Highlights

Platforms have shown gains in lowering average project processing time, with some variation by platform. Average processing time is the only aspect of efficiency on which the International Finance Corporation (IFC) reports.

Use of delegated authority (transfer of project approval authority from the Board to management) increased during the COVID-19 pandemic and was a major source of observed efficiency gains.

Standardizing and streamlining IFC internal processes (for both preparation and approval) under platforms also contributed significantly to time savings.

Platform projects incur lower expected losses—an ex ante risk indicator—in their debt finance compared with the rest of IFC, even after factoring out the effect of International Development Association Private Sector Window blended finance. However, this varies by platform.

Equity investment risk ratings for platforms and nonplatform projects are similar; the IFC Startup Catalyst platform is an important exception.

Platform projects are subject to almost the same up-front due diligence as IFC benchmark projects, with some streamlining.

Platform reporting has evolved over time but has not met the Board of Executive Directors’ expectations. IFC has begun to report average Anticipated Impact Measurement and Monitoring scores by platform but does not report on platform-specific credit risk, environmental and social risk and integrity risk ratings, or risk-adjusted return on capital.

A forward look exercise was conducted to guide IFC’s future use of platforms. Focus groups obtained original inputs from IFC management and the Board, reflecting on three aspects of future use: (i) extending efficiency gains through delegation and streamlining internal processes, (ii) responding to future crises and global challenges, and (iii) scaling up to reach more International Development Association clients, clients in countries classified as fragile and conflict-affected situations, small clients, new clients, and new markets.

The Board and IFC management agree that the platforms approach can be expanded to build on efficiency gains, but their views on the use of delegated authority differ. The Board saw potential for expanding delegation within clearly defined parameters and with timely reporting of information needed for oversight.

The Board and IFC management both see platforms’ value in addressing future crises by allowing a faster response to clients in urgent need of working capital. Both point to the need for dual capacities in future platforms to address short-term needs in crisis and long-term needs in addressing global development challenges and building resilience.

The Board and IFC management agree that platforms can provide efficient and targeted approaches to reaching clients in countries eligible for International Development Association financing, countries classified as fragile and conflict-affected situations, small clients, new clients, and new markets where the average firm and project size is small and therefore does not meet the investment threshold of normal IFC operations.

Efficiency

A major argument for platforms is that they bring more efficient processing through saving time or staff costs or both. Consistent with discussion with IFC management, the Board expects IFC to process projects more efficiently under platforms through expedited processes during project processing (from Concept Note to first disbursement).1 This implies that it anticipates projects of the same quality as nonplatform projects and with savings in processing time. Clients might not be aware of platforms, but they expect responsive and timely processing of their financing, comparable to sources of alternative finance. Our analysis largely confirms that platforms are associated with quicker processing times and do not sacrifice project quality, but it also raises important questions about how to conceptualize and monitor efficiency.

Processing time is shorter on average for platforms versus nonplatforms, but the time savings vary by platform. Key factors in reducing processing time included delegation of authority and standardization and streamlining of processes. On average, BOP projects were processed two months faster than its benchmark projects, while GHP projects were processed an average of three months faster than its benchmark projects (table 3.1). However, ISC projects took longer to process than their benchmarks, despite time savings from delegation of authority, partly because of the nature of the clients and their required support. ISC clients were mainly first-time fund managers focusing on start-up companies, and therefore ISC provided time-consuming hand-holding to clients, particularly during legal negotiations. In addition, the fund managers faced fundraising delays to achieve a minimum viable fund size. IFC’s approach to delegation of authority on a platform-by-platform basis contrasts with EBRD’s more blanket approach of applying delegation to all noncontroversial platform projects below a certain value (box 3.1).

Source: Independent Evaluation Group analysis of IFC portfolio data.

Note: IFC = International Finance Corporation.

a. The Small Loan Guarantee Program projects are guarantees in the case of default. Only two projects were disbursed under this platform.

Delegation of authority was the most important source of efficiency gains observed, aiding in crisis response. Use of delegated authority surged in FY20–21 during COVID-19 (figure 3.1). The number of platform projects using delegation of authority fell in FY22 and rose in FY23, led by new platforms, including the Africa, and the Middle East, Central Asia, and Pakistan Venture Capital Platform and the Africa Trade Recovery Initiative.

Figure 3.1. Use of Delegated Authority for Platforms Increased During COVID-19

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Figure 3.1. Use of Delegated Authority for Platforms Increased During COVID-19

Sources: IFC Business Intelligence reports; Independent Evaluation Group.

