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Chapter I

World Bank
1.1 Introduction

1.2 History

1.3 Functions

1.4 Objectives

1.5 World Bank Group

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The World Bank is a vital source of financial and technical assistance to developing countries
around the world. Our mission is to fight poverty with passion and professionalism for lasting
results and to help people help themselves and their environment by providing resources,
sharing knowledge, building capacity and forging partnerships in the public and private

We are not a bank in the common sense; we are made up of two unique development
institutions owned by 187 member countries:

The International Bank for Reconstruction and Development (IBRD)

The International Development Association (IDA).

Together, we provide low-interest loans, interest-free credits and grants to developing

countries for a wide array of purposes that include investments in education, health, public
administration, infrastructure, financial and private sector development, agriculture and
environmental and natural resource management.

The World Bank, established in 1944, is headquartered in Washington, D.C. We have more
than 10,000 employees in more than 100 offices worldwide.

Innovating from Within

To ensure countries continue to have access to the best global expertise and cutting-edge
knowledge, the World Bank Group is revising its programs to assist the poor, as well as its
range of financing options, to meet pressing development priorities.

Pillars of these efforts include:

Results: Together, we are continuing to sharpen our focus on helping developing countries
deliver measurable results.

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Reform: New reforms at the World Bank Group are aimed at improving every aspect of our
work: the way projects are designed (investment lending), how information is made
available (access to information), and how our staff are deployed to best assist governments
and communities (decentralization).

Open Development: The World Bank is leading the effort toward openness and transparency
in development by offering a wealth of tools and knowledge to provide people with the
resources they need to help solve the world's development challenges. In 2010, the Bank
launched a new Open Data website, providing free access to a comprehensive set of data
about development in countries around the globe.


The International Bank for Reconstruction and Development (IBRD) aims to reduce poverty
in middle-income and creditworthy poorer countries by promoting sustainable development
through loans, guarantees, risk management products, and analytical and advisory services.
Established in 1944 as the original institution of the World Bank Group, IBRD is structured
like a cooperative that is owned and operated for the benefit of its 187 member countries.

IBRD raises most of its funds on the world's financial markets and has become one of the
most established borrowers since issuing its first bond in 1947. The income that IBRD has
generated over the years has allowed it to fund development activities and to ensure its
financial strength, which enables it to borrow at low cost and offer clients good borrowing

At its Annual Meeting in September 2006, the World Bank with the encouragement of its
shareholder governments committed to make further improvements to the services it
provides its members. To meet the increasingly sophisticated demands of middle-income
countries, IBRD is overhauling financial and risk management products, broadening the
provision of free-standing knowledge services and making it easier for clients to deal with the


The International Development Association (IDA) is the part of the World Bank that helps the
worlds poorest countries. Established in 1960, IDA aims to reduce poverty by providing

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interest-free credits and grants for programs that boost economic growth, reduce inequalities
and improve peoples living conditions.

IDA complements the World Banks other lending armthe International Bank for
Reconstruction and Development (IBRD)which serves middle-income countries with capital
investment and advisory services. IBRD and IDA share the same staff and headquarters and
evaluate projects with the same rigorous standards.

IDA is one of the largest sources of assistance for the worlds 79 poorest countries, 39 of
which are in Africa. It is the single largest source of donor funds for basic social services in
the poorest countries.

IDA lends money (known as credits) on concessional terms. This means that IDA credits have
no interest charge and repayments are stretched over 35 to 40 years, including a 10-year grace
period. IDA also provides grants to countries at risk of debt distress.

Since its inception, IDA credits and grants have totalled US$222 billion, averaging US$13
billion a year in recent years and directing the largest share, about 50 percent, to Africa.


Eligibility for IDA support depends first and foremost on a countrys relative poverty, defined
as GNI per capita below an established threshold and updated annually (in fiscal year 2011:

IDA also supports some countries, including several small island economies, which are above
the operational cut-off but lack the creditworthiness needed to borrow from IBRD.

Some countries, such as India and Pakistan, are IDA-eligible based on per capita income
levels, but are also creditworthy for some IBRD borrowing. They are referred to as blend

Seventy-nine countries are currently eligible to receive IDA resources. Together, these
countries are home to 2.5 billion people, half of the total population of the developing world.
An estimated 1.5 billion people there survive on incomes of US$2 or less a day.

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($million, includes regional

India 2,578

Vietnam 1,429

Tanzania 943
Ethiopia 890

Nigeria 890

Bangladesh 828

Kenya 614

Uganda 480
Dem. Rep. Congo 460
Ghana 433

New IDA Lending by Region:

Sub-Saharan Africa...........49%
South Asia...........................32%
East Asia/Pacific..................11%
Europe/Central Asia...............4%
Latin America/Caribbean........2%
Middle East/North Africa.........1%

IDA Lending by Sector:

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Infrastructure ......................37% Public Admin and Law..........18%

Social sector.......................29% Agriculture ............................8%
Industry ................................2% Finance...................................5%

IDA funds are allocated to the recipient countries in relation to their income levels and record
of success in managing their economies and their ongoing IDA projects. IDA's lending terms
are highly concessional, meaning that IDA credits carry no or low interest charges. The
lending terms are determined with reference to recipient countries' risk of debt distress, the
level of GNI per capita, and creditworthiness for IBRD borrowing. Recipients with a high
risk of debt distress receive 100 percent of their financial assistance in the form of grants and
those with a medium risk of debt distress receive 50 percent in the form of grants.
Other recipients receive IDA credits on regular or blend and hard-terms with 40 year and 25
year maturities respectively.


