Highlights

The International Finance Corporation (IFC) platforms achieved the objectives they set out to achieve but with some exceptions. However, the importance of the platforms approach in terms of enabling the achievement of these objectives varied across platforms.

Platforms allowed IFC to increase the scale of its crisis response during the height of the pandemic, yet, in terms of the pandemic response, there was a period of time that elapsed after IFC’s initial COVID-19 response and before the launch of the Base of the Pyramid platform or the approval of the Global Health Platform’s first investment.

Three platforms that were expected to engage substantially (though not always exclusively) with small clients each succeeded in making smaller investments. Projects under the IFC Startup Catalyst platform were early-stage, preseed, or seed funds and were too small to be approved without this platform.

The BOP and IFC Startup Catalyst platforms both reached new clients. BOP stood out for having a much higher proportion of new clients than their benchmarks. In addition, BOP was able to engage with new and risky clients by taking advantage of pooling of risk using International Development Association Private Sector Window blended finance support.

A large majority of the Small Loan Guarantee Program and BOP projects and a substantial minority of the Fast-Track COVID-19 Facility projects were in International Development Association countries and countries classified as fragile and conflict-affected situations by design.

The Côte d’Ivoire Housing Program was dropped because it misjudged the market, focusing narrowly on one country, one sector, and two participating banks.

Platforms aiming to reach new sectors did so to some extent. IFC Startup Catalyst projects targeted the digital technology sector; BOP targeted financial service providers for micro, small, and medium enterprises in challenging markets; and the Global Health Platform financed medical equipment and diagnostic services. However, the platforms approach was not essential to Global Health Platform investments.

Overall, the IFC platforms achieved the objectives they set out to achieve, with some exceptions; however, the importance of the platforms approach in terms of enabling the achievement of these objectives varied across platforms. This chapter addresses evaluation question 1: To what extent do the IFC platforms achieve their objectives? We identified the following four objectives based on our review of the seven in-scope platforms’ Board papers: (i) responding to crisis at scale, (ii) engaging with small clients and new clients, (iii) engaging with clients in IDA countries and FCS, and (iv) engaging in new sectors. We discuss each of the four objectives in detail in this chapter. We assessed platform objectives based on triangulation of evidence from the following:

• Platform case studies, which involved desk-based reviews and interviews with investment officers, investors, and IFC clients
• Lighter desk reviews of four individual platforms outside of the three case studies
• Portfolio analysis
• Benchmarking the case study platforms against IFC stand-alone projects with similar characteristics, where applicable

For each objective, we also used these sources to assess the extent to which platforms achieved the objective and whether the platforms approach (that is, which platform features) was key to this achievement. As an early-stage evaluation, we examined early evidence on platforms as an approach rather than focusing on the development outcomes of individual IFC platforms. Because the Independent Evaluation Group had evaluated only one platform project at the time of this evaluation, we could not assess outcomes or compare them with what IFC achieved outside of platforms.

Response to Crisis at Scale

Platforms focused on pandemic response allowed IFC to increase the scale of its crisis response during the height of the pandemic (table 2.1). Three platforms were approved during the pandemic to address urgent needs: FTCF, GHP, and BOP. “Crisis” in this section refers specifically to the COVID-19 pandemic. Evidence from the case studies shows that 75 percent of IFC’s COVID-19 response ($7.7 billion) was channeled mainly through these platforms from late FY20 through FY22 (figure 2.1). Both the Board and IFC management confirmed in focus groups that platforms added value during the pandemic by allowing a faster and focused response. Using expedited processes, FTCF and BOP channeled substantial working capital to firms and financial intermediaries when liquidity ran short. For example, BOP financed a $50 million loan to a South Asian nonbank financial institution focused on women borrowers in 2022, enabling the institution to expand its lending during a time of increased delinquencies and provisioning requirements.

Sources: Independent Evaluation Group case studies, desk reviews, and portfolio analysis.

Note: The table covers three platforms aimed at the pandemic response. Dark green, white text = strongly; medium green, black text = moderately; pink, black text = weakly.

Figure 2.1. International Finance Corporation COVID-19 Response Channeled Through and Outside of Platforms

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Figure 2.1. International Finance Corporation COVID-19 Response Channeled Through and Outside of Platforms

Source: Independent Evaluation Group, using data from International Finance Corporation quarterly reports and platform evaluation portfolio.

