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Factsheet November 15, 2021

Small Investments, Big Impact — 5 Ways IDA is Leveraging the Private Sector to Deliver More for the Poorest


A'Melody Lee/The World Bank

The International Development Association’s (IDA) Private Sector Window (PSW) works closely with the World Bank Group’s private sector arms—International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA)—to leverage IDA’s resources and help mobilize sustainable private sector investment in the poorest and most fragile markets.

1. The IDA PSW helps to create jobs in some of the poorest and most fragile countries. 

The private sector accounts for the vast majority of jobs in IDA countries, making it an essential component of sustainable development. The IDA PSW provides co-investment funding and guarantees that help mitigate some of the risk in select IFC and MIGA-supported investments, allowing projects to move forward that otherwise would not. For example, financial institutions may be very reluctant to lend to small and medium-sized enterprises (SMEs), because of their smaller size, limited experience, and undocumented performance—especially when they operate in fragile markets or challenging environments. The IDA PSW-supported Small Loan Guarantee Program is an innovative mechanism that provides SMEs with access to financial services as well as risk-sharing support to encourage financial institutions to expand their lending portfolio, creating opportunity for job growth in some of the most vulnerable countries. 

2. The IDA PSW catalyzes the private sector to introduce new and creative development solutions in the most vulnerable countries. 

Since the IDA PSW began operating in 2017, it has facilitated the introduction of new and creative solutions in some of the most vulnerable markets. With the support of the IDA PSW, the first ever local currency bond was issued in Cambodia, the first small and medium-sized enterprises targeted private equity fund was introduced in the Kyrgyz Republic, critically needed working capital is being provided to one of Yemen's largest food conglomerates, and the first global risk sharing platform was created targeting Base of the Pyramid financing to reach the poor. Thanks to the latter, IDA is helping to provide much needed financing to micro and small enterprises in IDA countries, which are struggling to stay afloat due to the economic impact of COVID-19. 

3. IDA PSW projects have a track record of high impact.  

Historically, IFC’s Anticipated Impact Measurement and Monitoring (AIMM) and MIGA’s Impact Measurement and Project Assessment Comparison Tool (IMPACT) ratings of IDA PSW projects are higher than non-PSW supported IFC and MIGA projects. One such example is the IDA PSW SME Ventures Envelope (IPSVE), which is used to invest in SME-focused private equity funds operating in IDA PSW countries. SMEs in IDA PSW countries often experience the challenge of being too large for microfinance institutions, but too small for commercial banks. IDA PSW financing has been invested in SME-focused private equity funds helping them raise capital, attract other investors and develop an ecosystem for SMEs in challenging markets—from Central Asia to West Africa.

4. The IDA PSW helps countries attract sustainable private sector investment.

Countries’ resource needs currently surpass their own budgets and available donor funding, demanding that we find solutions to crowd in all possible sources of finance, innovation, and expertise to meet this challenge. The IDA PSW is one way in which IDA equips countries to attract and manage private sector investment, helping level the playing field for the poorest. Working with partners within the WBG’s institutions, IDA can help low-income countries expand their range of options for financing efforts to sustainably grow their economies, reduce poverty, and expand opportunity. During IDA18 and IDA19, the IDA PSW has allowed the WBG to strategically use $2.1 billion in public resources to mobilize $10.5 billion in private investments from IFC, MIGA, and other sources in some of the most challenging markets.

5. IDA PSW complements the World Bank Group’s COVID-19 response.

Governments in the poorest and most fragile countries have limited fiscal space to help their citizens cope with the impacts of the global COVID-19 pandemic. The IDA PSW is being used to preserve hard-won development gains in the poorest countries and to support continued economic activity to help companies continue their operations during these difficult times. In Uganda, support from IFC and the IDA PSW is ensuring that the country’s second largest healthcare provider remains operational. IDA PSW support is allowing IFC to partner with Cerba Lancet Africa to add new facilities, increase testing and laboratory services, improve test quality, and reduce testing costs across 16 countries in Sub-Saharan Africa—fighting the pandemic and supporting long-term health and economic recovery. In BangladeshCôte d’IvoireNigeria, and Rwanda, through IFC’s COVID-19 Working Capital Solution Program, IDA PSW is helping to make working capital loans available to small and medium-sized enterprises in critical need of additional short-term liquidity to continue operating during the pandemic.