Why the World Bank needs to revise its fundraising model

Late last year, the World Bank announced it had raised a record $52 billion for 2014-2016 borrowing to the International Development Association, the bank’s fund for the world’s poorest countries. Marking an increase of about 5 percent from the last time the IDA was topped up in 2010, the latest IDA replenishment — the bank’s 17th — was considered all the more significant against the backdrop of tough economic times. But despite its recent fundraising prowess, the World Bank could potentially be a victim of its own success. This is according to Scott Morris, senior associate at the Center for Global Development, who sat down with Devex reporter Paul Stephens to discuss his most recent paper. By placing the IDA at the centerpiece of its fundraising model, Morris noted that the World Bank has left other important lending arms such as the International Bank for Reconstruction and Development, the International Finance Corp. and the Multilateral Investment Guarantee Agency without any fundraising strategy or continuity. But as more and more developing countries graduate from IDA, solicitation of financial services from the IBRD and IFC is likely to increase over time — an obvious cause for concern if the bank sticks to the status quo, according to Morris. “My concern is that [the World Bank] is stuck in a particular model when it comes to how they obtain resources from their donors and shareholders that isn’t going to suit their needs in the years ahead,” Morris told Devex. So how can the World Bank avoid becoming an underfunded institution that is increasingly “unmoored” from its shareholders? Morris believes the D.C.-based funding agency should fundamentally rethink the way it raises money from shareholders by replacing the triennial IDA replenishment with a broader bank resource review. “It could include how big of an IDA do we want in the next three years, but it could also include a capital increase for the IBRD or the IFC. And these things would be brought together as a package,” Morris suggested. Applying a structured fundraising strategy to the bank as whole would help shareholders — particularly large nonborrowing countries such as the United States — to keep their influence in setting the bank’s agenda, but would also enable them to get bigger bang for their buck. “One of the great virtues of putting money in the IBRD or even IFC is that it is very cheap compared to what an IDA replenishment looks like … IBRD is a leverage model, it’s a capital model. Based on their capital, they can go into private markets and issue bonds, and this allows them to leverage up their assistance,” Morris highlighted. Should the World Bank push for further reforms by revising its fundraising model — and how should it go about doing it? Let us know by leaving a comment below. Check out more practical business and development advice online, and subscribe to Money Matters to receive the latest contract award and shortlist announcements, and procurement and fundraising news.