Note: IFC’s COVID-19 response outside of platforms was computed as IFC’s total COVID-19 response minus IFC’s COVID-19 response through the GHP, FTCF, and BOP platforms. Data on IFC’s total COVID-19 response are from IFC quarterly reports, and data on IFC COVID-19 response through platforms are from the platform evaluation portfolio. Data exclude the Global Trade Finance Program. BOP = Base of the Pyramid; FTCF = Fast-Track COVID-19 Facility; GHP = Global Health Platform; IFC = International Finance Corporation.

Seventy percent of IFC’s own-account financing to COVID-19 response was channeled through the FTCF. The quick activation and rapid disbursement of FTCF were based on speedy approval using delegated authority and improved internal processes without sacrificing its due diligence and decision-making standards. For example, an early look process replaced the traditional Concept Note process, which achieved time savings by preparing a short-form Concept Note (called early look) and eliminating minutes from Concept Note meetings. In addition, careful risk management using existing clients, short tenors, and de-risking with IDA PSW blended finance contributed to the quick activation and rapid disbursement.

However, in terms of the pandemic response, there was a period of time that elapsed after IFC’s initial COVID-19 response and before the launch of the BOP platform or the approval of GHP’s first investment. GHP focused resources on medical manufacturing. Despite urgent needs, GHP’s first investment was approved one year after the pandemic in March 2021. In addition, interviews with the investment officers show that projects would likely have occurred without GHP. Nonetheless, GHP’s focus was highly relevant to the pandemic.1 For example, GHP financed a pharmaceutical company in Africa to expand production of vaccines for the region and other emerging markets. By 2021, it reportedly created capacity to produce more than 400 million vaccines per year. Although BOP focused on providing financing to financial intermediaries serving BOP (for example, MSMEs), it was launched 11 months after the COVID-19 outbreak in February 2021. The delay occurred because IFC took time to assess the pandemic’s impact on financial intermediaries serving MSMEs so it could tailor its response.

Engaging with Small Clients and New Clients

IFC used specific platforms to extend its reach to a higher percentage of small clients (as reflected by small transactions) and new clients (table 2.2). For the purposes of this evaluation, “small clients” refers to clients with small IFC commitment amounts that IFC would not otherwise invest without specific platform intended to serve such clients. We used this proxy because client size is not always recorded. Project documents often do not capture or report the size of IFC clients (for example, company asset size, sales, number of employees, and so on). “New clients” refers specifically to clients in which IFC has not made an earlier investment since July 2000. Regarding the benchmarking analysis in this chapter (comparing the three case study platforms with IFC stand-alone projects), identical comparators were not possible because BOP and GHP benchmarks were implemented before these two platforms were launched. Moreover, the ISC platform finances smaller projects than individual (nonplatform) comparators because IFC would not otherwise invest in these projects without the ISC platform.

Sources: Independent Evaluation Group case studies, desk reviews, and portfolio analysis.

Note: Table covers three platforms with highest percentage of small or new clients. Dark green, white text = strongly; light green, black text = moderately. IFC = International Finance Corporation; SMEs = small and medium enterprises.

Platforms that aimed to reach small clients enabled IFC to make smaller investments than benchmarking projects. The BOP, ISC, and Private Equity Co-Investment platforms that aimed to reach small clients succeeded in doing so by making smaller investments (table 2.3). For ISC and BOP, the average commitment amounts per project were much lower than their benchmarks: for ISC, the average commitment amount per project was $3 million versus its benchmark of $14 million, and for BOP, the average commitment amount per project was $12 million versus its benchmark of $29 million. Private Equity Co-Investment financing, which was not benchmarked, averaged only $4 million per project. Platform features such as project processing efficiency and pooling of risk using blended finance (discussed in chapter 3) allowed platforms to finance transactions that IFC would not have financed through stand-alone projects.

Source: Independent Evaluation Group portfolio analysis and benchmarking exercise.

Note: IFC = International Finance Corporation; n.a. = not applicable.

Evidence from the case study shows that projects under ISC were early-stage, preseed, or seed funds and were too small to be approved under IFC’s nonplatform approach. Investment officers interviewed for the ISC case study uniformly stated that transactions would not have proceeded without the platform. For example, ISC made a $3 million equity investment in a venture capital fund supporting seed-stage investments in East Asia—a small investment IFC would not have made outside of the ISC platform. IFC also used ISC to make a $3 million equity investment in an accelerator and seed fund supporting start-ups in Latin America, supporting a first-time fund manager and setting a positive precedent for other emerging fund managers in the region.

