International Finance Corp. CEO Philippe Le Houérou said he expects the institution to work more closely with the World Bank in the future as it tries to be more proactive in “creating markets” in developing countries.
Rather than waiting for financing opportunities in the world’s poorest countries, the IFC will work together with the World Bank to help countries adjust “upstream” regulations and then provide early financing in markets as it creates them. He considers the shift a key part of “IFC 3.0,” the third iteration of the institution’s approach in its 60-year history.
Le Houérou described this new approach in part as a response to the common critique that IFC operates in areas where private capital already exists and that the additional “development externalities” it brings with its financing are questionable.
“What do we do to try to accelerate investment in the poorest countries? Move from using the market that you find — and it may not be the one that you would like to see — to changing the framework, the rules of the game to create more space for private sector,” Le Houérou said at a Center for Global Development event last week.
“That has a huge implication. It means IFC will have to work much more with the World Bank, because you need to engage with the public sector,” Le Houérou said.
Le Houérou, who twice led the replenishment of the World Bank’s International Development Account — the grant-making arm of the institution that works with least developed countries — said that the public sector side of the World Bank Group struggles to see how policy levers can be used to facilitate concrete private sector deals.
“They don’t know the private sector — I’m discovering it myself. So they don’t know who to call. They don’t have the rolodex to test ideas … So I think blending these two, it’s a good thing,” Le Houérou said.
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