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FactsheetMarch 6, 2024

10 Things to Know About the Private Sector Window

The International Development Association (IDA)—the World Bank’s fund for the poorest countries—recognizes that the private sector plays an essential role in lifting people out of poverty through sustained job creation, economic transformation, and domestic resource mobilization. However, in the most challenging markets, there are heightened risks and unpredictability that prevent private sector investment from happening at the necessary scale. The Private Sector Window (PSW) leverages IDA’s resources and helps mobilize sustainable private sector investment in the poorest and most fragile markets. Here are 10 things you should know about the IDA PSW:

1. The IDA PSW mobilizes private investments in the poorest and most fragile markets, enabling high-impact projects that would otherwise not happen. The window blends concessional funds with private investments to help mitigate a variety of risks—ranging from credit risk and currency devaluation to political risks—in select International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) supported investment and guarantee operations. 

2. The IDA PSW catalyzes the private sector to introduce new and creative development solutions in the most vulnerable countries. With the support of the IDA PSW, the first small and medium-sized enterprises targeted private equity fund was introduced in the Kyrgyz Republic, the first utility-scale renewable energy project is being implemented in Djibouti, the first global risk-sharing platform was created targeting Base of the Pyramid financing to reach the poor, and critically needed working capital is being provided to a group of Yemeni companies that produce and distribute basic food staples in the country.

3. The IDA PSW helps to create jobs in some of the poorest and most fragile countries. Since 2018, PSW-supported transactions are expected to generate as many as 1.3 million direct, indirect, and induced jobs in IDA countries and countries impacted by fragility, conflict, and violence. PSW-supported projects have enabled large-scale job creation, sustained livelihoods, empowered women, ensured food security, and promoted renewable energy in the world’s most challenging places, supporting the creation and deepening of markets that are essential to sustaining growth. 

4. IDA PSW enables private investors and companies to play a key role in financing the transition to a low-carbon economy in vulnerable markets. Climate action requires significant financing at scale and public resources alone will not be enough to meet this challenge, making private capital mobilization a must. IDA PSW is strengthening climate action by supporting MIGA’s de-risking solutions in renewable energy and allowing IFC to expand financing for climate investments. Replicable PSW-supported projects in climate finance can provide lessons for the operationalization of the Energy Transition, Efficiency, and Access Global Challenge Program under the World Bank Evolution.

5. IDA PSW helps to preserve hard-won development gains during times of crisis. Governments in the poorest and most fragile countries often have limited fiscal space to help their citizens cope when a crisis hits. The IDA PSW can be used to preserve jobs and livelihoods, supporting sustained economic activity to help companies continue their operations during difficult times.

6. Each dollar of the PSW has mobilized $5.2 of additional private sector investment, resulting in over $20 billion of new financing for low-income and fragile countries. In line with the World Bank Evolution and the priority to increase private capital mobilization, PSW-supported transactions attract private capital to finance impactful development projects. Development needs currently surpass countries’ budgets and available donor funding, demanding solutions to crowd in all possible sources of finance, innovation, and expertise. The IDA PSW is one way in which IDA equips countries to attract and manage sustainable private sector investment to meet this challenge, helping level the playing field for the poorest. 

7. Development impact is an essential consideration for all IDA PSW projects. Captured through the PSW Results Framework, with a particular emphasis on mobilization of private sector financing, market creation, and number of jobs created, development impact indicators are aligned with IDA’s goals.

8. IDA PSW projects have a track record of high impact. To date, 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 example, the IDA PSW SME Ventures Envelope, 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.

9. IDA PSW is only used when appropriate. IDA PSW is a source of co-investment funding and guarantees to de-risk projects and enable IFC and MIGA to support projects outside of their normal risk and financial sustainability acceptance criteria. Projects must meet strict criteria to be considered for IDA PSW support in eligible countries, including alignment with the DFI Enhanced Blended Concessional Finance Principles for Private Sector Projects, country strategies, and sector priorities. Projects are also carefully reviewed by IDA representatives for alignment with World Bank and IDA strategies, for concessionality level, and to avoid distorting private markets—and they only proceed after approval by the World Bank’s Board of Executive Directors.

10. Transparency and good governance are essential to the effective and efficient use of IDA resources, including the IDA PSW. IFC and MIGA disclose all PSW-supported investments and guarantees. The complete list of PSW-supported projects is also available publicly on the IDA website.