BOP, ISC, and Private Equity Co-Investment were all expected to engage substantially (although not always exclusively) with new clients, and all succeeded in doing so. Both BOP and ISC reached more new clients than their benchmarks, but the ISC benchmark (stand-alone projects) also reached a high percentage of new clients.2 Each of the three platforms targeting new clients exceeded IFC’s target of 40–60 percent for new clients as stated in the IFC Approach Paper, which was discussed at the Board in June 2022 (IFC 2022b; figure 2.2). However, BOP stood out for having a much higher proportion of new clients than its benchmark. BOP engaged with new and risky clients by taking advantage of pooling of risk using IDA PSW blended finance support.3 For example, in a Central Asian IDA country, BOP financed two new microfinance institutions, each for $2.5 million. The local currency loans were supported by blended finance earmarked for financing women-led micro enterprises and for affordable housing for low-income individuals.

Figure 2.2. Base of the Pyramid and International Finance Corporation Startup Catalyst Projects Reaching New Clients, FY17–22

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Figure 2.2. Base of the Pyramid and International Finance Corporation Startup Catalyst Projects Reaching New Clients, FY17–22

Sources: IFC Business Intelligence reports; Independent Evaluation Group calculated data on new clients.

Note: Dashed lines indicate IFC’s target for new clients at 40–60 percent as stated in IFC (2022b). IFC = International Finance Corporation.

ISC provided some nonfinancial additionalities, such as hand-holding to first-time fund managers who were unfamiliar with legal and technical requirements, to help them work with IFC and develop as fund managers. Legal negotiations were the major reason for delays with many first-time fund managers within ISC, who did not have experience dealing with development finance institutions and were unfamiliar with the legal requirements. The ISC case study found that IFC staff provided technical assistance to such fund managers.

Efficiency gains from its business model enabled Private Equity Co-Investment to provide additional financing to new clients (companies within IFC financed private equity funds in this platform). In Private Equity Co-Investment, IFC relies on the fund managers of the platform’s private equity funds to conduct due diligence and investment decisions of the companies in which IFC is co-investing. In addition, IFC’s co-investments within this platform have lower or no fund management fees or carried interest (the percentage of a private equity fund’s investment profits that a fund manager receives as compensation).

Engaging with Clients in International Development Association Countries and Fragile and Conflict-Affected Situations

Platforms provided a vehicle for IFC to engage with clients in IDA countries and FCS, except for the Côte d’Ivoire Housing Program, because it did not meet its objectives (table 2.4).4 By design, four platforms were expected to engage substantially in IDA and FCS: SLGP, BOP, FTCF, and the Côte d’Ivoire Housing Program. A large majority of SLGP projects (95 percent) and BOP projects (72 percent) were in IDA countries and FCS. In addition, a substantially higher percentage of BOP projects were in IDA countries and FCS compared with its benchmark projects (figure 2.3). Both the SLGP and BOP platforms have blended finance support integrated in their design, which enables them to pool risk and engage with riskier IDA and FCS clients. Portfolio focus (such as BOP’s focus on financial intermediaries targeting MSMEs), efficiency gains (for example, delegation of authority for existing clients and streamlined internal processes, such as short-form Board papers for AOB approvals for new clients under BOP), and risk mitigation (for example, pooling of risk through blended finance support in BOP and SLGP) facilitated engagement with IDA and FCS clients.

Sources: Independent Evaluation Group case studies, desk reviews, and portfolio analysis.

Note: This table covers four platforms with explicit IDA and FCS aims and highest IDA and FCS engagement. Dark green, white text = strongly; light green, black text = moderately; medium red, white text = not at all. FCS = fragile and conflict-affected situations; IDA = International Development Association.

Figure 2.3. Base of the Pyramid Projects Engaging in IDA Countries and FCS, FY17–22

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Figure 2.3. Base of the Pyramid Projects Engaging in IDA Countries and FCS, FY17–22

Source: Independent Evaluation Group analysis of data from IFC Business Intelligence reports.

Note: FCS = fragile and conflict-affected situations; IDA = International Development Association; IFC = International Finance Corporation.