While the IBRD raises most of its funds on the world's financial markets, IDA is funded
largely by contributions from the governments of its richer member countries. Additional
funds come from IBRD's income and from borrowers' repayments of earlier IDA credits.

Donors get together every three years to replenish IDA funds. 51 countries contributed to the
16th replenishment of IDA, which totalled US$ 49.3 billion.

The IDA16 replenishment raised funds for poor countries for the three-year period
between July 2011 and June 2014. These are critical years for countries trying to

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achieve the UN Millennium Development Goals since it takes time for projects to be
completed and yield measurable results.


Since inception in 1944, the World Bank has expanded from a single institution to a closely
associated group of five development institutions. Our mission evolved from the International
Bank for Reconstruction and Development (IBRD) as facilitator of post-war reconstruction
and development to the present day mandate of worldwide poverty alleviation in close
coordination with our affiliate, the International Development Association, and other
members of the World Bank Group, the International Finance Corporation (IFC), the
Multilateral Guarantee Agency (MIGA), and the International Centre for the Settlement of
Investment Disputes (ICSID)..

Once we had a homogeneous staff of engineers and financial analysts, based solely in
Washington, DC. Today, we have a multidisciplinary and diverse staff that includes
economists, public policy experts, sector experts and social scientists-and now more than a
third of our staff is based in country offices.

Reconstruction remains an important part of our work. However, the global challenges in the
world compel us to focus on:

- poverty reduction and the sustainable growth i the poorest countries, especially in
- solutions to the special challenges of post-conflict countries and fragile states;
- development solutions with customized services as well as financing for middle-
income countries;
- regional and global issues that cross national borders--climate change, infectious
diseases, and trade;
- greater development and opportunity in the Arab world;
- Pulling together the best global knowledge to support development.

At today's World Bank, poverty reduction through an inclusive and sustainable

globalization remains the overarching goal of our work.


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The World Bank is one of the Bretton Woods institutions. The group, which consists of the
World Bank and the International Monetary Fund, is named for the city of Bretton Woods,
New Hampshire, where they were created at a 1944 summit between representatives from the
United States, the United Kingdom, Australia and India. The World Bank promotes the
original purpose of the decisions made at Bretton Woods: the facilitation of the international


The World Bank was established at Bretton Woods because the end of World War II was in
sight and the summit attendees worried about the devastation of Europe. The Bank was
created to help with reviving Europe's economy and repairing the damage of the war. It did
this by giving loans -- its first loan, in 1947, gave $250 million to France to rebuild. As of
2010, the bank loaned about $13 billion each year to developing countries in the form of
interest-free credits.

Development Strategy:

Loans from the World Bank have strings attached: the Bank monitors how each country
spends the funds that it receives. The framework of the World Bank provides support for
countries to which it lends to ensure that World Bank funds are not spent inefficiently or lost
to corruption. The Bank studies the economy and political atmosphere of each country to
which it intends to lend funds. The loan comes with a development strategy that the various
institutions that comprise the World Bank will help the country follow.

Financial Services:

The World Bank also helps developing countries to manage their money effectively. As part
of its development strategies, the World Bank counsels the borrowing countries on
developing their financial strategies. It helps them to develop their investment
portfolios and teaches them about financial practices like risk management through
hedging and derivatives trading. It gives continuing financial advice to its borrowing
countries, advising them on managing investments and risk in addition to protecting against
disasters with catastrophe bonds.

Data Collection:

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The World Bank draws on the experiences of countries that it has supplied funds to in the past
to decide how a new borrower may best use its loan. It documents its experiences in data
banks. The World Bank collects information about each borrowing country and how it uses
World Bank funds. While the Bank collects this information primarily for its own use, it also
shares its knowledge. The World Bank makes much of its data available to the public in
online databases, and it also publishes its analysts' reports on emerging global trends.

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1.4 Objectives

The following objectives are assigned by the World Bank:

1. To provide long-run capital to member countries for economic reconstruction and


2. To induce long-run capital investment for assuring Balance of Payments (BoP) equilibrium
and balanced development of international trade.

3. To provide guarantee for loans granted to small and large units and other projects of
member countries.

4. To ensure the implementation of development projects so as to bring about a smooth

transference from a war-time to peace economy.

5. To promote capital investment in member countries by the following ways;

(a) To provide guarantee on private loans or capital investment.

(b) If private capital is not available even after providing guarantee, then IBRD provides
loans for productive activities on considerate conditions.

1.4 WORLD BANK GROUP (Formation)

International Finance Corporation (IFC)

Multilateral Guarantee Agency (MIGA),
International Centre for the Settlement of Investment Disputes (ICSID)

International Finance Corporation (IFC)

The International Finance Corporation (IFC) promotes sustainable private sector investment
in developing countries.

IFC is a member of the World Bank Group and is headquartered in Washington, DC. It shares
the primary objective of all World Bank Group institutions: to improve the quality of the lives
of people in its developing member countries.

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Established in 1956, IFC is the largest multilateral source of loan and equity financing for
private sector projects in the developing world. It promotes sustainable private sector
development primarily by:

1. Financing private sector projects and companies located in the developing world.

2. Helping private companies in the developing world mobilize financing in

international financial markets.

