With a strong learning focus, this evaluation is intended to inform the implementation of IFC’s corporate strategy (IFC 3.0) and the contributing roles of the World Bank and MIGA to that 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 |
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:
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).
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)
The Bank Group’s traditional Advisory Services and Analytics and the country-wide Systematic Country Diagnostics cover the private sector agenda, but too unevenly to allow for the design of a program of World Bank Group interventions that help client countries create markets.
IEG recommends enhancing the understanding of market creation opportunities, including through the recently introduced Country Private Sector Diagnostics, and ensure that such knowledge is adequately reflected in the Country Partnership Framework (CPF)
Read More about Identifying Market Creation Opportunities and Constraints (Chapter 3)
Evidence from case studies suggests that IFC’s activities and interventions that contribute to creating markets can be clustered around four interrelated channels:
Read More about the the Channels of Market Creation (Chapter 2)
Below are the two sets of indicators through which IEG gauged the success of market creation activities from IFC’s interventions, along with a high-level summary of IEG’s findings based on evaluation case studies:
1. Increased size or reach of markets, enhanced competition, lower prices, enhanced environmental sustainability and market resilience standards:
2. Provision of sustainable market access to the poor:
Therefore, IEG recommends that the World Bank Group enhance access to markets for the underserved groups, including the poor, and entailing adequate M&E provisions to understand how market creation affect the poor.
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:
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:
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.
The Creating Markets series summarizes detailed lessons of experience and key takeaways regarding the World Bank Group's Creating Markets concept. Findings from relevant IEG evaluations over the last ten years provide a rich source of lessons and determinants of success that are relevant for the implementation of the Cascade Approach and the success of the Creating Markets concept.