The case study found that the availability of the pooled risk paired with IDA PSW blended finance helped IFC make investments or provide financing in local currencies in countries where clients’ credit risks would otherwise have been regarded as unacceptably high. The IDA PSW blended finance support is embedded in the structure of some platforms (such as BOP and SLGP). The mechanism consists of a pooled first-loss facility, which reduces the risk of loss to IFC if borrowers covered under this credit protection default (applies to both BOP and SLGP platforms), and access to the IDA PSW local currency facility to address situations in which clients needed local currency, but IFC could not access local currency at viable rates (applies to the BOP platform). This support was important to enabling IFC to extend some platforms (such as BOP and SLGP) to IDA PSW-eligible countries, where the needs of the MSME or small and medium enterprise segment were the greatest. By reducing the effective riskiness of some IDA PSW clients to IFC’s portfolio through its first-loss protection, IDA PSW allowed IFC to reduce interest rate spreads for such clients. For example, BOP financing of $5 million supported a microfinance institution’s lending to MSMEs and individuals in the Middle East, especially women. The small institution is in a conflict-affected region, and its customer base is vulnerable.

A substantial minority of FTCF projects were in IDA countries and FCS. Its Financial Institutions Response Envelope, intended to reach clients in IDA countries and FCS, did so in most of its projects. Based on the evidence from a broader review of FTCF, 43 percent of the platform’s committed volume was deployed in IDA countries and FCS as of February 2022. During the pandemic, most of the engagement in IDA countries and FCS was from the Global Trade Finance Program (57 percent) and Working Capital Solutions (56 percent) components of the Financial Institutions Response Envelope. By contrast, FTCF’s Real Sector Crisis Envelope had limited engagement in IDA countries and FCS (23 percent).

However, the Côte d’Ivoire Housing Program did not meet its objectives. The program was a $100 million platform for supporting affordable housing in Côte d’Ivoire and the only platform to focus on a single development challenge in a single country. The platform was designed as financial intermediaries financing and was supported by IDA PSW blended finance. The platform’s first phase consisted of senior loans of up to $45 million equivalent in local currency to two banks in Côte d’Ivoire. Because IFC followed the standard procedures in project preparation, no obvious efficiency gains were expected from the first phase. A proposed second phase envisioned using a delegated authority. However, the program was dropped before providing any financing because it misjudged the market, focusing narrowly on one country, one sector, and two participating banks.5 One of the participating banks withdrew, citing negative price movements in the market, and the second bank failed to restore compliance with IFC’s environmental and social (E&S) standards. The Ivorian banking sector’s appetite for developing mortgage financing was somewhat overestimated under this platform. According to IFC, the Ivorian government did not deliver on the development of basic infrastructure (water, electricity, and so on) to service the housing under construction, after an unsuccessful World Bank engagement. This delayed delivery was further affected by the onset of the COVID-19 pandemic. The missing basic infrastructure made the banks hesitant to continue their engagement.

Engaging in New Sectors

Platforms aiming to reach new sectors did so to some extent, but the platforms approach was not essential to GHP investments.6 ISC, GHP, and BOP each realized their aim to reach new sectors that IFC had not otherwise reached, although to a limited extent (table 2.5 and figure 2.4). Platforms focused resources and industry knowledge in specific areas.

Sources: Independent Evaluation Group case studies, desk reviews, and portfolio analysis.

Note: “Platform” covers four platforms targeting new sectors or those with the highest percentage of new country sectors in the portfolio. Dark green, white text = strongly; light green, black text = moderately; pink, black text = weakly; medium red, white text = not at all. IFC = International Finance Corporation; MSMEs = micro, small, and medium enterprises.

In addition, processing efficiencies (for example, delegation of authority and deal acceptance criteria in ISC) freed up time to serve clients in new sectors. The ISC enabled IFC to target early venture capital financing to start-ups focusing on digital technology, including investments too small to be processed under IFC’s nonplatform approach. BOP targeted financial service providers, enabling IFC to reach MSMEs in challenging markets. GHP provided financing in the medical equipment and diagnostic service sectors in some countries where IFC had not invested previously in these sectors. For example, IFC loaned $3 million to a distributor of medical equipment with local presence in an East African country, providing scarce foreign currency to be repaid in local currency. Although GHP focused attention and resources in reaching new sectors, interviews suggest that these projects would likely have proceeded as IFC stand-alone projects.

Figure 2.4. Have Platforms Supported the International Finance Corporation’s Entry into New Sectors?

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Figure 2.4. Have Platforms Supported the International Finance Corporation’s Entry into New Sectors?

Sources: IFC Business Intelligence reports; Independent Evaluation Group calculated data on new sectors.

Note: The numbers in percentages at the top of the bars represent the share of all projects that were committed in a new sector. BOP = Base of the Pyramid; GHP = Global Health Platform; IFC = International Finance Corporation; ISC = IFC Startup Catalyst.