3. Providing advice and technical assistance to businesses and governments.

Six Decades of creating opportunity

1. 1940s - Roots.

1944- Bretton Woods Conference:

The United Nations Monetary and Financial Conference, commonly known as the
Bretton Woods conference, was a gathering of 730 delegates from all 44 Allied
nations at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire,
to regulate the international monetary and financial order after the conclusion of
World War II.
The conference was held from 1-22 July 1944, when the agreements were signed to
set up the International Bank for Reconstruction and Development (IBRD), the
General Agreement on Tariffs and Trade (GATT), and the International Monetary
Fund (IMF).
As a result of the conference, the Bretton Woods system of exchange rate
management was set up, which remained in place until the early 1970s.

1946- World Bank Opens

The World Bank begins operations with 32 shareholding countries, $7.7 billion in
capital, and headquarters in Washington, D.C. IFC has not yet been created.

1947 - Garner Arrives

The driving force behind the future IFC, New York financier Robert L. Garner, joins
the World Bank as one of its first senior executives. He brings a keen sense of the role
private business can play in international development, a topic few others considered
at the time.

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2. 1950s Creation.

1950 - The Idea of IFC

Garner and colleagues suggest creating a new institution to stimulate private

investment in the Bank's borrowing countries. "It was my firm conviction that the
most promising future for the less developed countries was the establishing of good
private industry," Garner said.

1951- Growing Support

The U.S. government calls for "an International Finance Corporation" tied to the
World Bank. It would finance private enterprises in developing countries but:
Take no government guarantees
Always work alongside other private investors
Never manage its investees

1956- IFC Created

IFC opens under Garner's leadership with 12 full-time staff but just $100 million in
authorized capital, a low amount that prevents it from making major investments.
Shareholders only allow it to make loans, not the equity investments that Garner
desired, and that in time would become the key to its profitability.

1957- First Investment

IFC's first investment: A $2 million loan to help the Siemens affiliate in Brazil
manufacture electrical equipment. Following the mandate, the project is a private
sector solution to a development challenge - at the time, Brazil's per capita power
consumption is just half of neighbouring Argentina's.

1958- First Mission to India

Garner leads IFC's first mission to India, becoming an early champion of its nascent
private sector that will later transform the country in the 1990s and 2000s

3. 1960s 1970s Growth

1960- IDA Created

World Bank shareholding governments create the International Development

Association (IDA), a new concessional funding arm for the world's poorest countries.
In time, IDA countries will become IFC's main focus.

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1961- New Powers

Upon retirement, Robert L. Garner sees a key part of his historic vision become
reality: IFC is authorized to make equity investments. The first one follows the next
year (a stake in Spanish auto parts manufacturer FEMSA).

1965- First Syndication

IFC mobilizes $600,000 from Deutsche Bank and others for Brazilian pulp and paper
company Champion Cellulose. The transaction provides early support for Champion,
a rising player that in 2001 is sold for $9.1 billion to the world's largest paper
company, International Paper of the U.S. The project also launches IFC's syndications

1969- A Call for Growth

Accepting an independent commission's report, World Bank President Robert S.

McNamara agrees that a larger, more development-oriented IFC could play a
powerful role. To guide the thinking behind IFC's growth, he recruits IMF official
Moeen Qureshi, a future prime minister of Pakistan.

1971- Financial Markets

At a time when few development thinkers are focused on the role of financial
institutions, IFC breaks the mold, creating a Capital Markets Department to
strengthen local banks, stock markets, and other intermediaries. In time this function
will become IFC's largest area of emphasis.

1972- First Advisory Services

With donor support from the U.S. and U.K., IFC sends two staff and 12 Canadian
banking consultants to Jakarta for four years to build Indonesia's securities markets.
Little noticed at the time, it is the start of a core business function: provision of
business and financial expertise through advisory services

1972 1977- First Field Offices

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Decentralization begins with small one-man offices in Jakarta and Nairobi, followed
by establishment of the first regional mission for East Asia, based in Manila. By 2008,
more than 50 percent of IFC staff will be based outside of Washington, DC.

4. 1980s 1990s A New Era

1981- Emerging Markets

IFC coins the phrase "emerging markets." Investment Officer Antoine van Agtmael
devises the term as a way to change the financial world's perception of developing
countries. It sticks, defining a new asset class. Worth almost nothing at first, the total
capitalization of emerging market stock markets will reach $5 trillion within 25 years
of IFC's origination of the phrase.

1982- First Advisory Facility

IFC creates its first multi donor advisory services initiative, the Caribbean Project
Development Facility. The first of many such initiatives within IFC, the initiative was
credited with creating 17,500 jobs before closing in the 1990s.

1984- Financial Autonomy

Long reliant on World Bank support, IFC becomes financially independent, gaining
approval to issue its own bonds in international capital markets.

1989- AAA Credit Rating

IFC receives the highest possible endorsement of financial health from private rating
agencies. It becomes the key to a large-scale, multicurrency borrowing program that
by 2009 will exceed $9 billion a year.

1991- Capital Increase

Shareholders give IFC a record $1.2 billion capital increase, leading to increased work
in privatization, infrastructure finance, capital market development, support of small
and medium enterprises, and renewed collaboration with the World Bank.