Note: The figure depicts platform financing. IFC = International Finance Corporation.

Among the case studies, time savings from delegation of authority were most evident for the BOP platform. Transaction leaders of BOP projects estimate that delegation of authority saved them 4 to 6 weeks of processing time by not having to prepare and obtain approval of Board papers. Our portfolio analysis found that 17 BOP projects processed under delegation of authority took an average of only 9 months from Concept Note to disbursement. By contrast, 28 BOP projects processed on an AOB basis took an average of 13 months to process compared with 14 months for BOP benchmark projects.

Although delegation of authority achieved time savings for ISC, overall project preparation time was longer because of the nature of its clients. Negotiating legal agreements took longer because the first-time fund managers it targeted were unfamiliar with legal and technical requirements. IFC also provided time-consuming hand-holding to these fund managers because of their inexperience. In addition, the fund managers faced fundraising delays to achieve a minimum viable fund size.

Our case studies indicate that standardizing and streamlining IFC internal processes (for both preparation and approval) under platforms also contributed significantly to time savings. In focus group discussions and interviews, both Board advisers and IFC management agreed that efficiency gains were achieved through streamlining and standardization, which was made possible by the platforms’ grouping similar projects. Some platforms that introduced a streamlined process included an early look process, which uses a short-form document and accelerated processing, saving time and steps compared with the more detailed Concept Review Memorandum and associated meetings and preparation processes applied to nonplatform IFC projects. Some platforms achieved efficiencies through standardization: mandate letters, Investment Review Memorandums by industry and subsector, deal acceptance criteria for screening investments, and the Anticipated Impact Measurement and Monitoring (AIMM) rating process. For example, both ISC and BOP achieved efficiencies through Investment Review Memorandum forms standardized by industry and subsector. BOP and GHP standardized and streamlined the AIMM rating process. Some platforms also pooled risk across eligible projects using IDA PSW blended finance at the platform level because the blended finance support was embedded in some platforms’ design (such as BOP and SLGP). Table 3.2 summarizes the efficiency features of the seven in-scope platforms.

Source: Independent Evaluation Group platforms approach evaluation of three case studies and four desk reviews.

Note: AIMM = Anticipated Impact Measurement and Monitoring; IDA = International Development Association; IFC = International Finance Corporation; PSW = Private Sector Window.

Current IFC reporting on efficiency has been limited to processing time, whereas a full consideration of efficiency must consider additional factors. IFC lacks a robust methodology for tracking sources of efficiency improvements or for collecting data related to efficiency by region, department, or platform. Savings in preparation time from mandate to first disbursement may not be the right measure of efficiency gains for several reasons. First, factors outside of the control of IFC or their clients (for example, government approvals, restrictive regulations, legal issues, and local economy problems) can influence preparation time. Second, efficiency needs to consider outputs relative to inputs, not simply time. Instead, efficiency analysis should include the cost-to-income effects of platforms on IFC’s financial statements. Such analysis should include cost reductions from process efficiency improvements and effects of changes in projects size and duration and how they interact with direct and indirect costs and affect IFC’s profitability.2 By comparison, EBRD made major investments in streamlining and standardization for efficiency in project processing both within and outside of its investment frameworks (box 3.2).

Risk

Platform projects incur lower overall expected losses—an ex ante risk indicator—in their debt finance compared with the rest of IFC, even when factoring out the effect of the IDA PSW blended finance. Expected loss is the amount that IFC is expected to lose from a client’s potential default on a loan.3 Platform projects approved in FY17–22 have an expected loss of about 0.51 percent of their total exposure at default ($29 million) compared with 1.25 percent for the rest of the IFC portfolio ($412 million; figure 3.2).4 In addition, the median expected loss is $121,000 for platform projects compared with $154,000 for the rest of IFC. To a limited extent, the presence of IDA PSW blended finance support can explain this lower expected loss; it compensates a small portion of potential losses to IFC, thus reducing risks to IFC’s balance sheet. As noted in chapter 2, some platforms are designed to pool risk across eligible projects backed by an envelope of IDA PSW support, which avoids the need for individual project applications to IDA PSW for support, achieving savings in processing time. However, clearly other factors must explain much of the lower expected risk of platforms compared with the rest of the IFC portfolio.

