IFC

What is IFC ?
• The International Financial Corporation is a
member of the World Bank Group and is
headquartered in Washington, DC.
• It shares the primary objective of all World
Bank Group institutions i.e. to improve the
quality of lives of people in its developing
member countries.
• It was established in 1956.
• In the developing world, IFC is the largest
multilateral source of loan and equity
financing for private sector projects.
Ownership and management:-
• IFC has currently 182 members, which determine
its policies and approve investments.
• To join IFC, a country must first become a member
of the International Bank for Reconstruction and
Development (IBRD).
• The corporate powers of IFC are vested in its
Board of Governors, to which member countries
appoint their representatives.
• IFC's share capital is provided by member
countries, and voting rights are in proportion to the
number of shares held.
• The President of World Bank Group Robert
Zoellick is currently serving as the IFC's president
also.
Functions:-
It promotes sustainable private sector development
primarily by:
• Providing financial assistance to the private sector
projects and companies located in the developing
world;
• Helping private companies based in the developing
world mobilize financing in the international
financial markets;
• Providing advisory and technical assistance to the
businesses and governments.
• While the World Bank finances projects with
sovereign guarantees only, the IFC finances
projects without sovereign guarantees also. This
means IFC is primarily active in private sector
projects.
• Like a bank, IFC lends or invests its funds to its
customers and expects to make a sufficient risk-
adjusted return on its global portfolio of projects.
• IFC supports projects with positive developmental
outcomes, and to improve the outcome of such
projects by various means.
• IFC provides both investment as well as advisory
services.
• IFC's Advisory Services focus basically on five core
areas: Access to Finance, Business Enabling
Environment, Environmental & Social
Sustainability, Infrastructure Advisory, and
Corporate Advice.
 IDA
Background of IDA:-
• IBRD was established in 1944 to help Europe recover from
the devastation caused by World War II.
• By the 1950s, the issue of poorest developing countries
needing softer terms than those that could be offered by the
Bank came up, and a need for special provisions for the
developing world was felt so that they could afford to borrow
the capital they needed to grow at favorable terms.
• US took the initiative, and a group of the Bank’s member
countries decided to set up an agency that could give
financial assistance to the poorest countries on the most
favorable terms possible. They called the agency as
"International Development Association” (IDA).
• Articles of Agreement of IDA came into force in 1960 and
the first IDA loans, known as credits, were approved in 1961
to Chile, Honduras, India and Sudan.
• IDA provides interest-free credits and grants for programs
that boost eco. growth, and reduce poverty and inequalities.
• IDA complements IBRD–which serves middle-income
countries with capital investment and advisory services.
• IBRD and IDA share the same staff and headquarters.
• IDA is one of the largest sources of assistance for the
world’s 79 poorest countries, 39 of which are in Africa alone.
It is the single largest source of donor funds for basic social
services in the world’s poorest countries.
• IDA lends money (also known as credits) on concessional
terms i.e. IDA credits have no interest charge and
repayments are stretched over 35 to 40 years, including a
10-year grace period. IDA also provides grants to countries
at risk of debt distress.
Membership:-
• IDA currently has 169 members.
• Eligibility for IDA support depends on a country’s relative
poverty also defined as GNI per capita below an established
threshold and the same is updated annually.
• IDA also supports several small island economies, which
although are above the operational cutoff but lack the
creditworthiness needed to borrow from IBRD.
• Some countries, such as India, Indonesia and Pakistan, are
IDA-eligible based on their per capita income levels, but at
the same time are creditworthy for IBRD borrowing also.
These are referred to as ‘blend’ countries.
• 79 countries are currently eligible to receive IDA assistance.
Collectively these countries are home to about 2.5 billion
people, which amounts to half of the total population of the
developing world.
IDA Lending:-
• IDA credits have maturities ranging from 20, 35 to
40 years with a further grace period of 10 years
before repayments of principal begins. IDA funds
are allocated to the borrowing countries in relation
to their income levels and record of success in
managing their economies and their ongoing IDA
projects.
• IDA also provides donor assistance to provide relief
to those poor countries that cannot manage their
debt-service burden.
• IDA-financed operations address primary
education, basic health services, clean water &
sanitation, environmental safeguards, business
climate improvements, infrastructure & institutional
reforms.
IDA Funding:-
• IDA is funded largely by funds provided by the
governments of its richer member countries.
Additional funds also come from IBRD's income
and from the borrowers’ repayments of earlier IDA
credits/loans.

IDA & India:-

• India is among the top 10 IDA borrowers with $956
million borrowings in the financial year 2009.
• IDA has assisted India with US $10.1 billion over
the past decade through 48 projects.
• IDA also helped India stabilise its economy in the
early 1990s during the economic reforms and
accelerate growth through various policy reforms.
• In education, IDA has supported world’s largest ‘Education
For All’ (EFA) program - the ‘Sarva Shiksha Abhiyan’ (SSA).
In 1st phase IDA contributed US $500 million & in 2nd phase
over US $9 billion.
• IDA also supported an innovative community forestry project
in Andhra Pradesh, recognized as the best practice in India.
• With the help of IDA funding, AP is now considered to have
the best-managed power sector, third highest credit rating,
one of the best investment climates and fourth lowest
corruption level among Indian states.
• The Andhra Pradesh Rural Poverty Reduction Project and its
precursors tried to improve the livelihoods of the rural poor
and reduce their vulnerability to shocks like illness, a death
in the family, crop failure, livestock disease, etc.
• Similar results have been achieved in the state of Orissa
also.
Future Perspective:-
• IDA & various other institutions have played a vital
role in economic and social upliftment of the Indian
poor but a lot more needs to be done.
• In coming years, the emphasis should be on
implementation procedures and institutional
arrangements that focus on: getting results
(including demand-side accountability through-
beneficiary, civil society and community
involvement); strengthening capacity for publicly
provided services; and enhancing private sector
participation.
 THANK YOU !!

By:- Navneet Kaur

LLM Batch 2009-11
NALSAR University of Law,
Justice City, R.R. Dist.,
Shameerpet,
Hyderabad-500078 (A.P) India.