1992- Global Industry Departments

Sensing that global knowledge is one of its most important assets, IFC creates new
global industry departments in Infrastructure, Agribusiness, Oil/Gas/Mining, and

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Chemicals/Petrochemicals/Fertilizers to complement the existing one for Capital


1994- Information Disclosure

IFC enacts its first policy on public disclosure of information, greatly increasing its
openness and transparency by increasing the amount of project information it releases
on projects before board approval. As part of the policy, IFC "recognizes and endorses
the fundamental importance of accountability and transparency in the development

1998- Environmental and Social Standards

IFC's launches new environmental and social review procedures and safeguard
policies. They will become a fundamental part of IFC's work, mainstreaming high
standards of sustainability in all investment transactions.

1999- Increased Accountability

As part of an increasing commitment to openness and accountability, Meg Taylor is

appointed Compliance Advisor/Ombudsman for IFC and MIGA. The post is the first
of its kind in a multilateral development institution.

5. 21st Century- Todays IFCS

2001- Sustainability Initiatives

Under Executive Vice President Peter Woicke's leadership, IFC begins mainstreaming
sustainability concerns into all its investment operations.

2003- Equator Principles

Meeting at IFC,10 top international banks adopt the Equator Principles, applying
new environmental and social development standards to their project finance lending
based on IFC's own standards. By 2009, 68 participating banks had adopted the
Equator Principles, representing 90 percent of all global project financing.

2007- IDA Focus

IFC's investment in IDA countries grows by 75 percent in one year, part of a new
focus on the world's poorest countries and other frontier regions left out of the

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emerging market investment boom. Soon, more than half of IFC investment projects
will be in IDA countries.


With most clients now coming from emerging markets, IFC plans moves to increase
client service and responsiveness by streamlining business procedures and
decentralizing staff and decision making. By 2009, IFC will be present in more than
80 countries and have more than half of its staff in the field-a dramatic turnaround
from previous years.

2008- Climate Change

IFC adds climate change to its main areas of business focus, leading to a vast increase
in investment and advisory services in renewable energy, energy efficiency, cleaner
production, and other earth-friendly business opportunities.

Expanded Reach:

For the year, IFC clients provide 2.1 million jobs, serve 5.5 million patients, and help
educate 1.2 million students. This comes as IFC's new financing reaches $16.2 billion,
a 34 percent increase over the previous year. This includes $11.4 billion for IFC's own
account and $4.8 billion mobilized for clients.

2009- Crisis Response

Amid a severe global economic downturn, IFC and its many partners launch crisis
response initiatives in trade finance, microfinance, infrastructure, advisory services,
and distressed assets. The moves show IFC's growing leadership, helping clients
weather the storm and preserve jobs during the crisis.

IFC Asset Management Company:

IFC Asset Management Company is launched, adding a third business line to

complement IFC's existing investment and advisory services work. IFC Asset
Management Company invests third-party capital in a private equity fund format. It
offers outside investors the opportunity to benefit from IFC's expertise in emerging
markets and track record of achieving strong equity returns as well as distinct
development impact.

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2010- Emphasis on Jobs

IFC investment clients provide 2.2 million jobs. More than 711,000 come from
businesses supported indirectly though IFC--backed investment funds. Commitments
reached $18 billion--$12.7 billion for IFC's own account and $5.3 billion in
mobilizations. Annual spending on advisory services hits $268 million.

Inclusive Business:

IFC makes a new commitment to reaching the many millions of people at the base of
the pyramid, launching a new initiative to create jobs, raise incomes, and bring more
low-income producers' goods and services to global markets.

G-20 Recognition:

Recognizing IFC's leadership in the field, the G-20 makes us its global partner in
SME development. At its Seoul summit, the G-20 receives our knowledge-sharing
report on access to finance, and ask IFC to lead implementation of the SME Finance
Challenge, a new campaign to scale up successful models of support to SMEs, a key
driver of job creation and growth.

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Chapter II

IFC- International Finance

2.1 IFC- Role
2.2 IFC- Services
2.3 IFC- Development Plans
2.4 IFC- Agricultural Plans

2.1 ROLE

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What We Do
IFC fosters sustainable economic growth in developing countries by financing private sector
investment, mobilizing capital in the international financial markets, and providing advisory
services to businesses and governments.

IFC helps companies and financial institutions in emerging markets create jobs, generate tax
revenues, improve corporate governance and environmental performance, and contribute to
their local communities. The goal is to improve lives, especially for the people who most
need the benefits of growth.

Where IFCS Work: IFC invests in enterprises majority-owned by the private sector
throughout most developing countries in the world. Developing regions include:

Sub-Saharan Africa

East Asia & the Pacific

South Asia

Europe & Central Asia

Latin America & the Caribbean

Middle East & North Africa

IFCs Strategic priorities

IFC emphasizes five strategic priorities for maximizing its sustainable development impact:

Strengthening its focus on frontier markets, particularly the SME sector;

Building long-term partnerships with emerging global players in developing


Addressing climate change, and environment and social sustainability activities;

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Addressing constraints to private sector investment in infrastructure, health, and

education; and

Developing domestic financial markets through institution building and the use of
innovative financial products.

For all new investments, IFC articulates the expected impact on sustainable development,
and, as the projects mature, IFC assesses the quality of the development benefits realized.


Investments & Advisory Services:

IFC offers an array of financial products and services to its clients and continues to develop
new financial tools that enable companies to manage risk and broaden their access to foreign
and domestic capital markets.

IFC offers a range of advisory services in support of private sector development in

developing countries.

