Management welcomes the Independent Evaluation Group (IEG) report, Mobilizing Technology for Development: An Assessment of World Bank Group Preparedness. This topic is key for the Bank Group, given its relevance to both the 19th Replenishment of the International Development Association (IDA) policy commitments and the International Bank for Reconstruction and Development–International Finance Corporation (IFC) capital package commitments. It has become even more timely in the context of the coronavirus pandemic (COVID-19). Management would like to thank IEG for undertaking this evaluation and consulting with management throughout the process.

World Bank Management Response

Management is pleased with the report’s appreciation of the World Bank’s solid reputation in supporting global public goods using disruptive and transformative technologies (DTT). The report recognizes that the Bank Group plays an important role as (i) an honest broker in dealing with public and private sector technology initiatives, (ii) a provider of robust advisory services and analytics on DTT, and (iii) a catalyzer for concessional funding in support of DTT initiatives. Management will build on these strengths and develop new ones by incorporating lessons learned from the IEG evaluation. Given the relative novelty of the mainstreaming approach (articulated in 2019), many improvement opportunities identified by the report (such as the/a proposed shift of the human capital and learning narrative[s?] from “necessary” skills of literacy and numeracy to include 21st century “sufficient” skills of digital literacy to meet the demands of the future labor market) are subject to ongoing efforts by management across a variety of fronts. Most of these efforts are still at early stages. For example, the FY21 Education Global Practice (GP) pipeline includes 42 projects that support the development of digital skills (both in basic and higher education) for teachers, principals, and learners.

Management believes that the report’s conclusion that the World Bank’s focus is largely limited to digital technologies (as opposed to DTT), is prompted by an incomplete account of World Bank initiatives. The report appears to focus mostly on activities undertaken by the Digital Development Group, the Data Development Group, and the Education GP. Many more groups across the World Bank spearhead initiatives that are relevant to this agenda. There is significant analytical and operational work across various Practice Groups (particularly in the Sustainable Development Practice Group) on data platforms, disruptive technologies, and technology innovations. Many of the more recently developed action plans, studies, and initiatives on DTTs provide a better sense of World Bank preparedness for supporting clients on DTTs.

Management recognizes that even more systematic internal collaboration is needed, given the wide-ranging nature of DTT projects that cut across sectors and involve both public and private institutions. The report describes several initiatives, notably Identification for Development (ID4D), that have generated collaboration across GPs. Notwithstanding these initiatives, management recognizes that the multisectoral dimensions of the agenda and the rapid evolution of the sector require further efforts. Therefore, it recently established the Digital and Disruptive Technologies Initiative, housed within the Digital Development GP, as an avenue to link different GP initiatives on DTT. This initiative will continue to mainstream digital and DTT solutions across sectors and work across the GPs to scale up digital and DTT applications in World Bank projects.

Management does not share the negative assessment of the Digital Economy for Africa Initiative (DE4A) yet recognizes room for improvement. DE4A fosters significant levels of collaboration across GPs and IFC. Each diagnostic is conducted with other GPs and IFC to avoid fragmentation of the analysis. Any digital economy assessment is done by a team of task team leaders from Finance, Competitiveness, and Innovation; Governance; Digital Development; Education; and IFC. The DE4A initiative and analytics by the offices of the Middle East and North Africa and Africa Region chief economists demonstrated the benefits of increased digital technology adoption and the links to both the twin goals and the Jobs and Economic Transformation agenda. The preparation of DE4A assessments (over 20 countries in Africa in FY19 and FY20) enhanced Bank Group readiness to respond to client demand. The initiative evolved after an adaptative process and will continue to do so by carefully examining the assessment of this report. The methodology was updated and tighter links between diagnostics and implementation enabled based on the initial experiences of preparation of DE4A diagnostics.

Management agrees with the report’s first recommendation, namely, to seize the opportunities brought by DTT to make progress on the twin goals and will continue doing so wherever relevant. This is fully in line with the 19th Replenishment of IDA policy commitments and the International Bank for Reconstruction and Development-IFC capital package commitments, which conceive the adoption of inclusive transformative technologies as promising means to achieve the twin goals. In this regard, management welcomes the report’s recognition that “more recent country diagnostics and strategies have increased attention to the digital economy.” Management emphasizes that the World Bank’s country engagement model is based on a principle of sovereign selectivity; hence, there should be no expectation that all World Bank client countries will systematically seek to assess or exploit opportunities for DTT. In this context, when it is justified by the congruence of client demand, policy dialogue and analysis, and the World Bank’s comparative advantage, management will continue making efforts to ensure appropriate diagnostics are conducted and a line of sight to the twin goals explicitly established. It is precisely for this purpose that the Bank Group recently endeavored to improve the digital economy country diagnostic methodology (version 2). Although the diagnostic is focused on the foundations of the digital economy, it recognizes that additional deep dives may be needed to further study specific areas of development, especially for key socioeconomic sectors. The diagnostic intends to provide actionable recommendations to governments and stakeholders on priority areas of development, with a mix of possible policy reforms and financing needs, and guidance on potential areas to achieve the twin goals.

