US DFC calls for probe of Bridge schools investment

U.S. International Development Finance Corporation, which finances private sector development solutions, has asked its independent office that reviews complaints to investigate its investment in Bridge International Academies, a for-profit chain of schools where child sex abuse was reported in Kenya in 2020. The DFC review comes after a separate probe into a 2013 investment the World Bank’s private sector arm, the International Finance Corporation, made in Bridge. IFC’s internal watchdog received reports of sexual abuse in Bridge schools in 2020 and an investigation found that IFC had failed on multiple counts, including staff turning a blind eye to reports of abuse and interfering in the investigation. The IFC watchdog, the Compliance Advisor Ombudsman, recently released the investigation report and the full details appear to have pushed DFC to further examine its own investment in the company. IFC’s board approved a remediation plan that includes education, community prevention measures, and rehabilitation, but, notably, doesn’t provide individual compensation despite requests from victims and support from the U.S. and other shareholders. World Bank President Ajay Banga apologized to the victims and admitted that protocols were not followed and mistakes were made. “DFC is profoundly concerned and saddened to learn of the allegations of abuse regarding the Bridge International Academies project detailed in the report by the International Finance Corporation’s (IFC) Compliance Advisor/Ombudsman,” the agency wrote in a press release. Community members in Nairobi reported cases of alleged abuse by two Bridge teachers to the IFC’s watchdog. Bridge schools reach some 750,000 students and the number of children abused is more than 20, according to the investigation. DFC’s predecessor, the Overseas Private Investment Corporation, or OPIC, gave Bridge a $10 million loan in 2013, which was fully repaid in 2022. DFC chief executive Scott Nathan has requested a review of the investment, including due diligence and monitoring. He also asked the Office of Accountability to determine whether “as a lender exercising reasonable care,” DFC should have been aware of the alleged child sexual abuse and to assess its procedures related to gender-based violence and harassment, including sexual exploitation and abuse. OPIC undertook environmental and social due diligence ahead of and during the investment, which identified and addressed issues at Bridge related to school licenses, teacher certification, poor sanitation, and teacher compensation and treatment. But based on an internal review, DFC has no reason to believe that it “had any knowledge” of the “child sexual abuse allegations,” a DFC spokesperson told Devex. DFC was not informed by Bridge, IFC, or others of the allegations, according to a letter Nathan wrote when requesting the investigation. DFC provided a loan, whereas IFC and other investors made equity investments in the company, giving them an ownership stake. “This means that OPIC/DFC did not have a seat on the board or access to internal documents that others may have had,” the DFC spokesperson told Devex via email. The “full independent review” of the project was requested “out of an abundance of caution and a commitment to transparency in light of the issues identified by the Compliance Advisor Ombudsman in its investigation of the International Finance Corporation’s (IFC) Bridge International Academies project,” the spokesperson said. Although the investigation was welcomed by some advocates, they want to ensure it is thorough and that victims are provided support if wrongdoing is found. It “shouldn’t just be a lessons learned exercise,” said Stephanie Amoako, policy director for Accountability Counsel, which advocates for communities harmed by internationally financed projects. “It’s not the responsibility of communities to teach an institution how to better do its work. The point of these investigations shouldn’t just be for future projects, but should be ensuring that the projects that were already supported, if there was harm caused by them, that it’s remediated and people can move on with their lives,” Amoako told Devex. If similar concerns or risks emerged today, DFC would have the tools and expertise to address them appropriately, Nathan wrote in his letter to the accountability office. DFC’s environmental and social guidelines have evolved since the 2013 loan, and an update to policies and procedures will be released soon. The amendment will include commitments and requirements to address risks related to gender-based violence and sexual abuse, the spokesperson said. DFC hired a senior gender and gender-based violence and harassment specialist in 2022 and has developed tools to address risks, including sexual exploitation and abuse of children. It has also created due diligence and monitoring questionnaires, issued guidance on preventing and responding to gender-based violence, and provided training for analysts, the spokesperson told Devex. While it’s unclear how long the investigation will take, the Office of Accountability plans to publish its findings, the spokesperson said. The investigation is a major undertaking for the new director of DFC’s accountability office, Mehrdad Nazari, who previously worked on compliance reviews at several multilateral financial institutions.