, shared/managed infrastructure services, media, ePayments and information technology (IT) enabled services.

4.21. Climate change. While a tremendous development challenge, climate change also provides significant and growing RE and EE market opportunities in developing countries, for example RE investments in developing countries totaled $89 billion in 2011. The private sector is key in delivering climate-smart solutions in terms of innovation, execution capacity, finance and cost-efficiency, and IFC is well-placed to catalyze this activity, especially as RE technologies become more cost-effective.

4.22. While IFC’s climate-related investments fell to 10% of IFC own-account volumes in FY12 (14% in FY11), IFC is confident that it can achieve its FY15 target of climate-related investments being at least 20% of annual long-term finance (LTF) and at least 10% of annual short-term finance (STF) commitment volumes. IFC also aims to increase the climate-related share of its AS program to 24% in FY16 (16% in FY12). Additional methodologies for IDG6a – GHG emissions reductions – were finalized at the beginning of FY13 and are being tested in all regions with the plan to implement this IDG in operations in FY14. IFC is also exploring an additional IDG sub-goal on carbon intensity in the most carbon-intensive sectors (see Annex IV). IFC will also continue to mobilize third-party funds for climate investing, such as through the $500 million IFC Catalyst Fund (see AMC below).

4.23. IFC’s climate business aspirations require pushing beyond business as usual. Internally, IFC’s increased focus on climate change, across IS and AS and all industries and regions, includes tracking climate-related investments on departmental scorecards, and reviewing its operations to make sure climate risks are fully reflected in investment and advisory decisions and portfolio management.

4.24. With regard to client needs, this includes scaling up existing RE, EE and efficient irrigation work programs using aggregation mechanisms such as financial intermediaries (FIs) and vendor finance, and launching more integrated IS and AS programs, such as with the IFC Green Building Strategy. It also includes continued demonstration investments in new business models and new technologies, using blended finance when necessary, within strictly defined principles. IFC is also exploring new areas such as waste to energy, and adaptation, through investments with IFC clients and through advisory programs. Working in

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MICs remains vital in order to achieve the highest mitigation impact in the most cost-effective way, benefiting all countries, but particularly the poorest countries which are least resilient to the impacts of climate change.

4.25. In the area of green growth, and pursuant to its Green Building Strategy, IFC is laying the groundwork for a green building certification program which could transform the market for green affordable housing in fast-growing urban areas. Using a simple green building certification system, the program aims to reduce information asymmetry among builders, buyers and bankers, thereby incentivizing development of low-carbon buildings and increasing private capital flows into the green building sector. This program targets developing countries, particularly MICs with a high population growth and urbanization trend. It is expected to increase IFC’s investments in green buildings through developer finance and lending to banks for green mortgages, while supporting countries’ migration to a greener development path. (See Chapter V for other examples of WBG cooperation in the area of Climate Change.)

AREAS OF MAINTAINED STRATEGIC EMPHASIS

4.26. Frontier markets. IFC will aim to have 45-50% of investment projects per year in IDA countries during FY14-16. IFC is also expecting that its AS program in IDA countries will be sustained at over 60% of IFC’s total AS program. In addition to having maintained its IDA project count within the range of 45-50% per year, non-blend IDA countries have consistently accounted for over half of IDA projects (see Annex V for IFC growth in IDA countries and other frontier markets). IFC will also continue with its focus on frontier regions in non-IDA countries. In addition, and as described in more detail in Chapter III, IFC’s overall work in non-IDA countries can be a strong contributor to the WBG goals to eradicate extreme poverty and pursue shared prosperity. As IFC continues to learn more about its poverty impact, it will be better placed to target specific poor populations.

4.27. SSA, IFC’s top regional priority, will remain one of the fastest-growing regions and is expected to surpass Latin America and the Caribbean (LAC) for the highest share of own-account volume by FY16 (around 22% from 18% in FY12), also increasing its share of total volume. The SSA share of IFC’s AS program will remain the highest, expected to grow to 32% by FY16 (29% in FY12). (See Annex I for the regional strategy update and Annex II for joint WBG approaches.)

4.28. MENA also remains an important regional priority. In FY12, IFC had a record year in MENA, showing strong counter-cyclical activity to boost investor confidence in the region post Arab-Spring. Bearing in mind the continued economic and political volatility in the region, IFC will aim to build its activity in MENA by supporting projects that have a strong demonstration impact and re-enforce the importance of the private sector for economic growth, while also addressing the core challenges of jobs, inclusion, and climate change. IFC will also continue to develop its equity program, and increasing investment and advisory engagement in FCS will be a key priority. The share of IFC’s AS program in MENA is also expected to increase, from 9% in FY12 to 10% in FY16. There is also significant opportunity for increased impact through MENA’s leadership in IFC’s South-South investment program as well as through implementation of joint WBG approaches. (See Annex I for the regional strategy update and Annex II for joint WBG approaches.)

4.29. Sustainability. IFC continues to be a global standard-setter in E&S risk management for private companies and FIs, and a leader on sustainability issues affecting the private sector. IFC helps clients and businesses at large to pro-actively manage ESG risks in a complex, dynamic sustainability landscape, finding sustainable solutions to address their specific challenges, as well as to identify possible business opportunities. IFC’s PS have become a recognized global benchmark and are a key component of the sustainability framework that guides IFC’s approach (for example resource management, sustainable supply chains, and community engagement). Work also continues at the firm and sector levels to promote broad

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market uptake of good ESG practices, particularly in agribusiness, extractives, cleaner production and green buildings. IFC leverages its global expertise, transfers knowledge globally, and convenes clients and partners around emerging sustainability areas. IFC also continues to build leadership in corporate governance, for example through the IFI Corporate Governance Development Framework 29 which is based on IFC’s methodology, in collaboration with almost 30 IFIs. More importantly, IFC is scaling up its ability to support its clients and promote corporate governance practices more systemically as part of a strategic focus on improving corporate governance standards.

4.30. Health and education. Health and education continue to be important focus areas for IFC, complementing the work of the public sector. IDG2 was one of the first two IDG’s to be implemented in operations in FY13, and for the FY14-16 period IFC is targeting improved health and education services for 11.3 million people through its committed and signed investment and advisory projects. Within the context of an updated education strategy and a health strategy currently being updated, IFC commitments are expected to grow in these areas, and IFC aspires to significantly scale up impact by FY20. Training and skills development are important elements of a comprehensive approach to decrease the mismatch of skills and employment, and as part of E4E. Health and education are emerging priority areas for IFC’s AS program. Opportunities for impact through integrated WBG strategies and joint interventions include E4E, Health in Africa, and the health sector in India (see Chapter V).

4.31. Local financial markets development. As described in Chapter III, improved access to finance supports both broad-based growth as well as inclusion, and lack of access to finance is a key constraint to job growth. Creating inclusive financial systems is therefore critical to private sector development and job creation. In response, IFC maintains its strong focus on improving financial inclusion for MSMEs, households and women, through programs with banks, microfinance institutions, housing finance companies, insurance companies, mobile service providers, and other FIs. IDG3 was one of the first two IDGs to be implemented in operations in FY13, and for the FY14-16 period, working with partners and clients, IFC is targeting providing increased access to financial services for 82.9 million micro/individual clients (50% of which women) and for 4.6 million SMEs (25% of which women-owned).

4.32. IFC’s broadly defined objectives for local financial markets development are to: (i) create inclusive access to finance – for underserved individuals and enterprises – with an emphasis on SMEs and job creation, and IDA countries and FCS, SSA, South Asia, and MENA, and including access for women, farmers and agribusinesses, South-South trade and investment flows, infrastructure, and climate and sustainability, deepening reach to create jobs and shared prosperity; (ii) build deep, efficient, competitive and innovative markets through integrated IS-AS approaches to deepen and broaden markets; and (iii) create profitable, stable and responsible “Partners in Development” by working closely with selected market participants that share IFC’s values and development goals (see Mobilization and Partnerships below).

4.33. Trade and supply chain (TSC) investments remain focused on IDA countries and FCS. New areas of TSC support are infrastructure (in particular performance and bid bonds to support project implementation), medium-term risk-sharing solutions along the lines of the Critical Commodity Finance Program (CCFP) to support equipment financing into emerging markets, and using GTFP to support energy-efficient and climate-related transactions. IFC will also continue combining IS and AS to lead innovation in access to finance and in strengthening financial infrastructure, particularly in IDA countries, FCS and SSA, with the SME deep dives in Nigeria and Côte d’Ivoire (see below) as good examples. The Access to Finance (A2F) share of AS program will remain relatively constant through FY16 at around 30%. IFC continues to expand

29 www.cgdevelopmentframework.com.

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its investor base and product mix for mobilization, increasing local currency financing and developing new products such as maturity put options, and sale of next installment participations.

4.34. South-South. Emerging market companies are increasingly investing on a global scale and South-South FDI has increasingly become a key source of financing for LICs and LMICs, as well as a means to transfer standards, knowledge and successful business models. Based on its track record and global presence, IFC is well positioned to be the partner of choice for sustainable South-South partnerships and investments, including to help build regional champions. There is also significant potential for impact through increased regional integration by catalyzing South-South investments – in terms of investment and job creation, provision of goods and services previously not available or not accessible, and of knowledge transfer.

4.35. To engage more strategically and proactively on South-South IS and AS opportunities, systematize South-South activities across IFC, and significantly scale up South-South support, IFC is putting in place a South-South Action Plan. This effort also builds on lessons learned from the South-South Emerging Markets to Africa Initiative under implementation. The Plan includes topics related to systems, incentives, staff learning, outreach and knowledge sharing.

4.36. Gender. A focus on women remains an important cross-cutting theme for IFC, and is a continuously growing component of IFC’s investment and advisory work. Indicators on women are included in DOTS and IDG3 on access to finance, while a network of gender champions is being created to ensure the promotion of business opportunities for and through women across IS and AS. Ongoing and new work to advance IFC’s gender focus in FY14-16 aim to:

• Expand opportunities for women entrepreneurs to grow their business with increased access to finance and access to markets, by supporting increased financing to women-owned SMEs at the country-level (for example through country SME deep dives), industry-level (for example through women-focused SME funds or the issuance of a gender bond), and firm-level (by way of joint IS-AS solutions for IFC partner FIs); and scaling up investment climate reforms based on the Women Business and Law diagnostic.

• Improve employment opportunities and working conditions for women in business by sharing the business case and codifying and implementing best practice from WINvest (a WBG Partnership Initiative with the private sector, with its Secretariat housed at IFC), and developing additional approaches that support women employment policies and practices of real sector clients; and develop IFC corporate targets around women’s employment.

• Improve firms’ understanding of women’s markets by developing a consumer road map for companies beyond the financial sector.

• Increase women’s voice as leaders and stakeholders by expanding training for women directors on corporate boards; and support identification of high caliber women for IFC directorships to meet or exceed IFC’s target of 30% of IFC nominee directors being women.

• Develop results measures for gender-focused activities.

4.37. SMEs. Given the important role of SMEs in developing countries, IFC has developed a broad range of IS and AS products and services focused on supporting SMEs in its markets. To better understand SME challenges and opportunities, strengthen its contribution to growth and employment through its SME activities, and demonstrate its thought leadership on this topic, IFC is currently working on a series of country SME deep dives, in Nigeria, Vietnam, Sri Lanka and Côte d’Ivoire. This work is also informed by in-depth thematic exercises, such as on value chains, gender, informality, and agriculture and rural SMEs. The Nigeria deep dive, the first to be undertaken, is currently in implementation phase and the action plan would envision IFC, through its partners, reaching up to 11% of the SMEs with financing gaps in Nigeria. A number of IS and AS engagements that are linked to the deep dive are being undertaken, or will be

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developed, under the umbrella of the Global SME Finance Initiative, supported by the United Kingdom’s Department for International Development.

4.38. Inclusive Business Models. IFC has worked for the past several years to identify Inclusive Business Models, which are used by innovative client companies pursuing both broad-based growth and inclusion of those living at the base of the pyramid (BOP)30. These commercially viable companies aim to provide direct benefit to the BOP through scalable market mechanisms. These inclusive businesses provide goods, services and livelihoods as they engage the BOP in their core business through their value chain, as suppliers/producers, distributors/retailers, and consumers/clients. Inclusive Business Models can be found in all regions and in many different sectors. Some inclusive business leaders may have started as social entrepreneurs that were able to reach commercial scale and appropriate funding.

4.39. IFC is the largest IFI investor in emerging market companies that serve the BOP by dollar volume, with over $7 billion in commitments in more than 300 companies in over 80 countries during the last seven years. In FY12 alone, IFC invested in 77 inclusive business projects amounting to more than $1.3 billion in commitment volume (around 9% of IFC’s FY12 commitments for its own account). IFC will continue to play a global catalytic role in this area to accelerate the uptake of Inclusive Business Models as a market-based solution for eradication of poverty and pursuit of shared prosperity.

ADVISORY SERVICES CONTRIBUTION TO STRATEGIC FOCUS AREAS

4.40. AS makes a substantial contribution to IFC’s development reach and impact, both by helping client governments improve the enabling environment for private sector investment, and by strengthening the capacity, standards and know-how of private sector clients, thereby extending IFC’s reach into challenging markets.

4.41. IFC’s experience, confirmed by IEG findings, shows that the development impact of AS can be magnified when strategies for AS and IS are aligned. IFC’s work with governments to improve the enabling environment, for example, can have a more substantial impact when IS helps to mobilize an investment response. For example, IFC helped Lao PDR modernize its banking law, in partnership with the World Bank, which paved the way for the country’s first private investment in the banking sector, which was supported by an IFC investment.

4.42. Similarly, providing AS to individual firms has greater impact when an investment relationship helps to strengthen the client’s commitment to implement the advice, and provides the resources to implement advice to scale across that client's operations. Examples include microfinance, SME banking, EE financing, corporate governance, and supply chain development in the agricultural sector. For example, a comprehensive advisory and investment approach to the agribusiness industry in Ukraine helped companies throughout the supply chain, for instance by facilitating access of farmers to agricultural inputs, improving food safety standards, as well as strengthening supply chain infrastructure. IFC’s engagement also led to a more efficient regulatory framework for the sector, and significantly increased apple exports.

4.43. AS make a substantial contribution to IFC’s shared priorities. AS is often IFC’s first offering in new or challenging markets. Over the next years AS will continue to deepen its synergies with IS and partnerships within the WBG, particularly with regards to agribusiness and the food supply chain, infrastructure, climate change, FCS, SMEs and gender. These synergies are reinforced through shared IDGs and reflected in a growing number of joint IS-AS/WBG strategies on a sub-regional, country and sector level.

