IFC: investment of $45 billion blindfolded
“Quite shocking”, said Anouk Franck from Both ENDS. “The International Finance Corporation is unaware of the social and environmental consequences of their investments in private enterprises in developing countries and emerging economies. This was observed by the Ombudsman of the IFC itself.”
No checks
The IFC is the worlds’ largest credit bank which focuses on businesses in developing countries. At the moment, IFC has a loan portfolio of approximately $45 billion. The bank issues credits only when the investments meet all kinds of requirements. These conditions were set by the IFC itself in 2006 and can be summarized as “do no harm”, meaning that the impact of the activities arising from the credit must not be harmful to the people or the environment where companies operate. It’s a good thing that IFC sets such requirements, but they must also be complied with. Whether that happens is unknown, because the IFC carries out almost no checks on the consequences. Therefore, the IFC is investing blindfolded.
Stricter rules
Anouk Franck: “Last year IFC imposed stricter rules on itself. They are now more extensive and state that its investments should have a positive impact on the development outcome. But this makes little sense without checks. The IFC Ombudsman states in his report that he even found examples of companies that did not meet the necessary lending requirements.
They were thus guilty of breach of contract, but were still granted more IFC credits.
Civil society pressure
The Ombudsman began his investigation after civil society organizations had expressed their concerns about the enormous growth of IFC investments. The bank increasingly made use of intermediaries such as commercial banks, insurance companies, micro financiers and asset managers for providing credit. This obviously has not helped rule compliance.
IFC should improve
Dutch investments in developing countries also receive IFC loans. My opinion is that the companies that are financed by the IFC should contribute to sustainable development. Therefore the IFC should take off its blindfold, comply with its own rules and carry out checks on the consequences of its lending.
Anouk Franck is programme officer for policy development and specialized in International Financial Institutions.
For more information see the Ombudsman report and the summary of that report made by our partner Eurodad.
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