Creating Markets: Learning from World Bank Group Joint Projects
What does the experience from two decades of projects co-financed by two or more World Bank Group institutions tell us about what works for market creation?
What does the experience from two decades of projects co-financed by two or more World Bank Group institutions tell us about what works for market creation?
By: José Carbajo MartinezLast week’s IEG event, How to Work as One World Bank Group: Lessons from Experience, shed light on the potential role and limitations of the World Bank Group’s ambitious Maximizing Finance for Development (MFD) agenda.
Under this agenda, the World Bank Group has outlined a new approach to help countries draw on private financing and sustainable private sector solutions to tackle development challenges associated with the Sustainable Development Goals. By so doing, countries can create market opportunities for the private sector, while reserving scarce public financing for those areas where private sector engagement is not optimal or available.
The MFD agenda will require the Bank Group institutions – IBRD/IDA, IFC and MIGA – to work jointly on an unprecedented scale. Consider the track record so far– a recent IEG study found that over a twenty-year period (1995 – 2015), joint projects represented only a tiny fraction of World Bank Group approved projects.
The Maximizing Finance for Development agenda will require the Bank Group institutions – IBRD/IDA, IFC and MIGA – to work jointly on an unprecedented scale. Consider the track record so far– a recent IEG study found that over a twenty-year period (1995 – 2015), joint projects represented only a tiny fraction of World Bank Group approved projects.
For the study, IEG defined a ‘joint project’ as one characterized by the co-financing of a single project by two or more World Bank Group institutions. Such joint projects can include advisory services from the Bank and/or the IFC, Bank and/or IFC finance, and political risk insurance from MIGA, for example. Thus, multiple combinations of Bank Group advisory products, financing and risk-mitigation instruments are possible (see Figure).
Combining technical assistance, finance and risk-mitigation products available across the Bank Group can yield benefits that are directly relevant to the creating markets/MFD agenda:
In Georgia, for example, IFC is providing loan and equity financing, with MIGA political risk guarantee, to construct and operate a hydropower plant to export electricity to Turkey. IBRD finances the building of the transmission line into Turkey.
IEG’s evidence and last week’s event highlighted similar opportunities and the opportunity to do more. Panelists, who included representatives from across the Bank Group, also discussed the objectives, success factors and limitations of joint projects:
For example, IEG found that half of the Bank Group’s portfolio of joint projects is highly concentrated financing infrastructure investments in IDA countries, mostly energy projects in Africa. Innovative examples abound including Lighting Africa, with WB ASA and IFC advisory support, that transformed off-grid solar energy use by households in the region and then went global.
While joint projects work in many situations, they may not apply in others. In some cases, joint projects may not be necessary to achieve sustainable sector transformation. Other types of Bank Group interventions will also work. Nonetheless, as the World Bank Group embarks on its ambitious creating markets/MFD agenda, it will benefit from the lessons of two decades of joint projects.
[NB: This is the second blog in the Creating Markets blog series. The motivation for the blog is to share lessons from IEG evaluations early enough to help the Bank Group be successful in its systematic implementation of the Creating Markets concept. The first in the series is Creating Markets: Lessons from Experience in Developing Countries.]
Aurora Medina Siy is an Evaluation Officer at IEG-MIGA, and led the recent evaluation World Bank Group Joint Projects: A Review of Two Decades of Experience.
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On top of the technical…
On top of the technical matters that are of upmost importance, the stakeholders' informed decision is a factor of upmost importance: this is what we leaned in our three decades field activity.
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