4.44. These measures are being complemented by ongoing efforts to continually strengthen IFC’s AS business. Recent and ongoing reforms are touching nearly every aspect of IFC’s AS business, including

30 Market segment comprised of all people with income below $8 per day in purchasing power parity or who lack access to basic goods and services. Also see The Next Four Billion, IFC/WRI 2007.

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deepening partnerships within WBG and beyond, strengthening results measurement systems, and improving talent and funding models.

MOBILIZATION AND PARTNERSHIPS

4.45. Mobilization is a key component of IFC’s Articles of Agreement and continues to remain central to IFC’s business model. Catalyzing additional private sector investment to leverage IFC activities both increases IFC’s reach and scales impact. IFC specifically measures and reports on core mobilization activities where IFC’s additionality has been demonstrated, and recognition of its role confirmed, through a fee-for-service model. As described in last year’s Road Map, four key platforms currently account for core mobilization activities.

• IFC’s Syndicated Loan Program will remain a key component of core mobilization with volume growth driven by external demand for IFC-originated deals. Diversifying the partner base by proactively engaging emerging market banks, including in South-South transactions, will remain a key focus for the program. In addition, through product innovation, IFC aims to grow the level of institutional (pension funds, insurance companies) investment in syndicated loans.

• AMC will continue to be an important mechanism for increasing IFC’s development impact and reach in its strategic focus areas by mobilizing third-party capital to expand the supply of long-term finance in developing countries, while at the same time allowing investors to access IFC’s global investment pipeline, network of relationships, and standards. By helping to channel investor money to developing countries, AMC strengthens the demonstration effect of IFC’s projects vis-à-vis other capital providers, increases the number and size of projects that IFC finances, and supports attainment of the IDGs. AMC is more fully discussed below.

• IFC’s TSC financing activities through Initiatives such as the Global Trade Liquidity Program (GTLP) and CCFP programs have to date been highly successful in mobilizing third party capital. With the worst of the crisis behind us, TSC platforms and new products could be a key contributor to IFC mobilization going forward.

• Volumes from PPP mobilization are not linear and as such it is expected that there will be continuing volatility in high and low amounts for PPP mobilization depending on the size and scale of the relevant PPP project activity.

4.46. AMC had $4.7 billion of assets under management at the end of the first half of FY13, across five funds, and had made investment commitments of $2.4 billion in 34 emerging markets companies, of which $1.6 billion was mobilized from third parties. The current funds managed by AMC are:

• IFC Capitalization Fund (comprised of an Equity Fund and a Subordinated Debt Fund, collectively called the “Cap Fund”), a $3 billion fund focused on making equity or equity-related investments in, and subordinated loans to, large domestic commercial private banks (or state-owned banks on a clear path to privatization) in emerging markets. Since inception, the Cap Fund has made investments of $1.74 billion to 16 banking institutions.

• Africa Capitalization Fund (“AfCap Fund”), a $182 million fund which makes equity and equity-related investments in banking institutions in continental Africa. Since inception, AfCap Fund has made investments of $84 million in five banking institutions.

• IFC African, Latin American and Caribbean Fund (“ALAC Fund”), a $1 billion fund which focuses on making equity and equity-related investments in SSA and LAC. Since inception, the ALAC Fund has made investments of $550 million in 16 companies.

• IFC Russian Bank Capitalization Fund (“RBCF”) has $275 million in capital commitments as of its first close in June 2012. RBCF makes equity and equity-related investments in commercial banks in Russia. To-date, RBCF has made investments of $78 million in two banking institutions in Russia.

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• IFC Catalyst Fund (“Catalyst Fund”) is a fund-of-funds with a target size of $500 million, which will invest in private equity funds focused on providing capital for companies that enable resource efficiency and develop low-carbon products and services in emerging markets. The Catalyst Fund had its first close in December 2012 with $281.5 million of capital commitments.

4.47. AMC is expecting to have the first close of the GIF in FY13, and will continue to raise funds for the Catalyst Fund and GIF to increase the size of these funds from their first close. AMC will also continue to develop the MENA Fund, which it aims to close in FY14. AMC will develop other fund ideas and bring them forward for the Board’s consideration; these funds could include a follow-on fund to the Cap Fund, a Global Fund-of-Funds, an Asia Fund and a Climate Debt Fund – although the precise fund mix and size will be dependent on IFC’s future growth plans, strategic focus, and investor appetite. As the existing funds continue to invest and new funds are brought on-stream, AMC is projecting that assets under management will continue to grow above the current level and annual investment commitments will approach $1 billion in the next several years.

4.48. IFC has traditionally leveraged funding for core mobilization from commercial banks and IFIs. Building on AMC efforts to broaden investor relationships and on existing relationships that IFC has through its Treasury and Syndicated Loan Program operations, opportunity exists to increasingly tap the larger pools of global institutional investment, and in particular the growing savings and pension funds in IFC client countries. Mobilizing capital from this investor base may require the development of innovative solutions and products, particularly in local capital markets.

4.49. FY12 was the first full year of blended finance operations after IFC formalized its approach through its presentation to the Board in March 2012. IFC’s blended finance approach covers work in the area of climate change, food security and agribusiness and SME lending, with the funding for these activities coming from donors. IFC employs a series of principles for blended financing which ensure that deployment is selective and disciplined, including the need to minimize the embedded subsidy element in order to promote long-term sustainability. IFC will update the Board at the end of FY13 on blended finance activities during the year. This work continues to remain a small proportion (by dollar volume) of IFC’s overall climate, agribusiness and SME programs.

4.50. Partners in Development. IFC has a number of major relationships with leading FIs. These clients share IFC’s values and are important partners in delivering development impact in their markets. Often, IFC is able to engage in multiple projects and sectors with these partners, increasing development impact through innovative solutions, while generating positive financial returns for IFC. Over time, these relationships have evolved to such an extent that IFC can work closely with these partners on its development agenda. For this select group of about 100 Financial Markets clients (out of 900), IFC now plans to put more structure around and operationalize an approach called “Partners in Development” which it will bring to the Board for discussion.

4.51. This approach would move away from being project-based to relationship-based. To do this, IFC plans to implement annual capital envelopes for these partners as well as to develop Relationship Engagement Plans as a basis for introducing delegated authority for this select group of relationships. These plans will address how IFC can bring all of its resources and capabilities to those partners to address both their strategic and business objectives as well as the WBG’s development priorities. This approach should increase both development impact and operating efficiency, as IFC will be able to respond more quickly and flexibly to the needs of its important clients and partners under pre-approved capital limits, rather than through individually approved projects.

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V. WORLD BANK GROUP COOPERATION FOR HIGH IMPACT

5.1. Close cooperation within the WBG to support, leverage, and complement private sector activity is essential to achieving the overarching WBG goals. IFC will continue to build on a foundation of enhanced strategic, program and project cooperation within the broader WBG, through collaboration at sector, thematic, regional and country levels, including some high impact approaches.

5.2. One important area for collaboration is work on the investment climate, which is jointly managed by two directors and reports to both IFC and the Financial and Private Sector Development Vice Presidency (FPD) of the World Bank. IFC and FPD also work closely together in a range of other areas, including on capital markets reforms (see Strategic Focus Areas below). IFC and MIGA will also build on the early successes of the IFC/MIGA business development partnership (see IFC/MIGA below).

5.3. Ongoing and planned WBG collaboration for FY14-16 include more concerted efforts to develop and implement joint approaches for potentially transformational impact. This will happen across IFC’s strategic focus areas, and at regional and country levels, including through joint business plans (JBPs). Many of the examples described in this chapter and in Annex II are in IDA countries, with some specific to FCS, and incorporate learning from prior collaborations.

STRATEGIC FOCUS AREAS

5.4. IDA countries. The rapid growth of IFC involvement in IDA countries, in both investment and advisory services, has been supported by enhanced joint work with other members of the WBG, IFIs, donor partners and strategic clients. Going forward, WBG collaboration in IDA countries31 will continue to grow, supporting increased impact through private sector development. Many of these examples will be in FCS, as described in more detail below.

5.5. FCS. This development priority requires a joint WBG approach. One such avenue is through JBPs at the country level. These JBPs will outline a joint World Bank-IFC-MIGA approach to promoting private sector investment in-country, and will involve either single- or multi-sector approaches, depending on the country context. JBPs are planned for all active FCS by the end of FY16. Several are currently in preparation, including Côte d’Ivoire, Myanmar, and Nepal. In Nepal, the WBG will support the energy sector, particularly in hydro-power. In Côte d’Ivoire, the JBP will build and expand on existing efforts such as the ongoing WBG program to put into place the building blocks for increased business activity, investor confidence and improved risk perception. In addition, IDA, IFC and MIGA have collaborated on critical power sector improvements, notably the Azito Independent Power Plant (IPP) which was financed earlier in FY13. In Myanmar, the WBG will collaborate on institutional and regulatory reform, transforming the power sector, and supporting the growth of microfinance and SME banking.

5.6. In addition, enhanced coordination between the IFC office and the World Bank Global Center for Conflict, Security and Development in Nairobi, as well as WBG co-location at country level, will reinforce opportunities for greater impact. IFC will continue to participate in the World Bank’s Community of Practice for FCS, a program designed to encourage innovative and creative thinking about development solutions in FCS, with a particular focus on design and implementation of operations.

5.7. Sustainability and climate change. While private sector innovation and resources are key, governments play an equally important role in creating the appropriate enabling environment to stimulate private sector investment, and IFC and the World Bank will continue to work closely together. Specific examples of ongoing collaboration include sustainable cities/green buildings and climate change adaptation. Pursuant to its Green Building Strategy, which speaks directly to the World Bank’s focus on sustainable

31 IFC and IDA are in the process of discussion on how to strengthen their cooperation.

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cities, IFC aims to reduce the GHG intensity of cities by leveraging the World Bank’s strengths on regulatory reform in building codes and IFC’s engagement with builders and bankers. Another example of collaboration is the Pilot Program for Climate Resilience, which supports market transformation to build resilience among farmers in the face of climate change across five countries (Zambia, Mozambique, Niger, Nepal, and Bangladesh). IFC and the World Bank are also expanding their joint Lighting Africa Program across the African continent and into India.

5.8. Pursuant to the WBG Environment Strategy, IFC and the World Bank are stepping up collaboration around emerging sustainability issues and promoting partnerships for sustainable use of natural resources. The WBG also has an expanding number of financial products for businesses to help them mitigate climate change and ensure E&S sustainability. The World Bank has adopted IFC’s PS in relation to its private sector activity which, along with MIGA, means there is now a common WBG approach to E&S standards for the private sector. Globally, IFC and the World Bank will continue to play a pivotal role in climate finance by deepening carbon markets, advising on the development of funding mechanisms such as the Green Climate Fund32, and working jointly to establish consensus in the development community around climate-related investment definitions and GHG accounting.

5.9. Agribusiness and the food supply chain. This focus area provides ample opportunity for WBG collaboration towards potentially transformative impact. Beyond ASAP and AGASI, described in more detail above, other examples of collaboration for impact at the sector level include an integrated WBG approach to the palm oil sector, and a food safety platform tailored to the needs of emerging markets. In addition, GAFSP is an integrated global response to food security challenges in the poorest countries, with overall program coordination provided by the World Bank and IFC providing leadership on private sector investment activities. The IFC-managed private sector window aims to support and scale up inclusive business models and innovative private sector solutions with a focus on improving livelihoods of smallholder and SME farmers. By way of example, IFC and GAFSP have invested in Root Capital (“Root”), a social enterprise fund that makes market linkages and delivers credit and financial training to agricultural SMEs across SSA and LAC. This financial package will enable the transformation of Root’s primary lending arm into a financially sustainable entity, and will enable Root to reach an additional 300,000 farmers over the next five years. GAFSP is also looking to provide $20 million in risk mitigation instruments to IFC’s Global Warehouse Finance Program (GWFP) to support projects in IDA countries. For future pipeline, IFC has received almost 90 investment proposals as part of the GAFSP Public Call for Proposals.

5.10. Infrastructure. The joint WBG Infrastructure Strategy mentioned in Chapter IV provided the framework for joint approaches such as joint IFC/IDA/MIGA power sector projects in Africa in FY12, including KPLC and the Thika IPP in Kenya, and the Kribi IPP in Cameroon. Joint projects in other sectors include Simandou in Guinea, where IFC is supporting – in conjunction with IDA efforts to improve governance and the regulatory framework – the development of the country’s iron ore resources that will generate substantial benefits in the form of infrastructure, jobs, community programs and government revenues. Another joint initiative, among the World Bank, Islamic Development Bank, IFC and other partners, is the Arab Infrastructure Investment Vehicle, a private-sector window related to the Arab Financing Facility for Infrastructure and a complementary Technical Assistance Facility.

5.11. The WBG Singapore office, launched as a global center of excellence for infrastructure, continues to deliver a range of integrated services and products to private and public sector clients globally.

32 The Green Climate Fund was designated as an operating entity of the financial mechanism of the United Nations Framework Convention on Climate Change (UNFCCC).

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5.12. Health and education. Opportunities for impact through joint interventions include:

5.13. E4E. After a flagship report which drew attention to a potential complementary role of the private sector in providing quality, relevant post-secondary education and training, the Initiative has moved into implementation in four priority countries: Egypt, Jordan, Morocco and Tunisia. In each country, specific target sectors are identified for piloting joint industry-education solutions building on IS and AS; the common sectors across the four countries are construction, information and communication technology, health care and tourism. The initiative aims to catalyze stakeholders, particularly by leveraging IFC partnerships, in order to drive strong local ownership and create replicable models of E4E solutions. A direct student reach of 180,000 is targeted by FY18. The Initiative includes direct investments in education and training providers, as well as policy and regulatory reforms, industry standards, support for educational institutions and potential financing for student loans.

5.14. Health in Africa. Ongoing follow-up from the original 2007 study and the 2011 flagship report, which highlighted the opportunity and role of the private sector in the health sector in Africa, include analysis and advisory engagements in eight countries, the creation of two sector investment funds which have made 16 investments, and seven direct investments by IFC. Building on IFC advisory assistance, the Kenya Health Bill of 2012 created equal opportunity for public and private providers, ultimately expanding coverage through the private sector, reaching up to 2 million beneficiaries.