Management will continue developing a robust pipeline of analytical activities and cross-sectoral initiatives with the intention of implementing the report’s recommendations. The knowledge and analytical pipeline is designed to provide practical tools for World Bank staff to harness opportunities and mitigate risks of DTT through the World Bank portfolio, enhance the skills of World Bank staff, and provide guidance on procurement for DTT. These activities also support knowledge creation and technical assistance to World Bank clients. Many of these activities are managed jointly across different Practice Groups and between the World Bank and IFC.1 The World Bank will leverage this broad spectrum of efforts by continuing to work closely with public and private partners and by enhancing its capacity through externally funded activities (for example, Digital Development Partnership).

Management also agrees with the report’s second recommendation, to build a workforce with the skills required to harness DTT opportunities and address DTT risks. Management welcomes the report’s acknowledgment of World Bank measures to strengthen the skills of staff working on digital development. As the report indicates, the World Bank has facilitated several staff to get online university degrees on artificial intelligence (AI), cybersecurity, 5G, and regulation. There is a large amount of learning on DTT in the Open Learning Campus. Disruptive Technologies is the main “Cross–Cutting” learning theme for staff learning and includes a package of learning on blockchain, AI, and internet of things. The Digital Development GP is sponsoring a wide range of training on mobile technologies, cybersecurity, and connectivity, among other topics. Information technology services has a Technology and Innovation Lab whose goal is to “serve as a catalyst, enabler and accelerator for WBG [World Bank Group] staff to learn about and build expertise around emerging technologies’ potential to support the WBG development agenda.” It also has an active staff learning program (Learn2Innovate) that partners with GPs for learning sessions on topics such as blockchain, AI, and other technologies with potential applications to the World Bank’s work. The Sustainable Development Practice Group has a robust learning program on the use of technologies for remote preparation and supervision for projects under its Remote Supervision and Preparation of Projects initiative. Additionally, the World Bank benefits from secondments of DTT experts from donor countries and the private sector. These initiatives demonstrate a growing commitment of time and resources, which will be sustained by management.

Finally, management agrees with the report’s third recommendation, to improve the procurement of complex technology projects, and believes that continuing to invest in client capacity and staff knowledge and skills is the most promising pathway to the outcome desired. Management appreciates the report’s illustrative example that upgrading the current guidance on complex procurement could be one solution to that end, but it must be complemented with other efforts to be sufficiently consequential. A fundamental issue with complex information and communication technology and DTT projects is that client countries’ institutional strength has a material impact on the course of procurement. Countries with strong control institutions typically discourage the use of innovative procurement methods or award processes that are more flexible. This offers strong disincentives for government decision makers to innovate, reinforcing behaviors to stick to a more objective, price-based award decision to avoid criticism by controllers. This needs to be more systematically factored in during project preparation and negotiations with clients, including through better reflection in procurement documents for specific contracts. As mentioned in the report, these issues are discussed in analytical reports being prepared by management under the GovTech Global Partnership (“GovTech Procurement Strategy”) and by the Procurement Global Unit (“Disruptive Technologies in Public Procurement”). Management will ensure that as these reports are finalized, appropriate lessons are compiled and guidance revised, as warranted, to inform staff and client capacity-building efforts.2

International Finance Corporation Management Response

DTTs play an increasingly critical role in a country’s economic growth and are fundamentally transforming how we and our clients do business. COVID-19 has only accelerated this trend of DTT and digitalization, impacting a wide spectrum—from productivity, scale, and the very nature of work, to financial inclusion, access to health and education, global value chains, and food security. Given the potential of DTT to help our client countries achieve their goals and the novel risk considerations digital development presents, this evaluation on the Bank Group preparedness is timely and important. IFC management welcomes this evaluation and would like to acknowledge the IEG team’s effort in evaluating this important subject.

