International Finance Corporation facts for kids
IFC logo
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IFC headquarters building, designed by architect Michael Graves
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| Formation | July 20, 1956 |
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| Type | Development finance institution |
| Legal status | Treaty |
| Purpose | Private sector development, Poverty reduction |
| Headquarters | Washington, D.C., United States |
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Membership
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186 countries |
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Managing Director
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Makhtar Diop |
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Parent organization
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World Bank Group |
| Website | ifc.org |
The International Finance Corporation (IFC) is a global financial organization. It helps businesses grow in developing countries. The IFC offers money for projects, gives advice, and manages investments. It aims to boost the private sector (businesses not owned by the government).
The IFC is part of the World Bank Group. Its main office is in Washington, D.C., USA. It was started in 1956. Its goal is to help countries grow their economies. This helps reduce poverty and improve living standards. The IFC works by investing in businesses. It also helps create jobs and provide important services.
Since 2009, the IFC has focused on key goals. These include:
- Helping sustainable agriculture (farming that protects the environment).
- Improving healthcare and education.
- Making it easier for small businesses to get money.
- Building better infrastructure (like roads and power).
- Investing in projects that fight climate change.
The IFC is owned by its member countries. But it has its own leaders and staff. These people manage its daily work. It is like a company where member governments are shareholders. They provide money and vote on important decisions. The IFC can make its own investment choices.
The IFC offers different ways to help companies get money. It also helps them manage risks. However, it does not get involved in running the companies. The IFC also advises businesses on how to be responsible. This includes looking at their impact on the environment and society. It also advises governments on building infrastructure. This helps support private businesses.
An independent group checks the IFC every year. In 2011, they said its investments helped reduce poverty. But they suggested the IFC should be clearer about its goals. This would help them measure their success better. The IFC is in good financial shape. It has received top ratings from financial experts.
Sometimes, the IFC gets criticized. Some groups say it doesn't always track its money well. This happens when it invests through other lenders. For example, a report in 2015 said the IFC didn't check enough on some investments. Other critics say the IFC helps big companies too much. These companies might not need help from a public organization. An example often mentioned is the IFC helping a wealthy person build a luxury hotel. Critics say this doesn't help development enough.
Contents
History of the IFC
The World Bank and International Monetary Fund were created in 1944. This happened at the Bretton Woods conference. The World Bank started working in 1946. Robert L. Garner joined the World Bank in 1947. He believed private businesses could help global development.
In 1950, Garner and his team suggested a new organization. This group would invest directly in private businesses. It would work in developing countries. The U.S. government liked the idea. They wanted a group that could invest without government guarantees. It also shouldn't manage the businesses. And it should work with other investors.
In 1955, World Bank President Eugene R. Black described the IFC. He said it would only invest in private firms. It would not lend money to governments. And it would not manage the projects it invested in.
Some people in the U.S. were worried about public ownership of private firms. But in 1956, the International Finance Corporation began. Robert L. Garner was its first leader. It started with 12 staff members. It had $100 million in capital. In 1957, the IFC made its first investment. It lent $2 million to a company in Brazil. This company was linked to Siemens.
In 2007, the IFC bought a part of an Indian financial company. In 2015, the IFC helped Greek banks. It bought shares in four of them. This was part of supporting the Greek economy.
How the IFC is Managed
The IFC is led by its Board of Governors. This board meets once a year. Each member country sends one governor. This is usually the country's finance minister. The governors give most of their power to the Board of Directors. This board handles the daily operations.
The Board of Directors has 25 executive directors. They meet regularly at the IFC headquarters. The President of the World Bank Group leads this board. These directors represent all 186 member countries. When they vote, each director's vote counts more if they represent countries with more money invested.
Currently, Makhtar Diop leads the IFC. He became the Managing Director in February 2021. Before this, he worked on building sustainable infrastructure for the World Bank.
The IFC works with other World Bank Group organizations. But it mostly operates on its own. It has its own legal and financial independence. The IFC has over 3,400 employees. About half of them work in offices around the world.
What the IFC Does
Investment Services
The IFC offers many ways to invest. These include:
- Loans: Money lent to businesses.
- Equity: Buying a share of a company.
- Trade Finance: Helping with money for international trade.
- Syndicated Loans: Getting other lenders to join in a loan.
- Structured Finance: Special ways to arrange money for projects.
- Risk Management: Helping companies deal with financial risks.
- Treasury Services: Managing its own money.
In 2010, the IFC invested $12.7 billion in 528 projects. These projects were in 103 countries. A large part of this went to the poorest countries.
