The World Bank Group and the Private Sector
As people’s aspirations continue to rise worldwide, we must move faster, on a larger scale than ever before, to help countries end extreme poverty and reach the Sustainable Development Goals. Strong collaboration between the World Bank Group and the private sector is essential. It is part of a much-needed effort to help developing countries maximize their financing for development.
As a powerful driver of economic and inclusive growth, the private sector can play an important role in shaping the development agenda and achieving the global goals. Investors and companies are increasingly engaged on socially conscious issues, and they know this is good for their bottom line. Consumers are also more focused on positive environmental and social impact.
Recognizing this challenge, the G20 Finance Ministers recently approved a set of guiding principles to help multilateral banks crowd in private investment and maximize resources for the poor. The World Bank Group supports this strategy, and is refining its approach to development finance to help bring private sector solutions to the table.
The World Bank Group has 70 years’ experience working with governments and the private sector around the world. We have long-standing relationships in 189 countries, an international staff, offices in 140 countries, and deep expertise across regions and sectors. We facilitate private investment through high-impact projects — for example, the Global Infrastructure Facility, which prepares and structures complex infrastructure public-private partnerships, and the Climate Change Action Plan to deliver investable projects in clean energy. We coordinate closely with other organizations, agencies, and multilateral institutions that are working with the private sector.
The World Bank Group offers multiple channels and instruments to encourage the private sector to seek opportunities and engage in developing countries. These include:
- Creating markets and matching opportunities: We help create markets by identifying new opportunities and unmet demand, sharing this information with the global business community, and helping governments build an environment that will open doors to private sector investment. We use a range of tools to understand country-level needs and risks.
- Building new markets for non-financial firms: Through operations in emerging markets and in high-risk, fragile, and conflict-affected environments, we have built considerable risk management expertise to help governments reform and enable business opportunities. We use technical expertise and financing to design solutions that link business interests and development impact. We help businesses successfully navigate new environments and increase their impact by connecting with local supply chains and strengthening relationships with local communities. We also offer credit enhancement instruments, political risk insurance, and payment and loan guarantees, which can be part of a package enabling new projects and transactions and unlocking better opportunities for private sector investment.
- Promoting investment opportunities for financial institutions: We mobilize resources from capital markets, reflecting our financial strength. We are also working to mobilize additional capital for the 2030 Agenda, using a range of tools, platforms, and approaches to mitigate risks in emerging and high-risk markets.
In addition to issuing traditional Triple-A credit-quality products in several currencies, we offer innovative solutions that support responsible, sustainable investments while reducing associated risks. We have themed bonds, including green, social, peace, SDG Index-Linked, and catastrophe bonds. And in 2016, for the first time, IDA received Triple-A credit ratings, enabling it to raise money in capital markets to help finance life-changing investments in the world’s 75 poorest countries – from providing clean water and energy to creating opportunities for refugees and responding to natural disasters and health crises.
IFC’s syndicated-loan program allows participants to enjoy the advantages of IFC’s preferred creditor status as a multilateral institution. It has mobilized more than $62 billion from more than 500 financing partners for projects in emerging markets since its inception in 1959.
- Supporting small- and medium-sized enterprises/promoting innovation and high-growth entrepreneurship: We offer tools that SMEs can use to improve their access to finance and markets, as well as unlock new sources of capital:
- SME Lines of Credit provide dedicated bank financing – frequently for longer tenors than are generally available in the market – to support SMEs in areas such as investment, growth, and exports.
- Partial Credit Guarantee Schemes, under which the guarantor pledges to partially or fully repay a loan to a lender in the banking sector, facilitate SMEs’ access to finance. The World Bank Group provides advisory support to design and capitalize on such facilities.
- Early-Stage Innovation Finance, which provides equity and debt/quasi-debt to start-up or high-growth firms that may otherwise not be able to access bank financing.
- IDA Private Sector Window was created to catalyze private sector investments in IDA countries, with a focus on countries affected by fragility and conflict, and includes a facility to help mitigate financial risks associated with investments in infrastructure, SMEs, agribusiness and other pioneering projects across sectors.
- Advisory services on trade and investment policies, supply chains, and improved financial infrastructure, which help create an enabling environment and build SME capacity to access finance and markets.
- A global network of business-incubation centers, which include Climate Innovation Centers, Agribusiness Entrepreneurship Centers, and Mobile Application Laboratories (mLabs). These support emerging entrepreneurs at each stage through early-stage financing, technical training, and market intelligence.
- Investing with the IFC Asset Management Company: Formed in 2009, the IFC Asset Management Company (AMC) manages $10 billion across 13 funds that invest in IFC projects in developing countries. AMC invests alongside IFC in high-potential companies and infrastructure projects across Latin America and the Caribbean, Africa, the Middle East, Eastern Europe, and Asia. AMC manages funds on behalf of a wide variety of institutional investors, including sovereign funds, pension funds, and development finance institutions.
- Engaging with business leaders and philanthropies: The World Bank Group engages with leaders of the global business community and philanthropies to develop solutions and crowd in funding for key corporate priorities, including investments in human capital, supporting economic activity and job creation for refugees and host communities, tackling climate change, and providing access to finance, particularly for women entrepreneurs. We also offer knowledge, data and technology advice to help companies and governments enhance their sustainability practices.
- Building relationships to advance common goals: The World Bank Group forms alliances with CEOs and global business groups on initiatives that are of mutual interest and can advance development priorities such as the Carbon Pricing Leadership Coalition and Invest4Climate. We also partner with organizations like the World Economic Forum and join other public and private platforms to promote transformational change.