Investment Services:

1. Loans for IFC's Own Account: A-loans:

IFC offers fixed and variable rate loans for its own account to private sector projects in
developing countries. These loans for IFC's own account are called A-loans.
Most A-loans are issued in leading currencies, but local currency loans can also be provided.
The loans typically have maturities of 7 to 12 years at origination. Grace periods and
repayment schedules are determined on a case-by-case basis in accordance with the
borrower's cash flow needs. If warranted by the project, IFC provides longer-term loans and
longer grace periods. Some loans have been extended to as long as 20 years.

IFC operates on a commercial basis. It invests exclusively in for-profit projects and charges
market rates for its products and services.

Loans from IFC finance both Greenfield companies and expansion projects in developing
countries. The Corporation also make loans to intermediary banks, leasing companies, and
other financial institutions through credit-lines for further on-lending . The credit lines are

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often targeted at small and medium enterprises or at specific sectors.

To ensure the participation of other private investors, A-loans are usually limited to 25% of
the total estimated project costs for Greenfield projects, or, on an exceptional basis, 35% in
small projects. For expansion projects IFC may provide up to 50% of the project cost,
provided its investments do not exceed 25% of the total capitalization of the project company.
Generally, A-loans range from $1 million to $100 million.

The Corporation is willing to extend loans that are repaid only from the cash flow of the
project, without recourse or with only limited recourse to the sponsors.

2. Syndicated Loans:
Through its syndicated loan (or B-loan) program, IFC offers commercial banks and other
financial institutions the chance to lend to IFC-financed projects that they might not
otherwise consider.

These loans are a key part of IFC's efforts to mobilize additional private sector financing in
developing countries, thereby broadening the Corporation's development impact. Through
this mechanism, financial institutions share fully in the commercial credit risk of projects,
while IFC remains the lender of record.

Participants in IFC's B-loans share the advantages that IFC derives as a multilateral
development institution, including preferred creditor access to foreign exchange in the event
of a foreign currency crisis in a particular country. Where applicable, these participant banks
are also exempted from the mandatory country-risk provisioning requirements that regulatory
authorities may impose if these banks lend directly to projects in developing countries.

3. Equity Financing:
IFC takes equity stakes in private sector companies and another entity such as financial
institutions, and portfolio and investment funds in developing countries. IFC is a long-term
investor and usually maintains equity investments for a period of 8 to 15 years. When the
time comes to sell, IFC prefers to exit by selling its shares through the domestic stock market

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in a way that will benefit the enterprise, often in a public offering.

IFC operates on a commercial basis. It invests exclusively in for-profit projects and charges
market rates for its products and services.

To ensure the participation of other private investors, the Corporation generally subscribes to
between 5 percent and 15 percent of a project's equity. IFC is never the largest shareholder in
a project and will normally not hold more than a 35 percent stake.

IFC's equity investments are based on project needs and anticipated returns. The Corporation
does not take an active role in company management.

IFC risks its own capital and does not accept government guarantees. However, to meet
national ownership requirements, IFC shareholdings can be treated as domestic capital or
local shares.

4. Quasi-Equity Financing: C-loans:

IFC offers a full range of quasi-equity products with both debt and equity characteristics to
private sector projects in developing countries. These products are called C- loans.

Among other instruments, the Corporation provides convertible debt and subordinated loan
investments, which impose a fixed repayment schedule. It also offers preferred stock and
income note investments, which require a less rigid repayment schedules. Quasi-equity
investments are made available whenever necessary, to ensure that a project is properly

IFC operates on a commercial basis. It invests exclusively in for-profit projects and charges
market rates for its products and services.

5. Equity & Debt Funds:

IFC promotes foreign portfolio investment in developing countries by establishing and
investing in a wide range of funds, such as private equity funds and debt funds that invest in
emerging-market securities. By pioneering and promoting such funds for developing
countries, IFC has introduced many international portfolio investors to emerging markets.

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Through IFC's mobilization efforts, both large and small companies in the developing world
gain access to longer-term finance, many for the first time. Accessing financing from
international markets helps them enhance their competitiveness in more open economies
around the world.

IFC's investment operations are managed by regional departments and sector/industry


6. Structured Finance:
IFC has developed products that provide clients with forms of cost-effective financing not
otherwise available to them. Products include credit enhancement structures for bonds and
loans through partial credit guarantees, risk-sharing facilities, and participations in

Partial credit guarantees allow IFC to use its international triple-A credit rating to help clients
diversify their funding sources, extend maturities, and obtain financing in their currency of
choice, including local currency. In securitization transactions, IFC participates as a
structuring investor or guarantor. Partial loan and bond guarantees also help broaden clients'
access to international and local capital markets. Credit enhancement structures help clients
attract new sources of financing in their currency of choice, reduce borrowing costs, and
extend maturities beyond what private investors would otherwise provide.

7. Securitizations :

It helps IFC's clients obtain financing that would otherwise be unavailable or unsuitable to
them because of perceived credit risk. This form of financing involves the pooling and actual
sale of financial assets and issuance of securities that are repaid from the cash flows
generated by such assets. The risk associated with this form of financing comes from the
asset pool rather than from the institution that originated those assets. Securitizations are
commonly done for mortgages, credit cards, auto and consumer loans, corporate debt, and
other assets with relatively predictable cash flows.

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8. Financial Intermediaries:
A large chunk of IFC financing is channelled to private sector projects in developing
countries through intermediaries. IFC uses its full range of financial products to provide
finance to a wide variety of financial intermediaries. Working through intermediaries allows
IFC to extend its long-term finance to more companies, in particular to small and medium
enterprises (SMEs) and microfinance entrepreneurs.