Figure 3.2. Riskiness of Platforms Versus the Rest of the International Finance Corporation

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Figure 3.2. Riskiness of Platforms Versus the Rest of the International Finance Corporation

Source: Independent Evaluation Group deep dive on platform risk.

Note: IDA = International Development Association; IFC = International Finance Corporation; PSW = Private Sector Window.

Platform projects in IDA countries are somewhat more likely than nonplatform projects to use IDA PSW guarantees to mitigate risk. For all platform projects in IDA countries, about 33 percent used IDA PSW support compared with only 23 percent for the rest of the IFC IDA portfolio. BOP used IDA PSW support the most among platforms: 71 percent of its IDA country projects used some form of IDA PSW support. As a result of IDA PSW coverage, the expected loss (projected) for platform projects is about 0.03 percent lower and for the rest of the IFC portfolio about 0.02 percent lower.

BOP was riskier than its benchmark because of the beneficiaries it targeted. BOP is a riskier platform with higher expected loss than its benchmark and GHP (figure 3.3). The BOP platform’s integrated ability to pool risk and use blended finance efficiently enabled it to take on riskier clients. To illustrate, BOP made local currency loans to two new clients with weak credit ratings (CR-11) in an East African country with the support of IDA PSW blended finance. In a second East African country, BOP provided financing (A and B1 loans) to two new clients with weak credit ratings (CR-11) using IFC’s own-account and parallel loans mobilized through the Managed Co-Lending Portfolio Program (IFC’s syndications platform for institutional investors). These two microfinance institutions were part of a large group that operated multiple microfinance institutions in Africa. IFC’s funding at a critical time was equivalent to about 20 percent of this group’s loan portfolio. In addition, during the COVID-19 pandemic, the microfinance sector in most of Africa experienced increases in nonperforming loans and funding restrictions. The BOP platform reached microfinance institutions both with and without blended finance.

Figure 3.3. Riskiness of Platforms Versus Benchmarks, FY17–22

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Figure 3.3. Riskiness of Platforms Versus Benchmarks, FY17–22

Sources: IFC Business Intelligence reports; IFC Investment Risk Platform (credit ratings); Independent Evaluation Group deep dive on platform risk.

Note: BOP = Base of the Pyramid; GHP = Global Health Platform; IDA = International Development Association; PSW = Private Sector Window.

Equity investment risk for platform and nonplatform projects is similar except for the ISC platform. Overall, the platform approach is characterized by equally risky investments compared with the rest of IFC. Risks to IFC’s balance sheet stemming from equity investments can be captured through project credit risk ratings (CRRs). The equity CRR scale ranges from 1 (best) to 7 (worst), with 2A being the second-best rating. Platform projects are rated in line with the rest of IFC projects, with a median CRR of 3A for platforms and the rest of IFC. The distribution of ratings for both platforms and the rest of IFC is skewed to the better-rated end of the rating scale (figure 3.4, panel a). However, ISC is riskier (median CRR of 3B) than its benchmark (2B) because of its targeted client base of private equity funds financing start-up companies (figure 3.4, panel b). Another platform that makes equity investments—Private Equity Co-Investment—has a median CRR rating of 2B, less risky than ISC.

Figure 3.4. Credit Risk Rating of Equity Projects, Platforms, the Rest of the International Finance Corporation, and Benchmarks, FY17–22

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Figure 3.4. Credit Risk Rating of Equity Projects, Platforms, the Rest of the International Finance Corporation, and Benchmarks, FY17–22

Sources: Independent Evaluation Group deep dive on platform risk, desk review, and portfolio analysis of risk associated with platform projects.

Note: IFC = International Finance Corporation; ISC = IFC Startup Catalyst.

Country concentration is significant in some platforms, whereas industry concentration is inherent to the focused strategy of platforms. In GHP, two countries account for 60 percent of the total commitments: China (31 percent) and Brazil (29 percent). In addition, five countries in GHP account for 96 percent of the total commitments. Similarly, in the BOP platform, three countries account for 52 percent of the total commitments: Tanzania (26 percent), India (13 percent), and the Democratic Republic of Congo (13 percent). By design, some platforms have a narrow focus targeting projects in one industry group. For example, BOP platform projects are all mapped to the Financial Institutions Group, and ISC projects are all mapped to the Disruptive Technologies and Funds group. However, platforms overall are not currently affecting the IFC portfolio’s country risk concentration or industry or sector concentrations. Because individual platforms by design exhibit both country and industry concentrations, if IFC scales up the platform approach, concentrations should be monitored carefully.