5.15. Health sector in India. This joint initiative leverages the role of the private sector for impact, supporting and scaling up innovating models. The joint team is identifying two focus states to initially pilot, including Uttar Pradesh where there is a comprehensive existing World Bank project. The team has also been actively supporting Meghalaya through PPP engagements in the area of a government-sponsored insurance scheme and a medical college. In addition, the team is exploring the establishment of health specific fund in India.

5.16. Local financial markets development. IFC is working together with the World Bank to develop a WBG-wide Capital Markets Development strategy. Over the next 12 months, joint IFC/World Bank teams will complete six deep dive country strategies, working in jointly selected countries to develop a comprehensive WBG approach to develop capital markets that can deepen financial access and reduce overall intermediation costs.

5.17. Existing examples of collaboration include joint work on local bond market development, insurance initiatives including in SSA and Haiti, and outreach to SMEs as well as women entrepreneurs. Going forward, joint opportunities include a Pacific Catastrophe Insurance program, and deepening financial inclusion in India and China through microfinance and financial infrastructure reform.

REGIONAL COOPERATION

5.18. Building on their collaboration on joint Country Assistance Strategies (CASs) and Country Partnership Strategies (CPSs), regions, with EAP taking the lead, have in recent years enhanced their joint WBG efforts at country level, and fostered a greater sense of being part of one WBG team. For the FY14-16 period, they have now made concerted efforts to prioritize joint country-level activities. Below is a summary, with more detail contained in Annex II.

5.19. In EAP and South Asia, in addition to further integration of joint work on priority country and sector strategies, including joint business plans, there have been ten projects identified for World Bank and IFC collaboration in FY14-16. These cover a range of countries (six in EAP, and four in South Asia), and focus on agribusiness, infrastructure (especially power), financial inclusion, gender and health. Both regions have joint work in FCS: the energy and finance sectors in Myanmar, and the power sector in Nepal.

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5.20. In SSA, IFC intends to leverage WBG capacity and partnerships through activities that have a clear line of sight to poverty reduction and shared prosperity. There are a diverse set of areas, ranging from JBPs for specific sectors and countries, complementary work on investment climate reform, and collaboration at the project level in areas such as power, water and mining. One example of a potentially transformative joint effort is the Nigeria Joint IDA-IFC-MIGA Energy Business Plan (see box below)

BOX 3: NIGERIA JOINT IDA-IFC-MIGA ENERGY BUSINESS PLAN

Project description: The Joint IDA-IFC-MIGA Energy Business Plan (EBP) is designed to optimize the WBG’s resources and

support to the Federal Government of Nigeria (FGN) to accelerate implementation of the Power Sector Reform Roadmap and

attract private investment to the power sector value chain. Under the EBP, the WBG’s first target would be the delivery of an

initial batch of pilot Independent Power Plants (IPP) for a total additional power generation capacity of approximately 1,500

MW. The WBG will also provide a broad range of support and advisory services to help achieve the longer-term objective of

increasing Nigeria’s total target installed capacity of 40,000MW (through diverse technologies, both conventional and

renewable) by 2020. In addition, the WBG has committed to: (i) supporting and potential investing in the privatized

distribution companies, and gas-to-power infrastructure in support of FGN’s long-term expectation of 75% electrification by

2025; and (ii) providing off-grid renewable energy (solar) solutions to the BOP through solar lanterns, cookstoves and other

solar products through implementation of the Lighting Africa program in Nigeria.

Expected additionality/development impact: The Power Sector Reforms in Nigeria encompass the entire power sector value

chain – from upstream gas development and related transport infrastructure, through generation and transmission, to

distribution and end-user tariffs. As such, the amount of credit enhancement support required in the short- to medium-term

transition period has the potential to be significant when consolidated across the full sector. More specifically, on power

generation, it is expected that the EBP will have a major impact to help reduce current power shortages in the country

(potentially estimated at 30,000MW) and the country’s ability to generate electricity at a competitive tariff with gas-fired

power plants versus mostly fuel-based generation currently.

Roles of World Bank/IFC/MIGA and status of collaboration: IDA already provides a comprehensive power program focusing

on (i) improving the gas network and its financial sustainability; (ii) supporting generation projects through institutional

reforms, development of power purchase agreements and the nomination of fourteen IPPs for the partial risk guarantee

program; (iii) providing technical assistance and financing to transmission and distribution projects; and (iv) increasing

electricity access. IFC is already engaged in negotiating investment agreements to develop and/or finance three IPPs for a

combined 1,400MW, and currently reviewing network expansion financing opportunities for a couple of privatized distribution

companies. MIGA is expected to bring termination guarantees and other investment guarantees as well as its dispute

resolution expertise to projects developed under the EBP.

5.21. In ECA, in a series of recent joint regional, sub-regional and country management team discussions IFC and the World Bank have agreed on modes of collaboration and a number of priority areas for joint review, development and implementation. These areas span a range of themes, including food security, climate change, regulatory reform for increased investment, sub-national finance, capital markets development, and health and education, and a range of sub-regions and countries, including the Western Balkans, Central Asia, Turkey, Russia and Ukraine.

5.22. In MENA, several ideas for joint WBG work have been identified at recent joint regional management team meetings, and proposals in early stages of preparation and discussion are being developed in the areas of solid waste management in Morocco, employment and training in Tunisia and Morocco, and housing finance in Saudi Arabia. In Pakistan and Afghanistan33, potential areas of collaboration include energy, access to finance and infrastructure, including enhancing mobile financial services.

5.23. In LAC, World Bank and IFC regional management have discussed areas of closer collaboration, and established working groups on competitiveness, energy, extractive industries, innovation, PPPs, small states, and Haiti to determine joint action. In the meantime, collaboration between the World Bank and IFC AS in LAC continues.

33 Program and impact in South Asia are contributed to both by the IFC MENA Region (Afghanistan and Pakistan) and the IFC South Asia Region (rest of the sub-continent).

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IFC/MIGA

5.24. Cooperation across the WBG is increasingly essential to meeting the Group’s objectives. In particular, IFC and MIGA are stimulating joint business development and knowledge-sharing while providing joint solutions to clients with high development impact and operational results.

5.25. Following a strong FY12, a more effective IFC/MIGA collaboration to business development is leading to a solid performance in FY13. For the first seven months of FY13, IFC/MIGA jointly delivered $335.6 million of new business compared to $201 million in FY12. Consistent with IFC and MIGA strategic priorities, the program continues to target South-South investments and IDA countries – all six projects in the first seven months of FY13 are in IDA countries.

5.26. The IFC-MIGA program has now built the foundation for stronger cooperation and transformational project development to stimulate private sector activity leading to growth and greater development impact. In the next three years, the scaling up efforts will continue to be in strategic priority areas including IDA countries, FCS and South-South investments, with a focus on agribusiness, financial and infrastructure sectors.

VI. STRATEGIC SCENARIO

PROGRAM SCENARIO

6.1. For the FY14-16 period, IFC will continue to pursue its own-account investment and its advisory program growth within its projected capital and budget resources, directing these resources to where development impact is greatest. It will also ensure its own financial sustainability through diversification in the geography, sector and product mix of its investment projects. IFC is increasingly considering Economic Capital (EC), portfolio impacts and profitability to guide the level and mix of its business (see Chapter VII).

6.2. In FY14-16 IFC would deliver greater impact through increased support of private-sector-led growth and job creation in pursuit of the WBG goals. IFC would grow more strongly in FY13-16 as it responds to increasing demand for its products and services, in particular for LTF and equity. IFC would also aim to significantly increase its operations in FCS and other challenging IDA countries. This scenario foresees:

• From FY13-16, 5-6% annual growth in LTF34 commitment volumes for own account; 5-6% annual growth in STF35 volume for own account; and 12-13% annual growth in mobilization volume; equity is expected to be 25-26% of LTF, in line with IFC’s equity strategy;

• A significant step-up in IFC’s IS business in FCS by FY16 and greater emphasis on other challenging IDA countries, including through a critical mass of investment staff dedicated to FCS, placed closer to where the needs are; and through enhanced risk cover, supported by increased operational flexibility, for higher risk projects, which would be scalable to give IFC the ability to adjust depending on available resources, and to work with other members of the WBG to support the private sector in these countries;

• A significant step-up in IFC’s AS program in FCS by FY16;

• A budget increase of around 4% in real terms in FY14, to support the special effort in FCS and other challenging IDA countries, the additional investment program growth; and increases in information technology expenses and other non-discretionary items; and

• Reallocation of resources, including to AGASI and South Asia.

34 Traditional long-tenor products of equity and long-term debt, as well as some supply chain products such as the GWFP, crisis-related GTLP and CCFP, and other TSC products (Structured Trade, Distributor Finance and Working Capital Systemic Solutions). 35 GTFP and GTSF.

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FIGURE 1: INVESTMENT PROJECTIONS FY14-16

TABLE 2: INVESTMENT PROJECTIONS FY14-16

6.3. Implementation. IFC would continue to grow in response to increasing client demand across its strategic focus areas, and in particular in those areas for greater implementation emphasis discussed in Chapter IV. In addition, IFC would put in place a special effort in FCS and other challenging IDA countries across IS and AS, with a main focus on access to infrastructure (especially power), access to finance, and access to markets.

6.4. FCS. Working in FCS and other challenging IDA environments often presents additional difficulties, for example untested legal environments in which it is not possible to ensure adequate collateral for IFC’s investments. IFC’s experience in FCS shows that development results in IS have been volatile, and about 20% lower than non-FCS due to higher risks, although, given the difficult operating environment, this level of results could be considered satisfactory. Risk-adjusted returns for both loan and equity have also been lower than for non-FCS projects, although financial returns excluding costs were actually higher. IFC has also looked at its experience investing in very small projects in difficult markets through its Africa Enterprise Facility and Small Enterprise Facility. Overall, these small direct investments performed poorly, with a high percentage of non-performing loans compared to the rest of IFC’s business.

6.5. Given the challenges described above, IFC has looked at lessons from its past experience in FCS and small projects, and would learn from these in the implementation of its revised FCS approach. These lessons include that local presence and specialization are critical, structuring is crucial, intermediation through local FIs and other institutions improves chances of success, project size matters (larger projects are more able to overcome challenging environments) and an increased level of targeted AS is needed.

Commitment Volume $ Billions FY12A FY13E FY14P FY15P FY16P CAGR FY13E-FY16P

Long-Term Finance 9.2 10.4 - 10.6 11.2 - 11.5 11.7 -12.0 12.1 - 12.5 5-6%

Short-Term Finance 6.2 6.2 - 6.4 6.7 - 6.9 7.1 - 7.3 7.2 - 7.5 5-6%

Total IFC Own Account 15.5 16.6 - 17.0 17.9 - 18.4 18.8 -19.3 19.3 - 20.0 5-6%

Mobilization 4.9 5.3 - 5.5 6.3 - 6.4 6.8 - 7.0 7.5 - 7.7 12-13%

Total (Own Account + Mobilization) 20.4 21.9 - 22.5 24.2 - 24.8 25.6 - 26.3 26.8 - 27.7 7-8%

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6.6. IFC’s expected impact in these countries would come not only through program growth, but also through its efforts to catalyze higher risk projects which meet certain criteria. Overall, IFC envisages36 that investments in FCS would increase by at least 50% above FY12 levels by FY16, and AS would continue to grow strongly with the aim of reaching over 20% of the total AS program by FY16 (up from 18% in FY12). The AS program levels could be higher, if AS partners are able to mobilize additional resources. The IS program levels could also be higher, as the enhanced risk cover and increased operational flexibility, described below, are scalable, depending on resources allocated and the ability to work with other members of the WBG to support the private sector in these countries. IFC is also exploring additional opportunities for enabling private sector investment activities in these geographies through potential joint WBG mechanisms.

6.7. Infrastructure projects have a long gestation period, and in many FCS, upstream policy or regulatory reform may be needed to open specific infrastructure services to private sector investment, or where the sector environment is already open, upstream work may be needed to identify where and how the private sector can contribute and articulate bankable projects. IFC plans to increase its overall infrastructure project count in FCS between FY14-16 compared to FY10-12. From FY10-FY12, IFC invested in nine projects for $114 million in the power sector, in particular, and the goal would be to significantly increase this level over the FY14-16 period. The difficulty in getting governments to sign or honor offtake agreements is a major deterrent to private sector investment in power in several FCS. MIGA guarantees and IFC financing may help mitigate this risk in some cases, although often the additional risk may need to be covered through an additional funding source.

6.8. To boost access to finance, IFC will build on its successful GTFP as well as A2F advisory engagements to help local financial institutions to improve their performance and provide much needed financing, in particular to local SMEs. IFC will explore a local currency program that would allow it to support banks in lending in local currency, as most FCS borrowers are not in a position to deal with the risks associated with foreign currency loans; this may require a new approach, including adequate cover at a reasonable price for the unhedged risks involved in such lending through a capital dimension. In addition, during FY14-16 IFC expects to convert at least 50% of its GTFP relationships in FCS into longer-term investments and also to invest in non-bank financial institutions in those countries, including microfinance and leasing institutions, to increase access to finance for SMEs.

6.9. With respect to access to markets, IFC is identifying opportunities in agribusiness that would give farmers in FCS better access to regional and global markets for coffee, cocoa or other crops. It is also developing projects to help local SMEs benefit from the opportunities offered by major private investments, as is the case for IFC’s investment in mining in Guinea (Simandou), where through advisory and other interventions, IFC has facilitated the integration of local firms into the mining value chain, whether upstream, downstream or as subcontractor or service suppliers to the mines. IFC will take a bolder approach to identify and support potentially transformational investment opportunities, working closely with the World Bank and MIGA, including through focused JBPs. This bolder longer-term approach will require additional dedicated financial and human resources.

6.10. Budget resources. The challenges of the operating environment in these countries means that business development, project structuring, compliance-related work and portfolio management take longer and are much more resource-intensive, sometimes also impacted by security considerations. IFC therefore plans to put a critical mass of dedicated staff on the ground. It also plans to enhance incentives for staff working on FCS, such as performance awards and corporate awards.

6.11. IFC will be looking to hire a critical mass of FCS-dedicated investment staff with seniority, appropriate skills and expertise, and, preferably, local knowledge and networks, to maximize existing and

36 FY14-16 projections for IS and AS are based on the FY13 Harmonized List of FCS. The Harmonized List is reviewed annually and the composition thereof may therefore change going forward.

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emerging opportunities, and to develop new ones. The expectation is that the new hires would be a mix of local and international staff, including returning diaspora, with the dedication to the country or region to stay for a long period and build relationships and pipeline on the ground. It could be more expensive to attract this very specific profile than a typical IFC staff.