In many regions of the world, small private companies are the principal engines of economic
growth and employment creation. But micro, small and medium-size investments carry high
transaction costs, limiting smaller companies' access to long-term finance. By working with
local or specialized financial institutions, IFC finance can reach these businesses.

IFC operates on a commercial basis. It invests exclusively in for-profit projects and charges
market rates for its products and services.

Examples of investments in financial intermediaries include:

Credit and equity lines to banks for on-lending to local companies. These investments
help the banks to provide working capital and investment financing for their corporate

Private equity and investment funds, such as index funds and country funds. IFC also
invests in venture capital funds which help channel flows to companies that generally
are unlisted and do not receive the notice of large investors.

Leasing companies, which are essential to the development of SMEs as smaller

companies typically, lease costly capital equipment. Leasing plays a critical role in
financial sector development in countries with small economies or low per capita
incomes. IFC has actively helped establish leasing industries in countries all over the

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IFC Advisory Services:

Economic development can often be enhanced in countries where private enterprises are
encouraged to operate efficiently and grow.

To help the private sector in emerging markets, IFCs Advisory Services provide advice,
problem solving, and training to companies, industries, and governments. Our experience
shows that companies need more than financial investment to thrivethey need a legislative
environment that enables entrepreneurship, and advice on business best practices. Our work
includes advising national and local governments on how to improve the investment climate
and strengthen basic infrastructure. Governments account for around half of our advisory
projects. We also help investment clients improve corporate governance and become more

We offer advice through more than 1,000 Advisory Services staff in 84 offices across 66
countries. Funding comes from donor partners, IFC, and client contributions. In FY10,
Advisory Services expenditures totaled $268 million, of which 61 percent went to
International Development Association (IDA) countries.

Access to Finance Advisory Services:

Advisory Services to expand access to finance (A2F) often accompanies our financial
investments, giving clients the benefit of in-house expertise from seasoned sector specialists.
We also partner with consultants familiar with local conditions to provide solutions suited to
the unique characteristics of a particular country. Our A2F advisory services projects include
assistance to banks and specialized financial institutions in improving their ability to provide
financial services to micro, small, and medium enterprises.

IFC offers access to finance advisory services in various fields which accompanies our
financial investments, giving clients the benefits of in house expertise from seasoned sector

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IFC offers access to finance advisory services for the following areas:

Agribusiness Finance Payment Systems & Remittances (Retail

Collateral Registries/Secured Lending Payments, Mobile Banking
Credit Bureaus Risk Management Loan Portfolio Monitoring &
Gender Access to Finance Workout
Housing Finance Securities Markets
Insurance SME Banking
Leasing Sustainable Energy Finance
Microfinance Trade Finance

FIAS: The Investment Climate Advisory Service

FIAS offers a comprehensive range of services tailored to governments' needs, and helps
improve their investment climate for domestic and foreign investors, facilitate public private
sector dialogue, boost investment generation, and maximize impact on poverty reduction.

Advisory Service products are the following:

1. Access to Land

Evidence from Investment Climate Assessments, Doing Business Reports, and other studies
has highlighted that constraints in the land market form a critical bottleneck to private
investment. Major concerns of investors are related to accessing land, securing land property
rights, and the time and cost for obtaining a myriad of permits to develop land.

The Access to Land Advisory Services team focuses on assisting governments in

implementing achievable short-term land reforms to encourage investment and lay the
groundwork for longer term reforms.

2. Business Entry

With over 40 active projects and on-the-ground expertise in every region around the globe,
Business Entry is a developed product under the Regulatory Simplification category of IFCs

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Business Enabling Environment (BEE) Business Line. Business Entry product is used in BEE
reforms aimed at simplifying and streamlining regulatory requirements for business entry.

3. Business Taxation

Investors identify the tax system as one of the most important parameters in making an
investment decision. Cumbersome tax structures are a drain on investor time and resources
and act as a disincentive to participation in the formal economy. A badly designed and/or
executed tax system negatively impacts investment economic growth suffers. Traditional
technical assistance has focused on the implementation of revenue-generating mechanisms,
while largely neglecting the impact of the tax system on investment and economic growth.
FIAS helps to improve the business-enabling environment by reducing the time and financial
cost that firms incur in complying with tax rules.

FIAS' Business Taxation team provides specialized advice aimed at promoting effective, fair
and inclusive tax systems that foster investment, economic growth and political stability in
developing countries.

Benefits to streamlining tax systems are considerable, including:

increasing the number of firms into the formal economy;

encouraging local and foreign direct investment (FDI);

widening the tax base;

Lowering the per-business costs of tax compliance.

4. Doing Business Reform Advisory

Countries differ in how they regulate businesses and economic activity. Complex and
outdated regulations burden investors and make it harder for entrepreneurs to start and

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operate new firms. This in turn hampers job creation and slows economic growth.

Doing Business Reform Advisory is a joint service of FIAS and the Doing Business report
program. It helps governments design and implements reform agendas to improve their
environment for doing business as measured by the Doing Business indicators. These
indicators are published annually in Doing Business, the IFC-World Bank publication that
tracks the ease of doing business in countries worldwide across 10 dimensions in the life of a
business: starting a business, dealing with licenses, employing workers, registering property,
getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts,
and closing a business. In delivering its services, the advisory team collaborates extensively
with the Doing Business team, other FIAS product teams, IFC-BEE regional teams and other
World Bank Group units.