IFC has been strategically planning and implementing various organizational changes to position itself to more effectively integrate DTT across all aspects of its business, from strategy formulation, investment, advisory, upstream, and diagnostics, to thought leadership. IFC management is critically aware that all industries need to understand the new reality that rapid innovation is changing business economics and therefore business models. It will change the constituency of IFC’s clients and how they operate their business. With this awareness, IFC management implemented two major organizational changes—IFC sector team realignment and upstream business establishment. In retrospect, these changes coincided with the time when the data collection and Bank Group interviews were being conducted for this evaluation.

In FY19–20, IFC management restructured its organization around DTT to better reflect the critical role of technology in development and strategically position IFC toward tapping into these investment themes. First, digital infrastructure, including telecommunications technology and services (TMT), moved to the Infrastructure Department. Second, financial technology (fintech), which has been investing in early-stage digitally-enabled payments and financial services since 2007, moved to the Financial Institutions Group Department (FIG). This was done in recognition of the impact fintech was having on financial services and the need to more closely integrate learnings from the technology portfolio into our work across the spectrum of financial services. Third, what we now call the Disruptive Technologies and Funds Department (CDF) was established as an Industry Department focused on the intersection of technology, manufacturing, agriculture, climate, and infrastructure that combines both funds and direct investments in early-stage businesses. CDF now integrates closely with our mainstream teams in FIG; Manufacturing, Agribusiness, and Services; and the Infrastructure Department to inform and share knowledge on disruptive technology trends while also cooperating through investment joint ventures on all aspects of investment decisions, knowledge transfer, and other cross-sectoral upstream and advisory initiatives in the space. In addition, IFC upstream business, which was launched in FY19, was further formalized in FY20 with the creation of the Global and Industry Upstream units. This aimed to better position IFC to support IFC 3.0’s vision toward market creation with a strong focus on harnessing the opportunities enabled by DTT and the digital agenda.

Although the report notes the reorganization, IFC management appreciates that the timing of the IEG evaluation may not have fully captured the extent of the above realignment and enhancement efforts in DTT across its investment, upstream, advisory and thought leadership businesses, some of which were in their infancies of establishment. It is notable to highlight that these activities have translated into increased capacity and expertise in DTT across IFC and enhanced collaboration within the Bank Group and private sector partners. Noting that it was too early to assess the effectiveness of its realignment and enhancement measures, IFC management would welcome IEG’s further assessment at a later time on the outcome of the efforts to strengthen its readiness to help clients harness the opportunities offered by DTT and mitigate the risks posed by them. In the interim, we highlight key enhancements that have taken place primarily since the above realignment, complementing the report.

Investments in Disruptive Technologies, Fintech, and Digital Infrastructure. As a leading emerging markets Venture Capital (VC) investor in disruptive technologies and fintech, IFC has invested over $1.5 billion in the VC and fintech asset class, building a portfolio that has approximately 120 direct investments in tech-enabled startups alongside over 50 limited partnership investments in early-stage VC funds across the emerging markets. IFC has developed unique expertise to support innovative business models leveraging technology in this space and built a portfolio with a diverse set of DTT solutions—from financial inclusion, access to high quality health care and education, to climate innovation—demonstrating a capacity for continuous learning and adaptation. In addition, we have provided financing or equity of $5 billion in digital infrastructure and the broader TMT space over the past 10 years, including mobilization.3 IFC is championing the pioneering of a transactional approach in several areas, such as electric vehicles, cold chain logistics, virtualization of infrastructure, digital twins of utilities operations, Cloud Platform as a Service, and green data centers. As of January 2020, IFC has 60 active portfolio projects and 66 pipeline projects with a digital component, totaling $3.1 billion in investments. The development impact and financial returns of these investments have been quite attractive. Below are some examples:

• Keeping supply chains afloat: E-logistics platform TradeDepot in Nigeria connected small businesses directly with suppliers and supplied food to informal retailers during lockdown, helping over 40,000 microretailers stay in business. The business is now expanding to other countries, including Ghana.4
• Expanding access to education: Ed-tech companies connect students to teachers without ever having to set foot in a classroom. The example mentioned in the report, Byju’s in India, has enabled over 900,000 students in India to expand their education.5
• Extending reach of health care: Health-tech companies like 1mg in India are providing critical medicines through e-pharmacy services to remote villages and connecting patients to doctors through e-consultation, for which demand has spiked over 440 percent during the pandemic. The data advantage has led this business to become the leader in AI powered diagnostics through e-medicine in remote parts of the country.6
• Financial inclusion: Fintech companies like Fawry, which started the first and largest electronic payment platform in Egypt and now serves over 30 million customers, bring convenient, lower cost payment systems to a country where as recently as 2014, 94 percent of all transactions were cash.7

