For FIFs. In light of the distinctive nature of the Banks role in relation to FIFs and the FIF portfolios considerable size, heterogeneity, varied experience and risks, the Bank should strengthen its framework for guiding its acceptance and management of FIFs going forward. To do so, Bank management should: Review experience to date on the development effectiveness of the funds and their synergy with the Banks own operations and, based on that review, revisit Operational Policy 14.40s adequacy for guiding acceptance and management of FIFs as a distinct business line. Seek Board approval for each proposed new FIF. Report to the Board regularly on FIFs delivery of intended results and the implications for the Banks pursuit of its development mandate and strategies. The review of FIFs and any resulting revisions of the Banks framework should be presented to the Board by the end of 2011.
Original Response: Partially Agreed. Management agrees to prepare a strengthened framework for guiding the Banks acceptance and management of FIFs and expects to present it to the Board in FY12. In preparing the framework, Management will review the Banks experience to date in accepting, establishing and managing FIFs and it will revisit OP 14.40, including the definition of FIFs and the adequacy of OP14.40 for guiding the acceptance and management of FIFs. In conducting this review, Management will continue to treat FIFs as separate business line, where the Bank provides financial intermediation services to shareholders and clients to support broader international development partnerships. In that context, FIFs for which the Banks role is that of trustee only, cannot be expected to have full synergy with the Banks own operations, as implied in the IEG recommendation. Management accepts the principle of Board approval for FIFs and will develop relevant criteria and procedures as part of the FIF framework referred to above. Management does not agree to report to the Board regularly on FIF results. It notes that assessing development effectiveness is the responsibility of the FIF governing bodies. As such, the Bank has no mandate for conducting reviews of the development effectiveness of FIFs to report to the Board on the overall delivery of FIF results.
IEG notes the substantial progress in FY15 with the issuance of a directive, procedures and guidance setting out principles and processes with respect to the Banks engagement in FIFs. This follows up on the Management Framework for World Bank Partnership Programs and Financial Intermediary Funds: Strategic Engagement, Oversight and Management (June 14, 2013 - SecM2013-0286).
Refer to management update to recommendation 70 and 72 for a detailed account of recent progress in implementing the Management Framework for World Bank Partnership programs and FIFs. Specifically in the area of review and acceptance of new FIFs, and guidance to staff involved in FIFs, a series of Directives, Procedures and Guidance notes were issued in 2015. Similarly, the Trus Fund Handbook was revised in 2015 and a Guidance note was published to clarify the Accountability and Decision making for the Approval of new Truste level Trust Funds. Looking forward, Management will present to the Board in FY16 a paper on External Funds, including Trust Funds and global partnerships, to take stock of all the reforms implemented since 2013, the evolving global landscape of development finance, and share the Banks vision for their contribution to meeting the Banks twin goals.
Management's actions in response to this recommendation are a work in progress. IEG reserves judgment on the outcome of this work until it is completed and starts to be implemented hence the medium rating. IEG is pleased that the new FIF framework and the new Partnership Program Management Framework are being prepared in conjunction with each other, given that almost all FIFs are supporting GRPPs. But Management's timeframe for its presentation of the new FIF Framework to the Board seriously lags that in IEG's recommendation.
Management is developing a new FIF framework that will establish criteria and procedures for Bank's engagement in FIFs, provide guidance for risk management, and improve Bank service delivery to FIFs. A concept note for the framework has been subject to Bank-wide review and consultations with external stakeholders, including donors and recipient countries. The FIF framework is at an advanced stage and Management expects to present it to the Board in late FY12.
IEG agrees with combining the PP and FIF Management Frameworks into one framework, since most FIFs are supporting Partnership Programs. The two frameworks are reasonably well integrated in the present draft Framework Paper, including the extensive references to aspects of the PP Management Framework in Annex 1 on FIFs.IEG is glad to see the expectation that agreement by the Bank to engage in a PP supported by a FIF would inmost cases be submitted to the Executive Board for approval, in accordance with the risk-based approach in the PPMF.
The first recommendation inIEG's 2011 trust fund evaluation -- that the Bank adopt a three-pillar structure for trust funds, consisting of country-specific trust funds, GRPPs, and umbrella facilities -- does not appear in the MAR, since Management did not agree with this recommendationat the time. However, IEG notes that the draft of "Trust Fund Reforms: Progress to Date and Future Directions" which was circulated at the same time as the PP and FIF Framework Paper, has effectively accepted this recommendation. Paragraph 38 states as follows: "Out of currently 698 IBRD/IDA trust funds, 38 percent support country-specific work and another 38 percent support Partnership Programs, defined as multi-recipient trust funds supporting global and regional programs with shared decision making. This means there are limited thematic areas where further UFs can be created."IEG suggests that there would be more scope to establish UFs if the Bank were to adopt a less expansive definition of PPs in the PP andFIF Framework Paper, more consistent with this statement in the Trust Fund Reforms paper.
CFPMI established an Advisory Group from across the Bank to review FIFs and advise on changes to Bank policies and guidance for acceptance and management of FIFs. The Advisory Group reviewed and endorsed a Concept Note for a new Management Framework for FIFs and draft Framework paper prepared by CFP. In the event, CFP decided to combine the FIF Framework with a new framework for Partnership Programs under development by the Vice-Presidency. The latter was at an earlier stage of development, however, and as a result the combined Management Framework for World Bank Partnership programs and FIFs was not ready for OVP review until May 2013. The combined Framework Paper was circulated for OVP review on May 17, 2013. A Board date of 9 July 2013 has been scheduled.
For new FIFs, the new Management Framework delineates the required level of approval, based upon a risk-based assessment of each new FIF engagement. In practice, management has been seeking Board approval for each new major partnership engagement supported by a FIF.
IEG appreciates the Management Framework and the outreach to donors but questions how much that has so far led in practice to a shared understanding of the role of GRPPs
Management has made substantial progress in working with global partners, as well as internal stakeholders, to develop a shared understanding of the role of GRPPs, including those supported by Financial Intermediary Funds (FIFs). A Management Framework for World Bank Partnership programs and FIFs was presented to the Board on July 9, 2013 and significant progress was made during FY13 and FY14 in implementing the Framework in the context of the wider WBG change process. Implementation of the Framework has benefited from extensive consultations, internally and externally. Specifically, a web-based Partnerships toolkit for staff has been developed and detailed staff guidance notes on FIFs have been prepared for roll out in FY15. These guidance notes and toolkit help in strengthening the adequacy of OP 14.40. A review of OP14.40 did not lead to changes to the actual OP. The practice of Board approval for FIFs has now been well-established.