IFC’s new corporate strategy
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IFC’s new corporate strategy (IFC 3.0) focuses the institution on creating markets and mobilizing private capital, with increased support to countries where private capital flows are the most inadequate to address major development gaps, including those linked to the sustainable development goals (SDGs).
Creating Markets has been part of the World Bank Group’s development agenda for at least the last 15 years. The 2002 World Bank Group’s Private Sector Development Strategy, for example, identified the ingredients for market creation, including sound rules, the expectation that such rules be adhered to, and physical access to markets
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The international development community acknowledges that the SDGs will not be achieved without greater participation from the private sector. Estimates for investment needs in developing countries alone range from $3.3 trillion to $4.5 trillion per year. Up to 70 percent of the investment gap could come from the private sector, according to international estimates.
Engaging the private sector as a financier, operator, service provider, or innovator in the pursuit of the SDGs requires efficiently functioning and competitive markets and effective governments. Such markets only emerge when there is a sufficiently conducive enabling environment that not only addresses market failures through policy reform but also improving underperforming markets through demonstration effects, enhancing competition, innovation, integration and enhancing skills through investments and advisory services.
This evaluation was designed to shed light on several key aspects of the IFC’s creating markets agenda and experience on the ground. Those key aspects include the following:
- Identification of market creating opportunities;
- Channels through which IFC contributes to market creation;
- Results from IFC’s market creating interventions; and
- Success factors driving the Bank Group’s market creation results.
The conceptual framework for the evaluation derives from IFC’s own creating market concept. IEG validated it through a literature review, interviews with experts, and a workshop with practitioners in the field.
The evaluation methodology includes 16 case studies typically centered around a cluster of IFC interventions in the areas of agriculture, financial inclusion, and information and communications technology (ICT).
Main Findings
The case study findings suggest that IFC contributed to making markets more inclusive, competitive, and sustainable by enhancing public and private sector capacity, fostering innovation, generating demonstration effects, and promoting integration of value chains. The country’s enabling environment and regulatory quality are essential. But sound regulations are not sufficient: market creation requires a broader view of a country’s constraints, including governance capacity, transparency, efficient and predictable public administration, and physical infrastructure.
Overall, the evidence points to the significance of the “Cascade” approach for implementing the Bank Group’s Maximizing Finance for Development objectives, with its focus on remedying the obstacles that block private sector solutions and help client countries create markets. However, important gaps remain.
More about the Objective, Scope, and Evaluation Questions (Chapter 1)