The IFC usually lends money to businesses for 7 to 12 years. It sets up repayment plans that fit each borrower. Sometimes, it offers longer loans or grace periods. This happens if a project really needs it. The IFC also lends to leasing companies and financial groups.
The IFC used to lend mostly in strong currencies. But now it tries to lend in local currencies. This helps local financial markets grow. The IFC is very careful with its money. It has strict rules for managing its funds.
The IFC was allowed to buy shares in companies in 1961. Its first equity investment was in 1962. It bought a share in a Spanish car parts maker. The IFC invests in companies directly or through special funds. It usually buys 5% to 20% of a company's shares. The IFC's private equity investments are spread across many regions. These include Africa, Asia, and Latin America.
The IFC likes to invest for the long term. This is usually 8 to 15 years. Then it sells its shares, often when a company goes public. When the IFC invests, it does not take an active role in running the company.
The IFC has a program called the Global Trade Finance Program. It helps reduce risks for international trade. It guarantees payments for banks in over 80 countries. This helps businesses trade more easily. In 2010, the IFC issued over 2,800 guarantees. Many of these helped the poorest countries. In 2009, the IFC also started a program to help with trade during crises.
The IFC also has a Syndicated Loan Program. It helps gather money from many financial groups. This money goes towards development projects. Since 1957, this program has raised about $38 billion. This has helped projects in over 100 developing markets.
For clients who struggle to get cheap money, the IFC uses special financial products. These include partial credit guarantees and Islamic finance. The IFC helps companies with high credit risk. It does this by making their assets more attractive to investors.
The IFC also helps clients manage financial risks. It offers products to protect against changes in interest rates or currency values. It connects businesses in developing markets with international financial experts. This helps them manage risks better.
The IFC borrows money from international markets. This money is used for its lending activities. It is often one of the first groups to issue bonds in local currencies. The IFC's treasury manages its money carefully. It aims to earn good returns and make sure funds are always available.
Advisory Services
Besides investing, the IFC also gives advice. It helps companies make good decisions. This includes advice on how to run a business well. It also helps them consider their impact on the environment and society. The IFC encourages changes that make it easier to do business. It advises countries on creating a good environment for investment.
It also helps governments with infrastructure projects. This includes advice on public-private partnerships. The IFC guides businesses towards more sustainable practices. This means having good leadership and supporting women in business. It also means actively fighting climate change. The IFC says that cities in developing countries can attract trillions of dollars. This money could go into climate-related projects by 2030.
Asset Management Company
In 2009, the IFC created a special company. It's called IFC Asset Management Company LLC (IFC AMC). This company manages money invested in developing markets. It manages money from the IFC and other groups. These include government funds and pension funds.
The AMC makes its own investment decisions. It has a duty to manage its funds responsibly. It also aims to bring in more money for IFC investments. This is because it can make some investments that the IFC cannot. As of 2011, the AMC managed four main funds. These funds invested in different areas and regions. For example, the IFC ALAC Fund was created in 2010. It was worth $1 billion. The Africa Capitalization Fund was set up in 2011. It invested in commercial banks in Africa.
Financial Health
The IFC prepares financial reports every year. These reports are checked by independent auditors. In 2011, the IFC reported a profit of $2.18 billion. This was an increase from previous years. The profit came from higher earnings from investments and service fees. The IFC also gave $600 million in grants to the poorest countries in 2011.
The IFC's total capital was $20.3 billion in 2011. Most of this came from its own earnings. The IFC held $68.49 billion in total assets in 2011.
The IFC is considered financially strong. It received top credit ratings from major agencies in 2012. These agencies noted its good capital and careful management. They also liked its wide range of investments. However, they noted that investing in the private sector can have higher risks.
Sustainability Efforts
The IFC has a Sustainability Framework. This shows its commitment to sustainable development. It is part of how the IFC manages risks. The IFC's rules for environmental and social issues are widely used. Many companies, investors, and governments follow them. These rules help ensure projects meet acceptable environmental and health standards.
Green Buildings in Developing Countries
The IFC created a system for green buildings. It's called EDGE ("Excellence in Design for Greater Efficiencies"). This system is for fast-growing developing markets. The IFC works with the World Green Building Council. Their goal is to increase green buildings in these countries. They want 20% of new buildings to be green within seven years. A building gets EDGE certification if it uses 20% less energy, water, and materials. This is compared to regular homes.
See also
- Environment, Health and Safety
- Global Environment Facility
- Grassroots Business Fund
- Multilateral Investment Guarantee Agency
- Architecture of Washington, D.C.