Doing Business Reform Advisory channels significant resources into helping countries with
the lowest Doing Business rankings. Among countries requesting assistance, 61 percent rank
in the bottom half of the Doing Business classification. Half of the 25 lowest-ranking
countries in Doing Business 2008 have become Doing Business Reform Advisory clients.

5. Industry Competitiveness

Many important investment climate issues such as product standard specifications, import
policy distortions, environmental regulation, social standards, and constraints to competition
are industry-specific in nature and traditionally have been overlooked in the investment
climate reform agenda. The Industry Competitiveness Advisory team brings together FIAS
expertise to address this gap in the investment policy planning process by identifying and
prioritizing the main policy, regulatory, and legal issues through an industry-specific lens.

This industry approach is a combination of industry knowledge, strong economic policy

expertise, and tools to address problems of access to industrial property which the private
sector frequently encounters in developing countries. This focused approach helps to identify
and prioritize investment climate issues and succeeds by

building private sector capacity

identifying and supporting anchor investments

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ensuring access to finance along the value chain

promoting supplier and community linkages.

Specifically, FIAS assists countries in designing special economic zone (SEZ) programs and
in developing their agribusiness and tourism sectors. The Industry Competitiveness team
focuses on introducing new programs in least-developed economies, particularly in conflict-
affected countries.

6. Insolvency Technical Assistance Program

In order to help client countries cope with the changed economic crisis, Investment Climate
Advisory Services has established a global restructuring and insolvency advisory services
program for countries seeking to strengthen their corporate insolvency systems. The program
can support insolvency legislative or regulatory reform efforts by, among other things:

Establishing or strengthening the insolvency practitioner frameworks that are key to

the proper functioning of a countrys insolvency system;

Designing or revising rules to facilitate informal workouts (out-of-court insolvency

procedures), in order to ease the burden on formal court systems.

Increasing the capacity of institutions that implement the insolvency framework.

7. Investment Policy and Promotion

Within the Business Enabling Environment (BEE) family of products, Investment Policy and
Promotion (IP&P) is one of the two core products in FIAS' Investment Generation practice
area, together with the newly developed Industry Competitiveness product.
IP&P seeks to help clients to establish an effective legal, policy, and institutional framework
for investment, and to market the improving business environment to win new investment.

Generating new investment for client countries

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The overall objective of IP&P is to support client countries' need for rapid increases in
investment, generally and in specific targeted sectors or industries, within the context of
longer term reform efforts.

8. Secured Lending

Effective secured lending laws are a crucial component of a healthy business climate. In their
absence, entrepreneurs are unable to leverage current or movable assets into capital for

FIAS' Secured Lending team works to foster the use of movable assets such as livestock,
receivables, and equipment as collateral in exchange for loans. FIAS, jointly with IFC's
Access to Finance business line, supports the development of a well-functioning secured
lending framework through a delivery model that focuses on harmonizing laws, building
electronic registries, streamlining registration processes, and eliminating unnecessary

The Secured Lending team focuses on three main areas:

- Legal Reform
- Collateral Registry Development
- Capacity Building

9. Sub-national Doing Business

Sub-national Doing Business projects apply the Doing Business methodology at the local
level, assessing whether local government regulations and practices enhance or impede the
investment climate in regions and cities. City- and regional-level rankings are increasingly
important in a globalized world, where localities rather than countries, compete for investor
attention. Sub national rankings are also excellent tools for creating genuine reform
momentum. Such transparency generates competition among cities to improve their business
environments, particularly in aspects important to mobile investors.

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FIAS' Sub national Doing Business team assists client countries in addressing weaknesses as
measured by the Doing Business indicators in three stages: by assessing regulatory regimes;
by identifying the bottlenecks firms face in setting up and operating; and finally, by providing
specific recommendations for reform.

The Sub national Doing Business team generally works in -

Countries where local regulations or local implementation of national regulations

have an impact on the business environment

Small countries in a region with similar regulatory frameworks

IDA countries or frontier regions in non-IDA countries

Countries with strong commitment from local and national governments

10. Trade Logistics

Faster, leaner and more responsive supply chains are essential for businesses to survive in a
competitive and globalized world. Firms increasingly use global sourcing strategies that
require flexible, speedy, and cost-effective solutions. This demand has energized
governments to make world markets more accessible by improving their trade logistics
services and providing efficient, easy, and accountable import and export procedures.


Sustainable Energy Market Development

One-third of the world's population nearly 1.6 billion people lives without access to
electricity. Particularly in the face of a changing climate, renewable energy and energy
efficiency play a significant role in answering this challenge by providing low-carbon, safe,
and reliable energy to consumers. Through donor partners, IFC's Sustainable Energy Market
Development product accelerates market-wide uptake of sustainable energy technologies and
practices by focusing on two areas: renewable energy and energy efficiency.

Sustainable Water Market Development

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Water use has grown at more than twice the rate of the global population for the past century,
according to the United Nations. An estimated 3 billion people more than 40 percent of the
world's population lack consistent household access to clean and safe piped water.

Sustainable Water Market Development aims to accelerate uptake of sustainable water

technologies and practices to increase access to safe and reliable water and sanitation

Cleaner Production Audits

In good economic times and bad, companies that want to remain

competitive must reduce costs to drive future growth. A cornerstone of
IFC's climate change agenda, the Cleaner Production product seeks to
help companies maximize profits through more efficient use of inputs such
as energy, water and raw materials and have a positive environmental
impact by minimizing carbon emissions, waste and pollution.

