The evaluation case studies confirmed that the enabling environment is essential for market creation, an area where the World Bank plays a leading role.
The following specific aspects related to the enabling environment were derived from the evaluation case studies:
- Regulation quality. Deficiencies in the regulatory and legal framework slow down market creation and can jeopardize the progress achieved in building markets;
- Private sector reach. When trying to reach the poor, private sector investments perform better when combined with regulatory reform interventions. Nonetheless, good sector regulations are not enough;
- Country-wide perspective. Market creation requires a broader view of a country’s constraints to market creation, including country governance capacity, transparency, efficient and predictable public administration, and physical infrastructure.
- Private sector experience and capacity. Countries with limited experience in working with the private sector, such as many low-income countries (or fragility and conflict-affected situations (FCS) face the greatest challenges in creating markets given their growing debt burden and limited domestic resource mobilization.
Overall, the evidence points to the significance of the “Cascade” approach as a tool for implementing the Bank Group’s Maximizing Finance for Development (MFD) objectives, with its focus on remedying the obstacles that block private sector solutions and help client countries create markets.
Other success factors relate to work quality aspects of World Bank Group engagements with clients:
- Local presence. Presence of Bank Group staff, their familiarity with local risks, and the quality of engagement matter.
- Policy dialogue. Long-term policy dialogue and design flexibility can help navigate political change. Early and broad stakeholder involvement matters.
- Programmatic involvement. Overly complex project design often causes low performance.
IFC’s risk-taking capabilities.
Market creation opportunities develop with the application of modern technologies, for example in FinTech, the renewable energy sector or ICT. Seizing those opportunities requires cutting-edge knowledge, nimbleness and appetite for risk, coupled with the expertise to manage those risks. The case studies suggest the need to have an adequate appetite for risk and a long-term engagement horizon to fulfil the Bank Group’s ambition to advance the MFD agenda in IDA countries, Fragile and Conflict States (FCS), and other structurally weak economies.
IEG recommends the World Bank Group regularly assess the risk-taking capabilities of IFC to carry out its market creation activities in IDA and other structurally weak economies in a financially sustainable way.
Read more about the Enabling Environment (Chapter 3)