Platform projects are subject to almost the same up-front due diligence as IFC benchmark projects, with some streamlining. Our benchmarking analysis shows mostly similar due diligence processes (table 3.3). For the three case studies, the Investment Review Memorandum process is the same for GHP, with minor customization for BOP and ISC. The client supervision report adheres to the same standards for GHP and BOP, whereas ISC reporting has a 12- to 24-month initial delay for incubation. E&S reporting is the same as for benchmark projects for new clients in BOP and GHP. For existing clients, BOP and GHP platform projects must meet E&S criteria. E&S reporting is the same for ISC and its benchmark.

Source: Independent Evaluation Group case studies and benchmarking analysis.

Note: AIMM = Anticipated Impact Measurement and Monitoring; E&S = environmental and social; IDA = International Development Association; IFC = International Finance Corporation; PSW = Private Sector Window.

Reporting and Oversight

Platform reporting has evolved over time but has not met the Bank Group Board’s expectations. The Board has made clear that its trust is influenced by accurate and complete reporting at the project and platform levels and assurances that platforms are operating according to agreed targets and guardrails. To fulfill its governance function, the Board’s expectation expressed in its discussions of platforms was to receive information on additionality, development impact (AIMM), E&S and integrity risk ratings, credit and equity risk ratings, and risk-adjusted return on capital. Our review of actual reporting shows that reporting was not standardized, and much of what the Board wanted was missing. Regular reports from IFC management to the Board (quarterly and monthly) show commitment volumes (IFC’s own account and core mobilization) with links to project data, platform usage and share of IFC’s own account across IDA countries and FCS, climate, and gender. IFC recently began to report average AIMM scores for individual platforms in its quarterly reports to the Board. However, there has been little reporting through the Board Operations System or IFC New Operations Portal on the areas expected by the Board.

Similarly, EBRD also provides limited information to its Board of Directors on investment framework projects approved under delegated authority (box 3.3). EBRD reports also tend to be limited to use amounts, average impact ratings and the proportion of projects on track to meet their objectives, and geographic distribution. However, whether the EBRD Board expects to receive anything more than this is unclear.

Our review of platform-related Board papers indicates that platforms have not consistently established indicators and measurable targets at the platform level in their Board papers as a basis for reporting and oversight. Instead, our review showed gaps in establishing clear and quantifiable indicators at the platform and project levels (table 3.4). However, the ISC platform expansion paper and Côte d’Ivoire Housing Program papers demonstrate better practices by providing both platform level and project level outcome indicators with explicit, quantified targets.

Case studies indicate that the Board has not commented based on information in routine platform reports. Interviews indicate that IFC transaction leaders have not received comments from the Board on monthly operations reports or on Board papers of projects submitted on an AOB basis. For example, IFC transaction leaders for BOP delegated projects did not receive Board comments on any of the monthly operations reports. The lack of comments could indicate either that IFC is exercising its delegated authority consistently with Board expectations or that the Board is not using this information in its oversight.

Source: Independent Evaluation Group desk-based review of the seven IFC platforms covered under this evaluation.

Note: IFC = International Finance Corporation.

IFC staff do not find the current reporting requirements for projects processed through delegated authority cumbersome, but feedback from IFC clients on reporting was mixed. In general, interviews with IFC staff and managers found existing reporting reasonable but had some trepidations about any additional reporting (see chapter 4). Regarding clients, BOP clients did not find the reporting requirements cumbersome, and many appreciated IFC’s technical assistance with their internal management systems and reporting capabilities. Similarly, GHP clients appreciated IFC’s thorough due diligence process but noted a lack of efficiency gains for existing clients because projects were either approved by regular process or AOB but not through delegated authority. By contrast, for ISC, less sophisticated first-time fund managers indicated that the frequency of reporting was difficult for them and their start-up companies to accommodate.

Forward Look: Reflections on Early Experience for Future Use of Platforms

To guide IFC’s future use of platforms, we conducted a scenario-based forward look exercise to obtain original inputs from IFC senior management and the Board in focus groups. Participants reflected on three aspects of future use: (i) extending efficiency gains through delegation and streamlining of internal processes, (ii) responding to future crises and global challenges, and (iii) scaling up to reach more IDA and FCS clients, small clients, new clients, and new markets.