Advisory services. In addition to IFC’s investments in DTT, IFC has developed extensive advisory capacity, including in-house expertise, to support the digital agenda. With over 220 advisory projects with digital or technology components that were launched since FY13 and currently in pipeline, IFC’s advisory assistance cuts across the themes of digital financial services, digital infrastructure, digital entrepreneurship, and digital skills. One such example, the Digital Gender-Ethiopia Program with Gebeya, provides critical software development skills to female students and helps build robust digital economies and competitive markets. IFC has particularly taken a programmatic approach with initiatives, such as IFC Startup Catalyst,8 ScaleX,9 and TechEmerge,10 to support the development of digital entrepreneurship. Similarly, we have taken a programmatic approach to underpin technology adoption in innovative climate programs, such as in Scaling Solar, Lighting Global, and EDGE.11 In the financial sector, IFC has supported financial institutions in adopting digital channels to drive efficiencies and expand the reach of financial services, and in leveraging data and technology for credit underwriting, risk management and transformation of back-end processes. The continuous evolution and sophistication of IFC’s product offering in this space demonstrates a capacity to adapt and evolve. Some important collaborations with donors have supported this work, such as the Partnership for Financial Inclusion supported by the Mastercard Foundation and the United Kingdom-funded Harnessing Innovation for Financial Inclusion program, a partnership across World Bank Finance, Competitiveness, and Innovation; the Consultive Group to Assist the Poor; and IFC.

Upstream. IFC management highlights that its investment and advisory support in DTT are well complemented by the upstream business, Diagnostics and Analytics, Thought Leadership, and other activities to maximize our development contribution. Since its establishment, IFC’s Upstream efforts have been strengthening the institution’s ability to bring together different teams from IFC and the World Bank to catalyze highly effective financial solutions for development and to impact policy and regulatory interventions. Eight TMT related Upstream Platforms, including Energy Service Companies for Telecom Anchor Clients; Satellite, Rural Communications, Cloud and Data Services, and internet of things, have been launched, targeting investment opportunities in cutting-edge market segments. To facilitate private investments, each of these platforms is scheduled to publish a study for public use and undertake some analytics that can be used by IFC and the World Bank teams.

Country diagnostics and analytics. Complementing the work on Systematic Country Diagnostics (SCDs), IFC, together with the World Bank, produces Country Private Sector Diagnostics (CPSDs) since 2017 as a core tool to deliver on IFC 3.0. The diagnostics then feed into two country-level strategy documents, the IFC Country Strategy and/or the Bank Group overall Country Partnership Framework. In this regard, many CPSDs have included the assessment of the DTT and sectors at their nexus and have led to World Bank-IFC joint interventions in the digital sector, for instance, in Kyrgyz and Madagascar. Furthermore, a separate Disruptive Technology and Digital Economy guidance note is being created to help each CPSD consider DTT opportunities and risks in the country. In terms of Analytics, IFC is enhancing its internal capabilities by undertaking a series of DTT analytical research pieces, such as ones stated above related to the eight Upstream Platforms and a Sector Deep Dive on digital infrastructure. Recent analytics also studied a model to assess the economic impact of reforms in the telecom sector; a benchmarking tool to assess areas of regulatory interventions to enable digital entrepreneurship; and the impact of digital connectivity on entrepreneurship and innovation in Africa.

Thought leadership. We further emphasize the role of IFC in exercising Thought Leadership in the DTT space. IFC has published a rich collection of related Thought Leadership pieces. For instance, recent pieces discuss the potential long-term impact of the COVID-19 pandemic on digitalization and adoption of disruptive technologies and a framework for anticipating the potential impact of COVID-19 on digital connectivity. Other pieces have contributed research and ideas to the application of AI in emerging markets (including its ethical uses), the Africa internet economy, sector trends and investment opportunities offered by DTT, and digital connectivity through infrastructure sharing.