6.12. In the context of its differentiated engagement strategy (see Table 1), IFC will initially focus new investment hires on those FCS with increasing investment potential, where AS groundwork has already started to open up opportunities for private sector investment.

6.13. These staff would identify broad investment opportunities for IFC in FCS, but would have a specific mandate to further develop and process projects with a higher risk profile which would not otherwise happen, and for which there will be special risk cover as further described below. IFC will also put even greater focus across its investment operations on growing its regular investment program in FCS.

6.14. The new hires can serve needs from existing offices in or near FCS. In Myanmar IFC and the World Bank would be relocating from their temporary co-located space to a permanent WBG office to help the WBG to more fully respond to the significant opportunity for increased impact. The joint WBG Interim Strategy Note (ISN)37 for Myanmar has been approved and has begun to be implemented, and there is clear opportunity for WBG collaboration and potentially transformational programs in infrastructure and access to finance (see Annex II). The first IFC investment and advisory project was approved and signed in December (a microfinance/South-South, IS-AS engagement with Acleda Bank, Cambodia to set up a new microfinance institution that aims to provide loans to more than 200,000 people by 2020 – mostly micro and small businesses run by women), and a number of others in access to finance, tourism and infrastructure are making good progress. IFC expects to ramp up its investment program in Myanmar to $150-300 million per year within the next five years.

6.15. As the investment environment improves in other FCS, and as JBPs lead to additional investment opportunities, IFC would keep up the momentum by hiring additional dedicated investment staff, and will make decisions on new offices or co-location depending on the extent of expected impact and available resources at the time.

6.16. While those staff would be hired to be dedicated to FCS, experience in developing higher risk projects in those countries could also be applied to other challenging IDA countries, in particular those which face similar impediments. In addition, IFC will make a concerted effort to grow its regular investment program in other challenging IDA countries.

6.17. The proposed step-up in IFC’s AS activities would have a special focus on creating better conditions for private investment in FCS. Growth would be initially focused on priority countries with increasing investment potential and countries with political will to improve investment climate, increasing staff based in or near these countries. AS will also explore new opportunities for engagement in countries that are currently not designated as FCS, but share similar characteristics (for example Mali). Depending on the need, activities would support increased access to power, MSME access to finance, and access to markets.

6.18. As IFC continues to implement its differentiated approach, engaging in overt conflict/dangerous conditions as conditions permit, it would also need additional resources to ensure the safety and security of its staff.

37 The ISN focuses on supporting the country's “triple transition” (from a military regime to more open governance, from a closed economy to a market-based system, and from conflict to peace in the border areas) by focusing on three pillars: (i) supporting the transformation of institutions to create an enabling environment for sustained, broad-based growth; (ii) building confidence in the reform efforts by delivering visible results to the population; and (iii) preparing the way for the resumption of a full country program, including arrears clearance.

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6.19. Capital. As FCS like Myanmar open up to private investment, the expectation is that much of the deal flow in those countries would be IFC investments with a regular risk profile. However, in some other locations, many projects would still fall outside IFC’s regular risk profile – such as projects with inexperienced sponsors with limited resources and smaller investments – which would require special support and risk cover given IFC’s past experience in these markets and with small projects, discussed above.

6.20. IFC therefore proposes to provide enhanced risk cover, supported by greater operational flexibility, to enable and catalyze those types of investment projects that exceed IFC’s typical risk tolerance, both in FCS and other challenging IDA countries. This risk cover could be used to support some high-risk deals in their entirety, or to specifically cover high-risk portions of larger projects (thereby catalyzing a multiple in investment amount), such as a potential first loss tranche, or taking a local currency loan on balance sheet where currency hedging is not available.

6.21. IFC envisions that the use of this risk cover will be guided by defined and robust criteria, currently under development. This cover would be scalable, depending on the availability of IFC resources in any given period, and partnership opportunities with other WBG entities.

6.22. WBG opportunities for exploration. IFC is also exploring other ways to catalyze private sector investment and impact in FCS within the context of broader WBG approaches. One such example is MIGA’s Conflict-Affected and Fragile Economies Facility, which, through a first-loss layer of $100 million, aims to mobilize three times this amount in political risk insurance capacity for cross-border investments in FCS. Given very high risk as well as prudential exposure limits, MIGA, other multilateral insurers, export credit agencies, and private reinsurers face limits in their ability to do business in FCS. IFC is considering various options to support this facility.

6.23. Another opportunity for exploration is a potential WBG project preparation facility for infrastructure projects in FCS. Filling a gap in the market, it would aim to support governments to prepare a pipeline of infrastructure projects for private sector participation, before they get to the bidding stage. Aiming to address two of the key barriers to business growth in FCS, it would focus on access to power and access to transport, the latter to grow access to and size of markets and to facilitate regional integration. The support could include a mixture of feasibility studies, some detailed design, and prioritization of relevant projects.

6.24. The concept would draw on successful work in Timor Leste where IFC’s collaboration with the ADB, backed by funding from the Public Private Infrastructure Advisory Facility, a partnership program housed at the World Bank, helped the government scope and prioritize several potential PPPs. This has resulted in the preparation of three projects to be bid out, two by IFC and one by ADB. This proposal differs from IFC’s InfraVentures, a project development fund which operates under commercial principles, with reasonable market-based return on investment expectations, primarily supporting private sector companies developing early-stage infrastructure projects in IDA countries. Some of these projects are, or have been, in FCS. The facility under consideration could also be used in other challenging IDA countries.

6.25. In addition, IFC will reallocate resources to areas such as AGASI and South Asia. For AGASI, IFC will start staffing up as part of a plan to hire a critical mass of dedicated staff over FY14-16. Assuming the requisite staff levels are in place, IFC aims to reach the AGASI objectives by FY18. These include reaching one million additional farmers per year (approximately half of the overall IDG 1 target), doubling commercial bank lending to the agricultural sector, and tripling total IFC agri supply chain investments in SSA.

6.26. South Asia. To grow IFC’s business and impact in the South Asia frontier (Bangladesh, Nepal, Sri Lanka, Bhutan, Maldives, and LIS in India), IFC plans to expand staff in frontier offices in Dhaka, Kolkata, Kathmandu, and Colombo. The aspiration is to significantly increase South Asia volumes in the frontier by

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FY16. IFC will also make greater effort to grow its program in Pakistan and Afghanistan, including through putting more staff in Afghanistan. As in other frontier markets, given the challenge of identifying and structuring bankable projects in these geographies, business development, project structuring and moving companies to accept and adopt IFC requirements will generally take longer and be much more resource-intensive, and require greater local presence.

ADVISORY SERVICES PROGRAM

6.27. The AS program is expected to maintain a trend of targeted growth, with an average growth of around 7% per year between FY13-FY16. AS is expected to significantly step up its program in FCS by FY16, to leverage opportunities for IS-AS alignment and to lay the groundwork for future private sector investment. The AS program will continue to sharpen its focus on IFC’s geographic, industry and thematic priorities.

TABLE 3: ADVISORY SERVICES PROGRAM (CLIENT-FACING PROJECT SPEND)

FY11A FY12A FY13P FY14P FY15P FY16P

$182m $197m $215m $233m $248m $264m

6.28. Geographically, AS will have a continued emphasis on IDA countries and FCS, with at least 60% of total AS program in IDA countries. There will be a strong focus on SSA and South Asia, which are projected to increase to around half of the total AS program by FY16. In MENA, the program is foreseen to increase to 10% of total by FY16. In FCS the emphasis will be on helping to open the power sector to private investment, to strengthen financial infrastructure and the capacity of FIs, and to build access to markets through engagement at the firm-level as well as the investment climate.

6.29. AS will continue to support IFC’s industry priorities, with emphasis on agribusiness and the food supply chain and infrastructure. The AS program in agribusiness is expected to grow to 20% of total, with emphasis on strengthening farmer productivity in supply chains, improving resource efficiency, strengthening logistics infrastructure, and developing innovative solutions to mitigate sector risks. The program in infrastructure is likewise expected to reach 20% of total AS by FY16, with emphasis on facilitating private sector entry to infrastructure markets, while improving private solutions for infrastructure service delivery – mainly through PPPs.

6.30. AS will continue to grow its engagement in climate change, which is expected to reach 24% of the overall AS program by FY16. Emphasis will be on promoting adoption of low-carbon technologies and practices by the private sector, and on supporting the private sector to build climate resilience, with a focus on sustainable energy finance, resource efficiency and clean energy. SMEs continue to be significant beneficiaries of most AS engagements. The emphasis will be on development of more holistic solutions for SMEs on a country-wide level, deepening IS-AS partnerships, and bringing together firm-level, financial sector and investment climate engagements. With gender as an important cross-cutting priority for IFC, AS works to promote business opportunities for women by helping IFC and its clients take a gender view across all areas of business.

VII. FINANCIAL SUSTAINABILITY

7.1. In implementing its strategy, IFC will continue to focus on both development impact and financial sustainability. In order to continue to grow, and in particular to engage in the most challenging environments, IFC needs to remain financially strong by generating returns on its investments and managing its financial resources, including capital, in an effective manner. IFC has brought more focus on profitability and effective capital utilization to its strategic discussions, as well as a greater emphasis on portfolio management and performance, including through the inclusion of relevant indicators in its internal scorecards.

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7.2. A critical element in financial sustainability, especially given the inherently volatile nature of IFC’s portfolio, is the need to hold sufficient capital to protect against unexpected losses while maintaining its triple-A rating. Capital adequacy on its own does not guarantee the maintenance of the triple-A rating, since the rating agencies have their own proprietary methodologies and reserve the right to adjust their ratings based on a range of quantitative and non-quantitative factors. Nonetheless, capital adequacy is a cornerstone of IFC’s triple-A rating, and IFC’s approach to capital measurement and management is broadly aligned with the regulatory framework (the Basel Accord) and with the methodologies of the rating agencies. IFC maintains an ongoing dialogue with the rating agencies, to ensure that it is aware of any change of methodology and to identify any potential threat to its triple-A rating.

7.3. The main measure of capital adequacy at IFC is Deployable Strategic Capital (DSC), described in Box 4 below.

BOX 4: COMPONENTS OF CAPITAL ADEQUACY

Drivers of Capital

• Total resources available (TRA) refer to the total capital of the Corporation, consisting of (1) paid-in capital; (2) retained

earnings net of designations and some unrealized gains and losses; and (3) total loan loss reserves. TRA grows based on

retained earnings (profit minus distributions) and increases in reserves.

• Total resources required (TRR) refer to the minimum capital required to cover expected and unexpected losses on IFC’s

portfolio. This is calibrated to maintain IFC’s triple-A rating, given the risk profile and size of the portfolio. TRR is the sum

of the economic capital (EC) requirements for IFC’s different assets, and it is determined by the absolute size of the

committed portfolio and by the product mix (equity, loans, short-term finance, Treasury portfolio assets) as well as by

operational and other risks.

• The conservation buffer, which is set at 10% of TRA, is aligned with the regulatory “capital conservation buffer” adopted

by Basel III; its purpose is to absorb short-term fluctuations in TRR and TRA that result from the volatile nature of IFC’s

portfolio.

• Deployable strategic capital (DSC) is the capital available for additional commitments, over and above the current

portfolio; it is calculated as capital available (TRA) minus capital required (TRR) and the conservation buffer and is usually

expressed as a percentage of TRA: DSC ratio = DSC (dollars) / TRA (dollars).

• A positive DSC ratio indicates that IFC capital position is deemed sufficient to maintain the triple-A rating and that it holds

a full conservation buffer; a negative DSC ratio that remains above -10% indicates that IFC has started eating into the

conservation buffer but still has enough capital to justify the triple-A rating; finally, a DSC ratio below -10% indicates that

IFC’s triple-A rating is threatened.

• Over time, DSC will decrease if growth in TRR (through portfolio growth or shift towards riskier products) is faster than

growth in TRA (through retained earnings); conversely, DSC will increase if TRA growth is faster than growth in TRR.

7.4. IFC projects DSC over a three-year period, in line with the Road Map, to ensure that there is enough capital to implement the strategy.

CONCLUSION

The private sector is critical to development, not least because it is a key driver of growth and the main provider of jobs in developing countries. IFC is the largest development finance institution focused on the private sector, with a global track record of significant achievements, leadership and strong development results. Development challenges are large and growing, and private sector needs for finance and integrated solutions to development challenges are also growing, especially in difficult markets. This provides an opportunity for IFC to step up its partnership with the private sector, and for the WBG as a whole to be transformational through collaborative approaches that support, leverage, and complement, private sector activity. IFC will make this key contribution to the achievement of the WBG goals, while at the same time efficiently managing its capital and budget resources.

41

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42

ANNEX I. REGIONAL STRATEGIES

East Asia and Pacific – Delivering Reach, Profitability and Partnerships

IFC Strategic Focus Areas: IFC’s priorities for both IS and AS are to: (i) mitigate climatechange; (ii) promote inclusive growth; and (iii) promote global/regional integration,

including South-South investment. Beyond the core strategy, IFC is working with AMC to

support its activity in EAP, with Asian banks to increase mobilization, and within the WBGto promote closer alignment in activities and improve synergies.

Climate Change: New focus on water and adaptation; on-going work on renewable energy, energy efficiency and sustainable energy. Over 19.3 million tons GHG reduced -

IS/AS China Utility-Based Energy Efficiency Finance Program (CHUEE) program and

significant delivery in renewable investments.Inclusive Growth: Focus on agribusiness and gender, increased access to finance, access

to infrastructure (PPPs), improved investment climate and improved education and skills with both IS and AS .

Global/Regional Integration: Focus on South-South, with China and India seen as major

source of Emerging Markets FDI, and promote broader adoption of global best practice ESG standards across the region.

Business Plan: IFC in EAP aims for strong delivery of the program over FY14-16• Development Impact: EAP program is expected to contribute strongly to IFC Development

Goals (IDGs) by supporting 850 thousand farmers; improving access to financial services for

close to 10 million MSMEs and to infrastructure services for over 10 million people; and

supporting GHG emissions reduction (4.8 million metric tons CO2 eq/yr).

• Around $12 billion in commitments of which about $9 billion for IFC’s own account

(250 projects). Over 60% of investments focused on the poorest and fragile and

conflict-affected. Advisory services program on track, and exceeding in all strategic priority areas.

