The impact of growth on poverty reduction depends on the pace and pattern of growth. Attention to the type of growth that IFC supports is critical for the institution's effectiveness in poverty reduction. IFC’s strategic priorities on frontier areas and sectors such as infrastructure, agribusiness, health and education, and financial markets are consistent with support to an inclusive growth pattern, but improvements are needed in three areas.
First, although priority to frontier markets has led to increases in IFC investments in International Development Association (IDA) countries, these investments need to be allocated in more than the few IDA countries where they are currently concentrated. Second, IFC investments in targeted sectors need to expand beyond financial markets where trade finance has contributed most to expansion. Third, IFC needs to continue to strengthen its partnership with the World Bank to enhance its poverty focus and results.
IFC’s interventions are designed to contribute to growth, although it has been challenging for the Corporation to integrate distributional aspects in projects. Fewer than half the projects reviewed included evidence of poverty and distributional aspects in project design, although the lack of such evidence does not necessarily rule out actual poverty impacts. Projects that paid attention to these aspects performed as well as, if not better than, other projects on development and investment outcomes. This suggests that poverty focus need not come at the expense of financial success. A broad range of IFC’s interventions can therefore be simultaneously pro-growth and pro-poor, but this link is neither universal nor automatic. A project’s poverty focus is positively associated with the development orientation of partners, a link with World Bank Group country strategies, and alignment of investment and advisory services.
Most IFC investment projects generate satisfactory economic returns but do not provide evidence of identifiable opportunities for the poor. The relatively high proportion of projects that do not generate such identifiable opportunities suggests a primary reliance in operations on the pace of growth for poverty reduction at a time when the institution’s strategies point more attention to the pattern of growth that it supports. Greater effort is needed in translating the strategic intentions into actions in investment operations and advisory services to enhance IFC’s poverty focus.