Forward-looking discussions on the future use of platforms started from a few stylized findings as presented in chapters 2 and 3. These included the following:

• Findings showing efficiency gains both from delegation of authority and streamlining and standardization of processes within individual platforms
• Findings on EBRD’s experience, which suggested potential to extend delegation of authority to small, noncontroversial transactions for existing and new clients
• Findings on the substantial financing (75 percent of IFC’s total response) channeled through platforms in response to the COVID-19 pandemic
• Findings on the Board’s expansion of delegated authority through platforms as a COVID-19 response to an urgent crisis, with the expectation of timely reporting of platform data on additionality, development impact, risks, and efficiency (Although IFC’s platform reporting has evolved, it has not yet met the Board’s expectations.)
• Findings on the ability of platforms targeting smaller and riskier transactions to engage with hard-to-reach clients, including transactions in IDA countries and FCS and transactions with small clients, new clients, and start-ups (By pooling IDA PSW first-loss guarantee, BOP engaged with new clients otherwise considered too risky.)

We organized three focus groups to solicit views from advisers to the executive directors on IFC’s Board, from IFC’s Corporate Strategy leadership team, and from IFC industry directors for industries addressed by the three case study platforms (appendix A). Discussion focused on the future role of the platforms approach in contributing to IFC’s efficiency gains through delegation of authority and standardization and streamlining of internal processes; its response to crises and global challenges; and scaling up to reach more IDA and FCS clients, small and new clients, and new markets.

Future Role of Platforms Approach in Achieving Efficiencies

The Board and IFC management agree that platforms can be used to achieve efficiency gains, but their views on delegation of authority differ. Both agree that streamlining and standardization in platforms should be used to reduce delays and costs. However, IFC management regards delegation of authority favorably as a key element of platform efficiency, whereas the Board regards it as neither inherent to nor necessary for platforms to operate efficiently. Both observe that although some platforms did not have delegation of authority (for example, GHP), efficiencies were achieved through streamlined processing and standardized templates for several functions—including early look process, Investment Review Memorandum, and Board papers. This was made possible by platforms’ grouping of similar projects. IFC management sees efficiency gains arising from delegation of authority as crucial for approving projects in difficult contexts (including small states) that involve smaller transactions and quick turnaround, especially to respond to crisis and when mobilizing capital from other financiers.

In addition, the Board views delegation as requiring more intense reporting. The IFC Corporate Strategy team points to the ongoing and anticipated improvements in reporting being implemented, including a real-time dashboard.5 IFC operational management cautions that too much reporting can undermine platform efficiency gains. The Board sees a role for expanding delegation within clearly defined parameters (for example, target clients with good E&S standards and well-defined country, sector, and regional thresholds) and with timely reporting of information needed for oversight.

Future Role of Platforms Approach in Responding to Crises and Global Challenges

Both the Board and IFC management point to the need for dual capacities in future platforms to address short-term needs in crises and long-term needs in addressing global challenges and building resilience. Both see platforms as adding value to IFC by allowing a faster response to its clients in urgent need of financing. IFC management believes that future platforms can be designed to support both short-term response to crisis and longer-term resilience. For example, the BOP platform was created during the pandemic to provide liquidity support to financial intermediaries onlending to MSMEs. After the pandemic, it continued to support them, extending the tenor of its projects from three years to five years to provide them with longer-term support.

In the Board’s view, the design of future platforms should consider different performance standards for due diligence, credit risk, and E&S standards, depending on the nature of the crisis. Doing so can help IFC apply appropriate performance standards adapted to the different nature of each crisis (for example, financial crisis, pandemic, food crisis, and so on).

Future Use of Platforms Approach to Reach IDA Countries and FCS, Small Clients, New Clients, and New Markets

Both the Board and IFC management agree that platforms can provide efficient and targeted approaches to reaching clients in IDA countries and FCS, small clients, new clients, and new markets where the average firm and project size is small and thus does not meet the investment threshold of a normal IFC operation. IFC management sees platforms as helping IFC to do more small projects and engage further in IDA countries and FCS through improved process efficiencies that lower processing costs. The Board wants IFC to do more in difficult markets and in small states in the future while upholding its standards.

The Board would consider expanding delegated authority under conditions that strengthen trust, alignment with strategic goals, and appropriate risk assessment. However, the Board wants clear, well-enforced performance standards on due diligence, credit risk, and E&S for clients in IDA countries and FCS, and it sees a need for a clear risk assessment framework for new IFC clients.