Key Risks: Economies of developing East Asia and Pacific remained resilient despite the

lackluster performance of the global economy. World Bank forecasts region will grow at7.5% in 2012, lower than the 8.3% registered in 2011, but the region is set to recover to

7.9% in 2013. EAP expected to contribute almost 40% of global growth in 2012, and a

similar share in 2013. Performance of the global economy, particularly in Europe, the US,and Chinaremain a critical factor that could impact the region’s momentum.

Achievements:

• In CY11, our investment portfolio clients in EAP:

– Supported 713,000 jobs;

– Facilitated around $51 billion in loans to MSMEs;

– Reached over 1.4 million farmers, 1.9 million patients, and

around 1,700 students;

– Improved access to infrastructure (power, water, gas, phone) for

nearly 50 million people.

• Record level of investment in FY11-12: totaling $5.8 billion in

140 projects, including $1.5 billion mobilization;

• Invested $1.3 billion in 34 projects during H1/FY13, with

around two-thirds of projects in IDA or frontier regions of MICs.

Over 50% of total AS spend was in IDA countries;

• $1.6 billion in climate change commitments in last 5 years;

• DOTS success rate of investment portfolio highest among

regions, averaging 76% vs. 69% for IFC in the last 3 years.

WBG Collaboration in EAP:

• IFC-World Bank collaboration in EAP spans across all countries,

with co-location of offices, joint work on country and sector

strategies, knowledge exchange events and workshops, joint

projects, and regular joint WBG meetings to discuss potential

new areas of collaboration.

• Most recently, the EAP management teams of World Bank,

MIGA and IFC met in Beijing, where they agreed to work

together on six potentially transfor mational projects: Myanmar

power; Philippines, Mongolia and Vie tnam agribusiness; gender

in the Pacific; and financial sector development in Indonesia.

These projects are further discussed in Annex II.

• The joint WBG teams will also take stock and agree on the next

steps toward the end of FY13, with a check-in point in

March/April 2013.

Key themes: “Shared Prosperity and Global integration” - Poverty is declining in EAP and has halved from 1990 levels, but still around one third

of the total EAP population (over 600 million) live in poverty1. IFC in EAP seeks to address the key development challenges of poverty and

inequality, infrastructure and urbanization, natural disasters and climate change, and jobs. EAP leads in WBG collaboration and is home to key

development partners: Australia, Japan, Korea, New Zealand and Singapore.

1 Using a $2 per day poverty threshold

43

IFC Approach per Sub-Region / Country Type:

• IDA: Pacific1: sector-based programmatic approaches leveraging partnerships with other IFIs

and donors focusing on: (i) gender (ii) catalytic investments and advisory work in sectors

where Pacific countries have a natural advantage, such as tourism and the real sector,

particularly agribusiness including fishing; (iii) infrastructure investment and innovative PPP

models that help connect entrepreneurs to markets, increase competition and enhance the

delivery of reliable services; (iv) supporting micro and small to medium size business growth

through investment and advisory work that increases access to funding and financial services;

(vi) improving the policy and regulatory environment to attrac t domestic and foreign

investment.

• IDA: Mekong2 , Mongolia and Myanmar:

• In the Mekong: (i) support rural income growth through investment in agribusiness and

microfinance; (ii) promote sustainable urbanization, by investing in infrastructure, best-in-

class emerging local entrepreneurs and financial markets; (iii) remove barriers to business

start-ups and facilitate higher standards through investment climate reform; and (iv)

provide market-based solutions to climate change.

• In Mongolia: (i) help the financial sector’s recovery; (ii) support diversification of the

economy through investing in new sources of growth, e.g., extractive industries, MSMEs,

agribusiness and renewable energy; and (iii) IFC and the World Bank to work on joint

advisory work with the government on corporate governance and support of businesses,

infrastructure planning, and revenue planning.

• In Myanmar: transformational projects in focus areas: power, telecom, financial sector,

investment climate.

• MICs3: (i) reduce the impact of climate change through PPPs, renewable energy investments,

and sustainable forestry advisory; (ii) increase rural incomes in frontier regions through

investments in agribusiness, rural/micro and smallholder finance, warehouse receipts, index

insurance, sustainable agribusiness advisory and access to finance to the unbanked and poorly

banked populations; (iii) promote sustainable urbanization; and (iv) help address governance

constraints to private sector development.

• China: (i) climate change, supporting market-based approaches to improve energy efficiency

and increase efficient use of water resources; (ii) equitable rural-urban growth, to reduce the

gap between living standards in urban and frontier/rural areas – principally through

investments and advisory work in MSME finance, agribusiness, infrastructure, and food safe ty;

and (iii) sustainable South-South engagement, particularly in Sub-Saharan Africa including as

part of IFC’s South-South Emerging Markets to Africa initiative.

• Singapore Office: The office will help imple ment WBG infrastructure strategy. IFC Strategy

includes: (i) increasing infrastructure equity business development world-wide including with

AMC; (ii) assisting Singapore-based companies in entering emerging markets; (iii) increasing

mobilization; and (iv) collaborating with World Bank on PPP Advisory mandates.

Note:

1: Kiribati, Papua New Guinea, Samoa, Solomon Islands, Tonga,

Vanuatu

2: Vietnam, Laos, Cambodia, Myanmar

3: Indonesia, Philippines and Thailand

EAP Development Results

FY12

Target

FY12

Commitments

0.1 0.1

0.2 0.2

4.6 4.7

0.7 0.7

9.5 13.1

- 12.7

- 0.1

- 0.3

1.6 -

FY11A FY12A

2,838 2,924 3,388 3,502

1,926 2,548 2,590 2,652

912 376 798 850

930 989 1,009 1,034

69 70 76 78

51 31 33 34

FY11A FY12A

25.8 28.2

13.6 14.9

3.4 2.8

4.1 4.9

For all tables, some data from previous years may have been revised.

FY13 Target

IDG 1: Farmers Reached (farmers m) 0.2

IDG 2: Health & Education (people m) 0.2

IDG 3a: Financial Services Micro (clients m) 2.8

IDG 3b: Financial Services SME (clients m) 0.3

IDG 4: Infrastructure (people m) 4.5

Utilities 4.3

Transport 0.1

Telecom 0.1

IDG 6: Climate Change (tCO2 eq/yr) 1.4

Investment Program FY13 Estimate

(Range)

Total Commitment ($m)

IFC own account ($m)

Mobilization ($m)

IFC Commitment in IDA ($m)

IFC Project Count

IFC Project Count in IDA

Advisory Program: Client-Facing Project

Expenditure ($m)

FY13 Estimate

Total 31.1

IDA 13.6

Fragile Situations 1.4

Climate Change 6.7

64%72%

76%80%

53% 56%62% 64%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

FY09A FY10A FY11A FY12A

DOTS - Investment

DE Rating - Advisory

44

Europe and Central Asia – Building Foundations for Sustainable Growth

IFC Strategic Focus Areas:There is significant variation in growth rates by country, while

commodity wealth in some countries masks a number of development challenges. ECA has

been slowest to recover since 2009, and recovery and future growth prospects are uneven. IFC seeks to support broad-based growth by: (i) improving access to infrastructure; (ii)

strengthening the financial system; (iii) increasing competitiveness and diversification; and (iv) addressing climate change.

• Infrastructure: Focus on utilities and power (particularly renewable energy), transport

and logistics, including through PPPs and sub-national engagements.

• Financial System: Interventions range from bank capitalization, domestic bank support,

capital markets development and corporate governance advisory to trade finance, sustainable energy finance, SME, agriand gender finance in other markets.

• Competitiveness and Diversification: Focus on investment climate work, corporate

governance, MSME support, agribusiness supply chains, health and education, resource efficiency and competitive manufacturing.

• Climate Change: With ECA being the most energy-intensive region in the world, climate

change cuts across all of IFC’s strategic focus areas.

These priorities are shared by the World Bank, facilitating close cooperation. IFC also

continues to carefully manage its large and profitable ECA portfolio.

Business Plan: IFC in ECA aims for strong delivery of the program over FY14-16:

• Development Impact: Reach 2.5 million microloan clients and 930,000 SME clients,

reach 310,000 farmers, impact 8.1 million people through infrastructure investments, reduce 2.6 million metric tons CO2 eq/yr, and invest $330 million in inclusive business.

• Over $13 billion in commitments over the three-year planning period (with about $10

billion own account), with continued delivery in IDA and FCS. TSC is projected to remain significant at around 37% of new commitments in FY16.

Key External Factors: (i) Eurozone impacts on mobilization environment, trade and long-

term finance; and (ii) unpredictable political risks in the region and social unrest in EU

periphery countries.

Achievements:

• In FY11-12 (reach data for CY11)

– Around 200,000 farmers and 2.9 million patients

reached; 2.6 million MSME loans extended; 40

million customers benefiting from improved

infrastructure;

– $809 million in climate change commitments.

• 228 projects committed for a total of $8.3 billion (of

which $5.6 billion own account) in the two year period,

representing a significant increase in commitments in

vulnerable markets (W. Balkans and Southern Europe),

and a record year in FY12 in Armenia, Albania, Romania,

Russia, Serbia and Uzbekistan.

WBG Collaboration in ECA:

• In ECA, there is effective collaboration in the areas of

resource efficiency and renewable energy (particularly

in Russia, Turkey and the Balkans), sub-national finance

(particularly in Russia and in Turkey), and investment

climate and PPP advisory services across the region.

– For instance, the upstream World Bank policy and

regulatory reforms in Turkey’s energy sector laid the

ground for IFC downstream investments, including a

$125 million loan to support a natural gas-fired

power plant in the city of Kirikkale, Turkey.

• Collaboration in FY14-16 on the above and other

sectors are also discussed in Annex II.

• IFC’s AS teams are leading the work on regulatory

reform in tandem with the Bank’s Development Policy

Lending operations in Moldova, Armenia and Tajikistan.

• All Country Partnership Strategy documents are

prepared jointly, most recently for Kazakhstan,

Tajikistan, Ukraine Kosovo, and FYR of Macedonia.

ECA is facing a new normal in the wake of the global slowdown. Over 170 million people continue to live on less than $8 purchasing

power parity per day, and youth unemployment remains high. ECA’s challenge: supporting broad-based growth in an uncertain

external environment with constrained sources of financing due to deleveraging and limited fiscal space.

45


• IDA Countries1: Reach the poor and promote economic diversification through

• Integrated investment and advisory services targeting MSMEs in agribusiness,

manufacturing and services;

• Investment climate and corporate governance advisory to help improve competitiveness, and financial infrastructure advisory to help strengthen financial

systems;

• Support private sector participation in infrastructure, targeting municipal services

and power, including through PPPs; and

• For the Caucasus in particular, transport and renewables to develop the sub-

region’s potential as transit corridor and energy exporter.

• Lower Middle Income and Middle Income with Less Developed Private

Sectors2:

• Advisory services and investments in infrastructure and value-added manufacturing to improve competitiveness, diversify the export base, create new

jobs, and accelerate private sector participation in infrastructure;

• Support to agribusiness expected to help countries realize comparative

advantages while reaching rural poor;

• Promote renewable energy and resource efficiency to mitigate climate change;

• In Ukraine, support banking sector stabilization, agribusiness development and

infrastructure modernization, with cross cutting focus on business climate

improvement and energy efficiency;

• As needed, increase financing support to banking sector in Albania, Serbia, FYR

Macedonia, and Montenegro, which are heavily exposed to Western European

banks.

• More Mature Markets3:

• Be innovative, with a focus on improving competitiveness, deepening financial

markets, increasing resource efficiency, and creating jobs; and

• Promote South-South investment and help strong local companies invest in the

region.

Note:

1: Armenia, Bosnia & Herzegovina, Georgia, Kosovo, Kyrgyzstan, Moldova, Tajikistan, and Uzbekistan

2: Albania, Azerbaijan, Belarus, FYR Macedonia, Kazakhstan, Montenegro, Serbia and Ukraine

3: Bulgaria, Romania, Croatia, Turkey, and Russia

ECA Development Results

FY12

Target

FY12

Commitments

0.1 0.1

0.5 0.5

0.7 0.2

0.1 0.3

1.2 0.2

- 0.2

- -

- -

0.6 0.2

FY11A FY12A

4,304 4,007 4,140 4,273

2,682 2,915 3,335 3,415

1,621 1,092 805 858

284 271 247 253

114 114 112 115

38 27 28 29

FY11A FY12A

35.6 34.4

15.0 13.1

8.5 5.6

12.0 10.0


FY13 Target


IDG 2: Health & Education (people m) na




Util ities 0.6

Transport 0.2

Telecom 0.4



(Range)



Mobilization ($m)


IFC Project Count



Expenditure ($m)

FY13 Estimate

Total 34.3

IDA 11.6


Climate Change 10.2

70% 66%60% 61%

68%74%

89%100%

0%

20%

40%

60%

80%

100%

120%


DOTS - Investment


46

Latin America and the Caribbean –

Tackling Inequality and Raising Productivity, Bringing IDA and MIC Countries to the Next Level

IFC Strategic Focus Areas: Tailored approach to IFC engagement in MICs, IDA, the

Amazon/Cerrado/Northeast, while firmly grounded on four strategic pillars of: i) inclusive growth;

(ii) competition and innovation; (iii) regional and global integration; and (iv) climate change.

• Inclusive Growth: Continue expanding access to finance, basic services to the poor, women and

indigenous. Focus on MSME finance, urban infrastructure, frontier regions, health and education.

• Competition & Innovation: IFC to support the productive capacity of the region by addressing

infrastructure bottlenecks, improving the investment climate, structuring vanguard PPP models, investing in frontier regions to boost access to finance, jobs and services, and broadening

mobilization by bringing in non-traditional partners.

• Regional and Global Integration: IFC to continue focus on capital market integration,

investments in connective infrastructure such as ports, roads and mass transit systems, strengthening energy networks and improving legal frameworks for trade logistics. In South-

South, IFC to support local and sub-regional firms become global including fostering Asia/LAC, and Brazil/Africa partnerships.

• Climate Change: IFC intends to be the primary catalyst for private sector investment in climate

change mitigation and adaptation. Mitigation activities include investments in renewable energy,

energy efficiency, cleaner production and land use, and Advisory Services on green building codes, E&S standards, sustainable energy finance and PPPs. Adaptation activities to focus on

wastewater treatment, catastrophe insurance and zoning codes.

Business Plan: IFC in LAC to continue delivering a strong program in FY14-16:

• Development Impact: Support 1 million direct jobs, 13 million microloan clients and 800,000

SME clients, reach 2 million students and patients, impact 1.7 million customers through PPPs, and include $1.5 billion in inclusive business and $2.3 billion in climate change commitments.