Bank Group collaboration. IFC management appreciates an extensive section dedicated to this topic in the report and agrees that the World Bank and IFC could play separate but complementary and highly coordinated roles to enhance DTT projects. As identified in the assessment, there has been increasing effective collaboration examples in the DTT and related sectors, including the “Digital Economy for Africa (DE4A)” initiative to digitally enable Africa by 2030 and the “Identification for Development (ID4D)” initiative highlighted in box 4.2 of the report; CDF Senior Director is a core member of the latter’s Senior Directors’ Group. IFC has contributed to 30 DE4A diagnostics by sharing its private sector perspectives and knowledge centrally collected and coordinated from across IFC by CDF. IFC continues to work with the World Bank as the Digital Economy Initiatives roll out in Central America (DE4CA) and South Asia (DE4SA) in alignment with the Cascade approach. For successful DTT-related outcomes, IFC teams are on the same page with the report that contributions from both public and private sectors are needed. We will further seek opportunities to improve the collaboration with the World Bank teams.

Gender. Although the report’s gender analysis focused on the World Bank, IFC management welcomes an increased focus on the cross-section of gender and technology. IFC’s Gender and Economic Inclusion Group hosts a team focused exclusively on inclusive technology. Since FY19, IFC has invested over $140 million in projects with a gender focus across funds and disruptive technologies and launched multiple advisory initiatives and market leading research reports. Examples include the first-ever research on women and ride-hailing, globally and in Sri Lanka, and the first investigation into emerging women-only solutions, which informed the development and rollout of increasingly prevalent solutions in the industry. The organization has also taken a lead convening the sector to develop and mainstream best practice in inclusive tech; for instance, the Digital2Equal initiative, the program cited in the report, has brought together 17 companies in the platform economy to close gender gaps.

The pandemic has exacerbated the need for more investments in this space and a burgeoning of new and innovative technologies that require our support. Digital transformation is key to ensuring that countries are well poised for the future. To that end in particular, the digital gender divide must be bridged by focusing closely on the role women play in this space–either as entrepreneurs, clients, or end users and decision makers. We also cannot afford to lose generations of youth due to lack of access to technologies for education or growth. IFC management will prioritize its efforts in this area, keeping in mind the report’s findings and two recommendations given to IFC.

Response to Recommendations

Recommendation 1. Given the above progress, IFC management is aligned with the thrust of the first recommendation. As noted, IFC has implemented two major organizational changes that we believe would yield a more effective and efficient response to opportunities to make progress on the development challenges, such as the twin goals, and to address risks posed by the adoption of DTT. The organizational changes have enabled us to establish CDF as a focal point to promote increased collaboration within the Bank Group and with external partners. In parallel, IFC management would like to further highlight the extensive work that we are doing in the Sector Deep Dives, CPSDs, Country Strategies (including the business plans) as described above. This host of institutionalized instruments offers opportunities for IFC to design, implement and invest in DTT private sector solutions in our countries of operations. Senior Managers within our organization are taking the lead in aligning the DTT agenda, ensuring that it is sufficiently incorporated into the direction of our investment, advisory services, and upstream work programs. We will continue our efforts to leverage the changes implemented.

Recommendation 2. With respect to the second recommendation, IFC management acknowledges that DTT is a rapidly changing area where we need more skilled staff. Steps were being taken to address those gaps as this evaluation was being carried out. The aforementioned restructuring has prioritized challenges related to skills in recognition of areas mentioned in the IEG report, and it has paved the way to enhance skillsets. Given the fast-changing pace and evolution of the DTT space, it would be very challenging and virtually impossible to keep expertise embedded in the institution. However, IFC has the core foundations of in-house DTT generalists who understand technology and its impact on our business embedded within our industry groups. IFC management commits to continue assessing its DTT skills and expertise needs as markets and technologies evolve, and leverage external consultants to ensure that our work in the space remains relevant to our clients and impactful in our markets and operations. IFC management will also continue to strengthen the expertise required to run IT for the Corporation. As also briefly introduced in the report, rapid response training has been offered in key areas, such as privacy, cybersecurity, AI, regulatory reform, digital finance, and technology investing. We are actively collaborating with the information technology services Technology and Innovation Lab to enhance staff understanding of new technology opportunities and are also proactively seeding new activities, such as cybersecurity appraisal, with staff who have previously acquired expertise in these areas. Several units have worked programmatically to upskill their own staff to better support IFC’s technology activities.

We agree that harnessing DTT for development demands innovation and involves controlled risk taking. Spaces for such innovations exist in IFC with early-stage fintech and VC investment activities, including recently developed venture ecosystem building programs to further embrace the DTT agenda, such as Startup Catalyst, Scale X, and TechEmerge, as mentioned above. IFC will continue its effort to enhance risk taking and innovative, growth mindsets.