• Around $18 billion in commitments over the three year planning period; with ca. $12 billion own

account. IDA will continue to account for about 24% of LAC advisory program (IDA represents

6.3% of LAC population).

Key Challenges: Performance of the global economy, particularly China, Europe and the US, given

their strong commodity trade links and capital flows. Caribbean and Central America highly

vulnerable to external shocks including natural disasters.

Achievements in FY11-12:

• 268 investment projects, $10.3 billion committed (of

which $4 billion in mobilization); 41 advisory projects

approved - $44.5 million; 42% of IFC’s cash income;

• Development impact ratings above IFC average; and 43%

of IFC’s inclusive business in FY12;

• 681,000 jobs supported, 30% of total IFC; accounted for

84% of students reached through IFC projects; MSMEs –

supported 6.8 million client loans; Utilities - IFC clients

are reaching 1 out of 7 households in LAC; Gender –

supported 243,000 jobs (32% of IFC total), and

enrollment of 379,000 female students (97% of IFC

total);

• Brazil Frontier - Amazon/Cerrado/Northeast: ten-fold

FY12 commitment increase vs. last 4 year-average;

Caribbean – MSMEs Access to Finance/Investment

climate advisory reached all member islands: supported

80,000 client loans - $72 million, credit bureaus in 7

countries, 25 initiatives in investment climate.

WBG Collaboration in LAC:

• All Country Partnership Strategies joint since FY11.

• Joint projects include:

– investment climate (World Bank-IFC Regional Program

- $18 million, with CIDA & SECO),

– credit bureaus,

– trade logistics,

– corporate governance

and other examples as discussed in Annex II.

• In December 2012, IFC-World Bank senior staff

established working groups for joint action on:

competitiveness, energy, extractive industries,

innovation, PPPs, small states, and Haiti.

• IFC Regional Investment Climate Business Line Leader

that is also World Bank FPD Country Sector Coordinator

for five countries.

LAC has lifted 73 million people out of poverty in the last decade, but remains the most unequal region in the world. Productivity levels

are low. External vulnerability remains. Caribbean and Central America are lagging behind. IFC’s challenge: achieving sustainable higher

growth in the face of income, gender and geographical inequality to take middle-income and IDA countries to the next level.

47

IFC Approach per Sub-Region:

• IDA Countries1: contributing to higher and more sustainable growth through (i)

development of physical and social infrastructure (through investments, Advisory

Services and PPPs); (ii) development of local financial markets and access to finance;

(iii) promotion of economic integration (through infrastructure and trade logistics); and

(iv) reduction of reliance on imported fossil fuel (through wind and geothermal

projects).

• Caribbean: Support investment climate; addressing financial sector issues with World

Bank and other IFIs; provision of integrated investment-advisory work on infrastructure

solutions; financial markets - MSMEs and trade; development of tourism linkages;

companies with OECS2 focus; and reconstruction and job creation in Haiti.

• Central America: Foster investments in agribusiness and services; promote

renewable energy and regional infrastructure projects; support regional integration;

MSME finance; affordable housing; advisory on trade logistics.

• Andean: Take a systemic World Bank Group approach to infrastructure, PPPs, and

extractive industries (including revenue management); deepening financial sector and

capital markets; fostering regional integration, and guiding revenue management.

• Mexico: Focus on job creation, health and education, affordable housing; developing

local capital markets; implementing a systemic investment-advisory approach to

climate change.

• Southern Cone: Focus on agribusiness, the food security supply chain, renewable

energy and energy efficiency, SMEs.

• Brazil: Achieve significant impacts on inclusive growth, competitiveness, and climate

change. Focus on urban infrastructure, investment climate reform, health and education, and water and sanitation. Includes a programmatic approach to the

Amazon/Cerrado/Northeast:

• In Amazon/Cerrado, promote economic alternatives to deforestation and

preservation of natural habitats through productive use of degraded land, forestry

licenses and concessions, inclusive supply chains.

• In the Northeast, focus on competitiveness and job creation, opportunities for the

urban poor, integration of the NE with the rest of Brazil and the region and local,

innovation-driven emerging industries.

1 Bolivia, Dominica, Grenada, Guyana, Haiti, Honduras, Nicaragua, St. Lucia2 Organization of Eastern Caribbean States

LAC Development Results

FY12

Target

FY12

Commitments

0.0 0.1

0.6 0.6

3.8 5.6

0.2 0.2

1.8 3.6

- 3.6

- -

- 0.0

0.0 -

FY11A FY12A

5,269 4,971 5,644 5,853

3,031 3,680 3,847 3,940

2,238 1,292 1,797 1,913

283 211 324 332

133 135 130 144

20 20 22 22

FY11A FY12A

18.9 20.9

5.0 6.0

2.2 1.5

1.6 2.7



FY13 Target





Transport 0.0

Utilities 2.3


Telecom 1.2




(Range)

Mobilization ($m)


IFC Project Count



Expenditure ($m)

FY13 Estimate

IDA 6.0

Total 24.3

Climate Change 5.3


77% 77%

74%

72%

82%

73%

79%

75%

66%

68%

70%

72%

74%

76%

78%

80%

82%

84%


DOTS - Investment


48

Middle East and North Africa – Striving for Greater Impact

IFC Strategic Focus Areas: IFC is implementing an integrated IS/AS Strategy in MENA focusing on: (i) access to finance, especially for MSMEs; (ii) access and quality of

infrastructure services; (iii) skills and training; and (iv) investment climate reforms. The

two cross-cutting themes of IFC’s strategy are boosting investor confidence and increasing regional integration though cross-border investments. IFC’s strategic focus

will be to increase impact with greater emphasis placed on jobs and inclusion (especially, women and youth) and climate change.

• Jobs and Inclusion: Address unemployment through increased access to finance,

improve quality of education and minimize skills mismatch through the E4E

initiative, scale up IS and AS support to high-value added and employment creating sectors (tourism, ICT, retail, services, and agribusiness, among others). Map out and

target large global and regional food retailers with whom IFC can explore supplier finance. Where there is limited scope to do traditional agri projects, pursue

opportunities in the agri-processing / horticulture area.

• Climate Change: Focus on renewable energy and energy efficiency and look for

opportunities to develop joint ventures and/or wholesaling opportunities for sustainable energy finance.

Business Plan: IFC aims for strong delivery of the program over FY14-16:

• Development Impact: Support 5.8 million microloan clients and 260,000 SME

clients, reach 122,450 farmers, impact 13.5 million customers through infrastructure investments, reduce 1.2 million metric tons CO2 eq/yr;

• Around $8 billion in commitments over the three-year planning period; around

$6.3 billion own account. By FY16, around 29% of new commitments expected to be

in IDA (vs. 26% in FY12), and around 11% of new commitments expected to be in FCS (vs. 5% in FY12).

Key External Factors: Key risks to MENA largely domestic: political, economic, and

security volatility (including due to spillover effects of Syria) , and unpredictable

policy environment. Prolonged Eurozone difficulties could be a risk to North Africa due to strong trade links with the EU, while external vulnerability could impact

countries with increasing current account deficits and large external financing needs.

Achievements:

• In FY11-12, strong and diversified investment program driven by FM with a

focus on MSME access to finance in Arab Countries in Transition (ACTs) and

IDA/FCS.

– 108 projects committed for a total of $5.3 billion (of which $3.8 billion

own account), capping a ten-fold increase in 10 years;

– 67% of commitments in ACTs and IDA/FCS;

– Increased South-South investments representing around 40% of total

own account volume;

• Development Reach (as of CY2011):

– 109,000 jobs created through IFC’s operations;

– Around 66,000 farmers and 2.2 million patients reached; 1.8 million

MSME loans extended; more than 30 million customers benefiting from

improved infrastructure.

• Ramp up of Advisory program with $34 million in project spending in FY11-

12. Increasing focus on Levant & Mashreq in areas of PPP, corporate

governance, financial infrastructure, SME banking support, and regulatory

frameworks.

WBG Collaboration in MENA:

• IFC and World Bank work closely in the development of country strategies,

joint missions, consultations with stakeholders, and implementation of

joint initiatives:

– Several joint ISNs and CPSs were delivered, including latest Egypt,

Jordan, Tunisia, and Yemen country strategies;

– Financial sector: joint scoping missions and comprehensive action plans

to: (i) foster access to finance for MSME in Jordan, Egypt, Morocco, and

Tunisia, and (ii) to strengthen financial infrastructure (Iraq, Yemen, and

Libya);

– Close collaboration continues in joint initiatives, such as the MENA

MSME Technical Assistance facility, the E4E initiative, the joint Technical

Assistance Facility of the Arab Financing Facility for Infrastructure (AFFI);

and the Transition Fund launched under the Deauville Partnership.

– World Bank & IFC organized one day events/collaboration sessions to

agree on specific areas to work together on.

• Upcoming collaboration for FY14-16 is discussed in Annex II.

MENA facing a “new normal” in the wake of the political and social upheavals since January 2011. IFC leading the private sector IFIs’

response to Arab Spring and played strong counter-cyclical role to boost investor confidence. Going forward IFC’s challenge is to maintain

program momentum while increasing impact in the face of political uncertainty and rising poverty and unemployment. IFC ‘s current

IS/AS ‘”Jobs Strategy” remains valid with an increasing focus on jobs, inclusion, and climate change. There are six FCS in the MENA

region at present.

49


• Maghreb1: Promote a competitive private sector to create jobs (especially for women

and youth) by increasing access to finance for MSMEs; developing infrastructure and PPPs,

including in the areas of renewable energy and water; investing and advising on improving

skills of youth for private sector jobs; and selective investments to improve real sector

competitiveness, including mobilizing South-South investments.

• Mashreq2: Integrated investment and advisory engagement in infrastructure (especially

PPPs), access to finance (MSME support, corporate governance, financial infrastructure),investment climate, services, and climate change (EE). Some specific approaches:

• Egypt: i) increasing private investments in infrastructure and services (especially through PPPs); (ii) export-oriented manufacturing to increase job creation; (iii)

increasing access to finance and strengthening financial infrastructure (MSME, secured

lending); and (iv) improving business climate and corporate governance.

• Jordan: (i) supporting PPPs (esp. solar/wind power); (ii) financing strategic

infrastructure projects; (iii) supporting microfinance and SMEs; and (iv) strengthening

financial infrastructure (secured lending, credit information, and microfinance).

• Iraq: (i) supporting infrastructure development; (ii) developing financial infrastructure

to increase MSME access to finance; and (iii) assisting the economy diversify from oil sector.

• Yemen: IFC continuing to look for investment opportunities while implementing its strong advisory service program in the areas of MSME support, Business Edge, and

corporate governance.

• Gulf Cooperation Council (GCC) Countries3: Capacity building through reimbursable

advisory services and highly selective investments in financial markets, education and

climate-related infrastructure. Mobilize and partner with regional champions, including in

South-South investments.

• Afghanistan and Pakistan: Increase access to finance for MSMEs; reduce infrastructure

gaps (esp. power/telecom), retail and supply chains/logistics. Some specific approaches:

• Afghanistan: (i) increasing access to SME, micro and housing finance; and (ii)

developing the financial, infrastructure, telecom, and health and education sectors.

• Pakistan: (i) improving social services and infrastructure (esp. power); (ii) strengthening

the investment climate for MSMEs; and (iii) supporting on Renewable Energy. Note:

1: Algeria, Libya, Morocco, Tunisia

2: Egypt, Jordan, Iraq, Lebanon, West Bank and Gaza, Syria, Yemen

3: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE

MENA Development Results

FY12

Target

FY12

Commitments

0.0 0.0

0.1 0.1

1.1 2.2

0.0 0.0

2.0 9.6

- 0.7

- 8.0

- 0.9

0.4 -

FY11A FY12A

2,396.1 2,878.2 2,433 2,516

1,603.3 2,209.7 1,823 1,867

792.8 668.5 609 649

787.0 578.4 446 457

51.0 56.9 52 54

23.3 24.0 22 22

FY11A FY12A

16.1 17.9

7.0 5.6

5.7 4.0

2.3 1.1


FY13 Target






Utili ties 0.2

Transport 0.0

Telecom 2.0



(Range)



Mobilization ($m)


IFC Project Count



Expenditure ($m)

FY13 Estimate

Total 21.4

IDA 4.2


Climate Change 2.5

68% 70%

56%60%

41%

52%45%

30%

0%

10%

20%

30%

40%

50%

60%

70%

80%


DOTS - Investment


50

South Asia – Playing a Pivotal Role in Meeting the Global Poverty Challenge

IFC Strategic Focus Areas:To help the region grow out of severe poverty, past conflict, and

climate change vulnerabilities, IFC is addressing development challenges with a focus on: (i)

inclusive growth; (ii) climate change; and (iii) global/regional integration.

• Inclusive Growth: With more than 900 million people in South Asia living below $2 a day,

IFC will continue promoting inclusive growth in low-income, rural and fragile regions by

increasing access to finance, infrastructure, and markets. Continued focus on investments in power (generation, transmission, and distribution) and inclusive business.

• Climate Change: To support one of the most climate vulnerable regions, IFC will continue

promoting private sector role in this area with diverse IS and AS products, with an

emphasis on renewables (hydro, solar, and wind), energy efficiency, and agricultural and irrigation efficiency activities.

• Global/Regional Integration: Recognizing unexploited opportunities for intra- and inter-

regional trade, IFC will support South-South investments, knowledge transfer, improvements in investment climate, and trade and logistics, with a particular focus on

Africa.

Business Plan: IFC in South Asia aims for strong delivery of the program over FY14-16:

• Development Impact: 32 million microloan clients and 730,000 SME clients, reach 1.8

million farmers, impact 10.2 million customers through infrastructure investments, reduce 5.9 million metric tons CO2 eq/yr.

• More than $7 billion in investment commitments (about $6 billion for IFC’s own

account), all in IDA and with significant growth in the frontier part of the region (more than

75% of FY16 new commitments vs. 33% in FY12).

• Approx. $112 million in advisory spend over the same period, with a focus on

improving investment climate and access to finance.

Key External Factors: Eurozone challenges and fiscal consolidation in the US remain

ongoing uncertainties. Should global market conditions deteriorate significantly, South Asia

will be affected by reductions in capital inflows, exports and remittances.

Achievements:• South Asia was the top region on FY12 scorecard, with

FY12 one of the region’s strongest years in terms of IS

volume, AS programs, reach, innovation, inclusiveness and clean growth.

• In CY11:– 320,000 jobs provided through IFC’s operations;

– 490,000 farmers and 2.4 million patients reached;

– 7.2 million SME and microloans extended; and 105 million customers received power and phone

connections.• In FY11-12:

– 124 projects committed for total financing of $2.6

billion (of which $2.1 billion for IFC’s own account);– $399 million in climate change commitments.

• High success rates in development impact (see the chart on the next page).

WBG Collaboration in South Asia:

• IFC-WBG collaboration spans all countries and key

sectors in South Asia. In the center of collaboration are the development and implementation of country

strategies. The FY09 Nepal ISN was one of the six

strategies formulated under the new framework of the IDA-IFC Secretariat. Country strategies for Bangladesh,

Sri Lanka, Bhutan, Maldives and India are all jointly formulated, aiming for synergy and leverage.

• South Asia WBG Management Team met in November

2012 to discuss key areas of collaboration, modalities

for working more closely and identified four potential new joint projects and areas of collaboration. These

projects include Nepal Hydro, Health sector in India, Access to Finance in Sri Lanka, and Infrastructure in

India. These are further discussed in Annex II.

(Afghanistan & Pakistan joint projects are discussed in the MENA Section.)

IFC has been delivering substantial development impact in South Asia despite challenging macro-economics. However, high and rising

income inequality remains. South Asia’s challenge: massive presence of poverty and inequality, vulnerability to climate change, poor

investment climate, low FDI (outside of India) and underdeveloped capital markets.

51


• Bangladesh, Bhutan, Maldives, Nepal, Sri Lanka:• Promote growth and economic inclusion by reducing barriers to investments

and access to finance, supporting infrastructure, job creation and gender;

• Focus on renewable energy and promote local financing capability for climate

change projects;

• Support catalytic investments and private sector-led infrastructure building,

such as Nepal Hydro (a WBG joint project); • In Sri Lanka’s post-conflict northeast, continue promoting essential financial

services for low-income households and support general rebuilding in

partnership with the World Bank and other stakeholders through microfinance.

• India Low Income States (LIS):• Leverage strong growth rates, built-up demand and natural resource

advantages in LIS;

• Solidify Kolkata office as IFC’s LIS hub and for LIS business growth;• Continue to strengthen IS-AS collaboration and stakeholder partnerships to

improve investment climate, promote FDI, and help with poor’s access to

infrastructure and services;

• Support innovative green projects, including PPPs and water management;

• Help increase rural incomes through processed food and agribusiness, logistics and infrastructure, and MSME finance and insurance.

• India overall:• Engage with firms that would promote IFC’s poverty and inclusion focus,

especially in the LIS, as well as provide a platform for South-South expansion;

• Continue emphasizing financial inclusion and responsible finance, including

microfinance and collective investment vehicles (for structured finance, debt

and equity). Build institutional capacity (in deposit mobilization, risk management, service quality, product innovation), delivery channels and

corporate governance;

• Focus on agribusiness/food security, manufacturing, and the social sector (e.g.,

Health sector in India) for inclusion, jobs and competitiveness;

• Continue focusing on infrastructure in India, esp. through renewable energy and state-level infrastructure;

• Support innovative Indian companies in South-South to become future global

leaders.

SAR Development Results

FY12

Target

FY12

Commitments

0.1 0.4

0.3 0.3

5.1 10.3

0.1 0.2

2.0 1.6

- 1.6

- -

- -

1.3 1.6

FY11A FY12A

1,063 1,583 1,896 1,950

742 1,332 1,489 1,525

320 251 407 425

742 1,332 1,489 1,525

51 73 63 64

51 73 63 64

FY11A FY12A

21.8 27.6

21.7 27.6

1.4 2.4

2.6 5.0



FY13 Target





Transport 0.1

Util ities 2.4


Telecom 0.1




(Range)

Mobilization ($m)


IFC Project Count



Expenditure ($m)

FY13 Estimate

IDA 30.4

Total 30.4

Climate Change 5.0


79% 79%72% 73%

62%

93%

80%85%

0%10%20%30%40%50%60%70%80%90%

100%


DOTS - Investment


52

Sub-Saharan Africa – Africa is Rising

IFC Strategic Focus Areas: IFC’s strategy is built around the focus areas of the Strategic

Initiative for Africa: (i) improving Africa’s investment climate; (ii) encouraging

entrepreneurship through support for MSMEs; and (iii) transforming key sectors and markets through proactive project development, particularly infrastructure, agribusiness, and health.

Vocational training and mobile solutions are emerging focus areas.

This strategy is designed and implemented in coordination with the World Bank and MIGA. Attention to gender issues and climate change is built into all IFC projects wherever possible.

• Investment Climate: Boost private sector investment through interventions such as Doing Business reforms, regional level reforms (OHADA1, EAC2), and upstream work on priority

sectors of agribusiness, infra PPP, and health.

• MSME Support: in priority sectors and with a focus on gender, using a range of financing options and capacity building, including mobile solutions, to create jobs.

• Proactive project development: to stimulate private sector activity and execute transformational projects. Focus on infrastructure, agribusiness, health, and jobs.

Business Plan: IFC in SSA aims for strong delivery of the program over FY14-16:

• Development Impact: Support 27.8million micro / individual clients and 684,000 SME

clients, reach 1.3 million farmers, increase or improve infrastructure services for 22.6

million people, and avoid 1.4 million metric tons CO2 equivalent of greenhouse gases;

• Around $15 billion in commitments over the three-year planning period, with about $11

billion own account, making Africa IFC’s biggest regional portfolio by FY16. Continued

significant engagement in IDA (over $3 billion new business in FY16 from $2.5 billion in FY12) and FCS (over $400 million new business in FY16 from $296 million in FY12).

Key Risks: Despite advances in political and economic stability, Africa still faces structural

problems. Risks include political unrest and weak governance; infrastructure deficits and

low human capital; inequality and social exclusion worsened by unplanned urbanization; insufficient job creation; weak public finances that limit policy responses to shocks.

Externally, SSA is at risk from commodity price volatility and slower growth in China.

Achievements:

• As of CY11, IFC portfolio clients in SSA:

– Provided nearly 256,000 direct jobs, of which over

64,000 were held by women;

– Reached over 382,000 farmers, 934,000 patients, and

nearly 139,000 students;

– Generated power for over 4 million people;

– Provided over 450,000 loans to MSMEs with an

outstanding volume of over US$ 5.2 billion.

• In FY11-FY12, IFC committed:

– 216 projects committed for total $6.8 billion (of which

$4.9 billion own account);

– $81 million in climate-related commitments.

WBG Collaboration in SSA:

• In SSA, IFC and World Bank collaborate on joint country

strategies and initiatives, including:

– Establishing an appropriate regulatory environment for the palm sector that complies with the Roundtable on

Sustainable Palm Oil (RSPO) certification;

– Addressing water, land and other regulatory

constraints, including in Burkina Faso, Niger, Tanzania

and Nigeria;

– Working with the global Center for Conflict and

Fragility based in Nairobi on effective joint

interventions in FCS.

• Upcoming collaboration for FY14-16 are discussed in

Annex II.

• IFC’s Investment Climate Business Line continues to

deepen involvement with World Bank’s FPD Global

Practice, working together in nearly 30 countries.

• The Special Initiative for Infrastructure in Africa (ASI) is

ramping up. IFC ASI staff now represented on WBG

Energy Task Force. IFC projects included in

Transformation and Priority projects pipeline.

Success in Africa is critical for IFC to achieve its poverty reduction goals. SSA economies have performed well despite global economic

volatility, but struggle to create sufficient jobs for a growing population. Most African countries are likely to qualify as MICs in the next

decade, yet face significant development obstacles. IFC aims to reduce vulnerabilities and support inclusive growth in the region.

1 Organisation pour l'Harmonisation en Afrique du Droit des Affaires“ (Organisation for the Harmonization of Business Law in Africa)2 East African Community

53


• Fragile and Conflict Situations1:

• Joint and/or tailored investment and advisory services interventions to address

ongoing challenges of conflict and/or governance. Focus on investment climate, MSMEs, and rebuilding banks and other financial institutions. Support for

private sector role in providing and rebuilding infrastructure.

• Frontier IDA2:

• Focus on advisory services to improve the investment climate, on entry

products such as trade finance in financial markets, on SME Management

Solutions and Access to Finance initiatives for the domestic private sector, and

on export sectors where significant.

• Mainstream IDA3:

• Deploy IFC’s full range of products in states with significant private investment

flows, a more dynamic domestic private sector, and market size sufficient to

elicit investor interest. Job creation key objective as urbanization accelerates.

• Focus on programmatic sector development initiatives, private and PPP projects in infrastructure, deepening financial markets, private health and education

services, and support for competitive sectors in agribusiness and

manufacturing. Emphasis on regional integration and mobile platforms.

• Middle Income4:

• For South Africa and Mauritius, support outward investment in the region,

development of competitive regionally networked firms, development of SMEs

focused on excluded communities, and advanced innovation in areas such as

renewable energy;

• In oil producing states, support economic diversification and advisory services

to broaden economic competitiveness.

Note:

1: DRC, Liberia, CAR, Sierra Leone, Cote d’Ivoire, Burundi, Guinea, Guinea-Bissau, Angola, Chad, Togo, Congo, Sudan, South Sudan, Comoros, Zimbabwe, Eritrea, Somalia

2: Benin, Burkina Faso, Cape Verde, Djibouti, Ethiopia, Gambia, Lesotho, Madagascar, Malawi, Mali, Mauritania, Niger, Rwanda, São Tomé and Príncipe 3: Cameroon, Ghana, Kenya, Mozambique, Nigeria, Tanzania, Senegal, Uganda, Zambia

4: Botswana, Equatorial Guinea, Gabon, Mauritius, Namibia, Seychelles, Swaziland, South Africa

SSA Development Results

FY12

Target

FY12

Commitments

0.1 0.3

0.0 0.0

0.6 9.6

0.1 0.1

2.3 4.8

- 1.6

- 3.2

- -

0.0 -

FY11A FY12A

2,739 3,950 4,181 4,317

2,150 2,733 3,297 3,376

589 1,217 884 941

1,874 2,494 2,923 2,994

95 121 127 130

88 112 119 122

FY11A FY12A

47.3 57.4

43.4 54.7

7.0 16.8

3.5 6.2


FY13 Target






Utilities 4.9

Transport 0.1

Telecom 0.7



(Range)



Mobilization ($m)


IFC Project Count



Expenditure ($m)

FY13 Estimate

Total 62.5

IDA 58.9

Fragi le Situations 17.6

Climate Change 7.1

65% 66% 63% 64%

50%58%

67%

78%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


DOTS - Investment


54

ANNEX II. REGIONAL EXAMPLES OF WORLD BANK GROUP COOPERATION

II.1. Building on their collaboration on joint CASs and CPSs, regions, with EAP taking the lead, have in recent years enhanced their joint WBG efforts at country level, while also fostering a greater sense of being part of one WBG team. For the FY14-16 period, they have now made concerted efforts to prioritize joint country-level activities.

II.2. EAP: In addition to further integration of joint work on priority country and sector strategies, including through joint business plans, the region has identified the following projects to represent the best of World Bank and IFC collaboration in FY14-16:

• Myanmar: energy – power sector transformation through building an integrated central power utility with donors and the private sector to generate 500MW of new power reaching three million people;

• Vietnam: agribusiness – a comprehensive WBG IS/AS solution for inclusive agricultural modernization, with at least $400 million in new agri-finance and sustainable practices for 200,000 farmers with a strong gender focus;

• Philippines: agribusiness – building peace with agribusiness in Bangsamoro, Mindanao province. Within five years, support Datus/local Muslim leaders to build inclusive coalitions among conflicting parties to unlock opportunities for agribusiness development and raise rural incomes;

• Pacific Islands: gender issues – increase women’s access to economic opportunities and voice in the Pacific, including access to employment and financial services, business and leadership opportunities and security and safety;

• Indonesia: financial inclusion – building a sound, stable and inclusive financial sector; World Bank and IFC programs focusing on payments, retail banking, micro-saving, and micro-insurance services which are expected to significantly increase access to finance for individuals through leveraging innovative technologies and business models (for example branchless banking and “no frills” savings products);

• Mongolia: improving livelihoods through agriculture – focused on job creation and retention in rural sectors to improve rural incomes and livelihoods and reduce vulnerabilities. Focus on improving access to private sector agri-financing through FIs and with lead firms, and improving productivity in agriculture and livestock production.

II.3. ECA: Beginning at a World Bank Regional Management Team meeting in October 2012 in which IFC’s VP for EMENA participated, and at subsequent joint sub-regional and country level management meetings, IFC and the World Bank agreed on modes of collaboration and identified the following priority areas for joint review, development and implementation:

• Food security and agribusiness development in Ukraine, using coordinated solutions to improve governance, increase sector competitiveness, and increase awareness and stakeholder involvement;

• Climate change, particularly through improved resource efficiency in Russia, and support of RE in the Western Balkans;

• Regulatory reforms implementation under WBG Development Policy Lending (DPLs) in Armenia and Moldova, with IFC interventions closely linked to key benchmarks and triggers to the DPLs;

• Increasing investment in Central Asia through industry regulatory and business environment reform, sector competitiveness analytical work and technical assistance, Public-Private Dialogues, and PPP investments;

• Health and tertiary education throughout ECA;

• Electricity and gas transmission in Turkey;

55

• Capital markets development and sub-national finance in Russia and Turkey.

II.4. LAC: In a joint session in December 2012, World Bank and IFC regional management discussed areas of closer collaboration, and established working groups on competitiveness, energy, extractive industries, innovation, PPPs, small states, and Haiti to determine joint action. In the meantime, collaboration between the World Bank and IFC AS in LAC continues as follows:

• Caribbean – joint comprehensive approach, reaching out to MSMEs – The joint IFC/World Bank advisory projects involving credit bureaus and investment climate have been successful in reaching all member islands throughout the Caribbean. The Credit bureaus joint project led to the passing of legislation in several countries, while investment climate projects involve 25 initiatives. Investment climate is a joint World Bank-IFC regional program ($18 million), supported by both the Canadian International Development Agency (CIDA) and Swiss State Secretariat for Economic Affairs (SECO);

• Central America – Trade logistics joint workshops helped define regional action plans of technical assistance that IFC and the World Bank could support;

• Investment, job creation and gender in Haiti – The joint FPD program is comprised of three interdependent projects, namely the IFC/CIC Haiti Investment Generation, World Bank Jobs Creation and Growth ($55 million) and World Bank Haiti Economic Reconstruction and Growth ($30 million) projects, which support improved conditions for investment and job creation in Haiti. The joint work on investment generation led to a new Integrated Economic Zone strategy and legislation;

• Non-Government Bond Market Development Program (ESMID) in Colombia – The LAC ESMID program, funded by SECO, aims to improve the ability to issue and invest in non-government bonds to help finance development, particularly in infrastructure, housing and microfinance. This is a joint World Bank/IFC two-year project that combines enabling environment work and transaction support to catalyze the reforms. In Colombia, transaction support is being conducted in partnership with the PPP Infrastructure agency in Colombia, Agencia Nacional de Infraestructura (ANI), for the design of a framework for bonds to support financing for an ambitious toll road program of approximately $20 billion in the next five years;

• Extractive industries in Peru – Advisory Services is undertaking the “Enhancing the Development Impact of Extractive Industries in Peru” program with CIDA’s support. The program involves revenue management work to help local governments improve royalty investment, by addressing basic needs and promoting greater transparency and accountability. It also includes initiatives to promote regional local suppliers, linking them to the supply chain, and to improve income and employment opportunities for poor households by increasing access to credit. Presently, IBRD and IFC are developing a pilot to be implemented in a region selected by the Government. The pilot will expand the work currently being done by IFC, and would support extractive firms in increasing their contribution to sustainable development.

II.5. MENA: For MENA, joint regional management team meetings were held in January in Washington (MENA) and Dubai (Afghanistan and Pakistan)38 to discuss areas of collaboration. Several ideas for joint WBG work have been identified and proposals in early stages of preparation and discussion are being developed in the areas of solid waste management in Morocco, employment and training in Tunisia and Morocco, and housing finance in Saudi Arabia. In Pakistan and Afghanistan, potential areas of collaboration include energy, access to finance, and infrastructure, including enhancing mobile financial services. Joint

38 Program and impact in South Asia are contributed to both by the IFC MENA Region (Afghanistan and Pakistan) and the IFC South Asia Region (rest of the sub-continent).

56

meetings will be held annually with regional Senior Management having close oversight on progress in project preparation and implementation.

II.6. South Asia: The region has identified the following projects for high level focus for WBG collaboration in FY14-16, in addition to further integrating joint work on priority country and sector strategies:

• Nepal: hydro-power – This effort will seek to address the problems of crippling blackouts (especially during the dry season), and 54% of the population lacking access to the grid, through integrated investment and advisory services programs. Five to six potentially transformative projects will be evaluated with the aim of unlocking untapped hydro resources for domestic energy supply and potentially for export, including a 37MW hydro-power project;

• Sri Lanka: access to finance – This initiative will focus on enabling access to finance for SMEs through banks, capacity building and secured transaction registry. Only around 35% of small firms have a loan or credit line access while SMEs constitute up to 90% of businesses and 75% of employment;

• India: health sector – This joint initiative leverages the role of the private sector for impact, supporting and scaling up innovating models. The joint team is identifying two focus states to initially pilot, including Uttar Pradesh where there is a comprehensive existing World Bank project. The team has also been actively supporting Meghalaya through PPP engagements in the area of a government-sponsored insurance scheme and a medical college. In addition, the team is exploring the establishment of a health-specific fund in India;

• India: State-level infrastructure – The program will focus on helping expand infrastructure access through an integrated WBG approach to expand state-level provision of infrastructure services.

II.7. SSA: In Africa, IFC intends to leverage WBG capacity and partnerships to achieve meaningful impact through activities that have a clear line of sight to poverty reduction and shared prosperity, in infrastructure, agribusiness and food security, FCS and investment climate reform. The region has identified the following activities as focal areas in FY14-16:

• JBP – energy: In Nigeria, IFC, the World Bank and MIGA have elaborated a JBP to address near- and medium-term challenges facing the energy sector, including generation, transmission and distribution. The joint team is actively exploring medium-term project opportunities related to IPP projects with a combined installed capacity of 950 MW;

• JBP – agribusiness and food security: In Burkina Faso, IFC is collaborating closely with the World Bank and MIGA to elaborate a JBP in the agribusiness sector, centered on the Bagre Growth Pole project;

• JBP – FCS: In Côte d’Ivoire, IFC is collaborating closely with the World Bank and MIGA to elaborate a JBP that will address the complex, near- and medium-term constraints facing this country with respect to private sector development across multiple sectors, including infrastructure, agribusiness and financial markets;

• Mozambique – power sector: IFC is exploring provision of finance to a greenfield 1.5GW IPP hydro-electric dam and associated transmission lines aimed at increasing supply of electricity in Mozambique as well as South Africa and the Southern Africa Power Pool countries. IDA is providing technical assistance to the government while MIGA is considering providing insurance cover to lenders and equity holders;

• Guinea – mining sector: The $15 billion Simandou project aims to produce 95m tons of high grade iron ore annually, thereby unlocking Guinea’s mineral resources, enabling royalties to be used for social and economic investment. This allows the development of associated transportation

57

infrastructure, and strengthening SME linkages. IFC, IDA and MIGA are collaborating closely on the project; IFC has already committed $185 million in equity, IDA has provided $20 million in technical assistance for government capacity building, and MIGA is considering provision of insurance cover;

• Ghana – water sector: IFC is considering provision of finance for the construction and maintenance of a water treatment plant and a distribution system expansion pipeline from the plant, expanding access to potable water in the Accra-Tema metropolitan area by approximately 30%. IFC, IDA and MIGA are collaborating closely on the project; IFC is considering a $169 million commitment, IDA is funding the government’s transaction advisor, and MIGA is considering provision of insurance cover;

• OHADA Reform Program – investment climate: In West and Central Africa, IFC and the World Bank are providing ongoing investment climate reform support to the 17 members states of OHADA (Organisation pour l’Harmonisation en Afrique du Droit des Affaires) to simplify and harmonize business laws and implementing regulations. A General Commercial Law and Secured Transactions Law were adopted in December 2010, and IFC is actively involved in training activities related to implementation. Current assistance also focuses on revision of Company Law and Insolvency Law.

58

ANNEX III. PRELIMINARY THINKING: APPLYING MICHAEL PORTER’S FIVE FORCES

MODEL

Below is IFC’s preliminary thinking on how to express IFC’s strategic positioning as enabler of development through the private sector by using the lens of Michael Porter’s “Five Forces” analysis. This widely used model39 provides a framework for strategic analysis by examining five areas:

1. Bargaining power of buyers. Private companies in developing countries frequently face critical constraints in areas such as finance, infrastructure, employee skills, and the regulatory environment. Clients see IFC as a provider of scarce capital, knowledge and partnerships, not readily available from others, that can help address these issues. Client needs for services vary greatly by, among other things, country, sector, and company sophistication. IFC has tailored its approaches to bring unique value for these different segments, such as its different approaches in IDA and non-IDA countries. Further, IFC’s focus on particular clients is guided by country development priorities, as it coordinates with the country, the World Bank and other development partners in identifying interventions that best contribute to poverty reduction and shared prosperity.

2 & 3. Rivalry among existing players and threat of potential new entrants. IFC has a number of strengths that allow it to play a leading role among IFIs. IFC is the largest development finance institution focused on the private sector with a global reach, allowing it to leverage lessons of experience across regions while diversifying risk. It has the most developed global footprint among private sector IFIs, a unique combination of three complementary and aligned lines of business – IS, AS and AMC – and is part of the WBG. These characteristics provide IFC with the depth of skills to be innovative and help craft transformative client solutions. IFC is also a leading mobilizer of third-party resources for its projects through several mechanisms, including syndication, credit enhancement, local currency capabilities and AMC. Finally, IFC is a leader in measuring, evaluating, and reporting on development results.

4. Threat of substitute products or services. Substitutes to IFC’s products and services come primarily from commercial market financing and from other providers of advice. IFC’s comparative advantages compared to commercial financing include willingness to engage in difficult environments beyond the risk tolerance of commercial funders, high standards of due diligence and ESG which help bring in other investors and enhance company reputations, and strong advisory services to enhance company performance and relationships with communities. Being part of the WBG enhances IFC’s convening power on critical development challenges, and allows it to frame solutions that require close public-private collaboration. IFC’s Advisory Services target areas where its public character and membership of the WBG provide unique advantages (such as in investment climate, and PPP work), and where there are strong ties to investment work (such as in access to finance).

5. Bargaining power of suppliers. IFC’s suppliers include providers of capital, liquidity, and advisory services funding including member governments, partners in mobilization, donors, and bond purchasers. IFC has capabilities in place – in terms of organization and resources, processes and management systems – to engage with each of these supplier/partner groups. Its triple-A rating, sovereign ownership, strong credit culture, transaction volume, and preferred creditor status provide particular credibility in the commercial markets. IFC’s focus on results measurement, development effectiveness, and efficiency is critical to maintaining credibility among private sector clients, governments, donors and other partners.

39 See for example, Michael E. Porter, “The Five Competitive Forces That Shape Strategy”, Harvard Business Review, January, 2008.

59

ANNEX IV. IFC DEVELOPMENT GOALS – GOING FORWARD

In FY11, IFC started testing six IFC development goals (IDGs) intended to help drive implementation of strategy and business decision-making, alongside other measures. Two of these goals went live in FY13 (health and education, financial services) and three additional goals are scheduled to go live in FY14 (agribusiness, infrastructure and GHG reductions). Testing of one goal – increase in MSME revenues – was discontinued as it proved not to be useful for decision-making.

IFC is continually working with internal and external constituents to improve the existing IDGs and to develop new ones. IFC is sharing experience on the IDGs with IFIs and donors, and organized an IDG workshop in September 2011 with representatives from academia, the private sector and the international aid community. Feedback received helped both to improve additional goals and develop concepts for new ones.

Efforts are ongoing to assess the feasibility of harmonizing the core indicators that underpin the IDGs with those of other IFIs and the World Bank’s core sector indicators. Such harmonization might present opportunities for joint goals across institutions. In this context, IFC is working with World Bank to assess the potential for alignment of the IDGs with Tier 2 indicators in the World Bank Corporate Scorecard.

Complementary Metrics for Agribusiness

IFC engaged in an Agrimetrics Working Group with partners, consisting of agribusiness firms, standards organizations and IFIs, to discuss possible additional metrics to measure the impact of IFC’s projects alongside the existing metric of farmers reached. Two metrics were identified to have potential for further testing:

• Food availability, as a proxy for food security, would measure the number of people that could be fed as result of the additional food made available by IFC’s various interventions.

• Contribution to sustainable land was identified as an indicator that is equally relevant and of interest to private sector firms and donors. Possible metrics could be the number of farmers adopting more sustainable practices or the number of hectares under improved practice.

Economic Growth/Gross Value Added

Gross Value Added is a metric based on the indicator “Economic Value Generated and Distributed” used by the Global Reporting Initiative. It is aligned with the concept of wealth creation used in national statistics and as an IDG would set a target for the increase in wealth added by IFC’s clients to their economies every year.

Climate Change: Carbon Intensity

A first climate change-related IDG focusing on emissions reductions is scheduled to go live in FY14. Now IFC is exploring an additional goal that would target the carbon intensity of sectors that represent the majority of carbon emissions in IFC’s portfolio. This goal could be expressed either as intensity per output or per dollar invested.

Trade and Regulatory Services

An additional IDG under development is focusing on IFC’s reach relating to trade and regulatory services. Such a goal would set targets for the number of firms to be reached by IFC’s investment climate work and through IFC’s trade finance clients.

60

ANNEX V. IFC PROGRAM IN IDA COUNTRIES AND FRONTIER MARKETS

Frontier Markets - IDA FY10 FY11 FY12 FY13

(Actual) (Actual) (Actual) (Estimate)

IFC own account Commitments ($ million) 12,664 12,186 15,462 16,600 - 17,000

IFC own account Commitments (# of projects) 528 518 576 560 - 600

IDA Commitments for Own Account ($M) 4,881 4,867 5,864 5,810 - 6,800

As a % of IFC own account Commitment 39% 40% 38% 35% - 40%

IDA Commitments (# of projects) 255 251 283 270 - 310

As a % of IFC Commitment 48% 48% 49% 48% - 52%

IDA Advisory Services Program ($M)* 94 107 122 122 - 132

As a % of Total Advisory Services Program 62% 64% 65% 60% - 65%

Transfers to IDA Replenishment ($ million) 200 600 330 340**

Frontier Markets - Other FY10 FY11 FY12 FY13

(Frontier Regions of non-IDA + Fragile and Conflict Situations (Actual) (Actual) (Actual) (Forecast)

Other Frontier Markets Commitments for Own Account ($M) 2,160 1,638 1,370 1,900- 2,500


Frontier Regions Commitments 1,575 1,123 832 1,300 - 1,700


Fragile and Conflict Situations Commitments 585 515 537 600 - 800


Other Frontier Markets Commitments (# of projects) 115 100 87 90 - 120


Frontier Region Commitments 58 57 42 45 - 60


Fragile and Conflict Situations Commitments 57 43 45 35 - 48


Fragile and Conflict Situations - Share of AS Program, % n/a 17% 18% 15% - 17%

Frontier Markets - Total FY10 FY11 FY12 FY13

(IDA + Frontier Regions of non-IDA + non-IDA Fragile Situations*** (Actual) (Actual) (Actual) (Forecast)

Frontier Markets Commitments for Own Account ($M) 6,540 6,011 6,809 7,200 - 8,800


Frontier Markets Commitments (# of projects) 316 312 331 320 - 375


** Actua l replenishment as of FY13 fi rst hal f.

* For Advisory Services Program (cl ient facing project expenditure) projects excluding World Region.

*** Mos t Fragi le and Confl ict Si tuations are IDA countries , so only non-IDA Fragi le and Confl ict Situa tions are

added to IDA and Frontier Regions for the Frontier Markets aggregate.

99

151

195

225

255251

283

1.7

3.2 3.54.4

4.9 4.9

5.9

0

1

2

3

4

5

6

7

8

9

10

50

100

150

200

250

300

FY06 FY07 FY08 FY09 FY10 FY11 FY12

Co

mm

itm

en

t V

olu

me

in I

DA

Co

un

trie

s

(US$

bill

ion

s)

Nu

mb

er

of

Pro

ject

s in

ID

A C

ou

ntr

ies

Commitment Volume and Number of Projects in

IDA Countries

Number of Projects in IDA Countries (Left Axis)**

Commitment Volume in IDA Countries (Right Axis)

61

ANNEX VI. IFC CORPORATE SCORECARD

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