Eco-Standards and Sustainable Supply Chains

Though the populations of developed nations have the highest consumption rates, supply
chains that support this consumption are spread far and wide across the globe. Unsustainable
practices along the supply chain, from production to final markets, drive the degradation and
disappearance of biodiversity and ecosystem services, which in turn accelerate climate
change and threaten long-term business and market viability in developing countries.

A critical barrier to achieving sustainability in supply chains is the lack of agreed-upon

metrics by which to benchmark supply chain activity and practices at all levels and make
reasonable claims of sustainability. IFC supports the development and adoption of industry-
led voluntary standards, developed through commodity roundtables and related better
management practices, as the most efficient method to correct this market failure. IFC's Eco-
Standards and Sustainable Supply Chains product includes knowledge management and
advisory services at global, national, and client levels to influence and improve supply chains'
sustainability. Interventions are designed to change the behaviour of market players in a
variety of sectors, but especially in agribusiness.

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Chapter III
MIGA: Multinational
Investing Guarantee Agency
3.1 Introduction
3.2 MIGA- Services

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The Multilateral Investment Guarantee Agency (MIGA) is a member organization of the

World Bank Group that offers political risk insurance. It was established to promote foreign
direct investment into developing countries. MIGA was founded in 1988 with a capital base
of $1 billion and is headquartered in Washington, DC. 175 member countries comprise
MIGA's shareholders.

MIGA promotes foreign direct investment into developing countries by insuring investors
against political risk, advising governments on attracting investment, sharing information
through on-line investment information services, and mediating disputes between investors
and governments. MIGA's membership in the World Bank Group enables the organization to
intervene with host governments to resolve claims before they are filed.


Investor Information Services

MIGA manages PRI Centre, an online information service disseminating knowledge on the
political risk environment, risk-management issues, as well as PRI industry news and events.
We also publish an annual report, World Investment and Political Risk. This report offers a
snapshot of political risk perceptions of the largest multinational enterprises and perspectives
of the political risk insurance industry.

From 2007-2011, MIGA also administered This service was discontinued in July

Until mid-2007, MIGA administered the FDI Promotion Center, a knowledge-sharing and
learning portal for investment promotion agencies in developing countries. Today, the site is
managed by the Foreign Investment Advisory Service. Building on MIGAs Investment
Promotion Toolkit, the site provides free access to best practice resources to help practitioners

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update their knowledge and skills. MIGA has launched three regional versions of the FDI
Promotion Center in Arabic, Russian and Serbian.

Technical Assistance:

MIGA provides technical assistance to help governments and other intermediaries involved in
promoting investment improve their ability to respond effectively to investor needs.
Investment promotion intermediaries promote FDI into their countries through a combination
of activities, with the goal of generating economic growth and creating jobs.

MIGAs technical assistance helps investment promotion intermediaries develop their

capacity to provide investors with information and advice, with the goal of reducing the
transaction costs associated with site selection, as well as helping businesses get started.
MIGA is one of the few organizations with the global experience to provide the broad-based
package of assistance needed to build the institutional capacity of these agencies, in areas
such as strategic planning, marketing, and sector targeting, and improving responsiveness to
investor needs through information services. For an overview of the agencys TA results, see
past MIGA Annual Reports.

MIGAs TA services integrated into FIAS

In March 2007, MIGAs technical assistance services were integrated into the Foreign
Investment Advisory Service, a World Bank Group entity. Combining the investment climate
reform work of FIAS with MIGAs investment promotion work allows the World Bank Group
to help countries get the framework right for investment, and then market the improved
environment, all from a single platform. It also creates a more coordinated, single interface
for clients, donors, and other partners.

Established 20 years ago, FIAS has helped more than 130 countries increase the level and
impact of private investments. The FIAS strategy for fiscal years 2008 to 2011 centers around
regulatory simplification to make investment less costly, less risky, and more attractive; and
investment generation, including investment policy and promotion, and industry-specific
approaches to investment.

FIAS aims to develop new products and strategies to promote private investment in frontier
countries and fragile states in particularareas where MIGA has extensive experience. Day-

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to-day operations of the integrated facility are run by FIAS, with financial contributions from
IFC, MIGA, and the World Bank, as well as donors. Senior management from these three
World Bank Group institutions comprise a supervisory committee to oversee the activities of

Chapter IV

The World Bank In India

4.1 Introduction
4.2 Plans/ Action in India
4.3 Projects
4.4 Lending
4.5 Data analysis

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The World Bank is one of the worlds largest sources of funding and knowledge for
developing countries. India is one of our oldest members, having joined the institution at its
inception in 1944.

In India, the World Bank works in close partnership with the Central and State Governments.
It also works with other development partners: bilateral and multilateral donor organizations,
nongovernmental organizations (NGOs), the private sector, and the general publicincluding
academics, scientists, economists, journalists, teachers, and local people involved in
development projects.


The World Bank's work plan in India is spelt out in its Country Strategy (CAS). The Country
Strategy for India is closely aligned with India's own development priorities and
describes what kind of support and how much can be provided to the country over a period of
around four years.

The Country Strategy for India for 2009-2012 is aligned with the government's Eleventh Five
Year Plan. It focuses on helping the country to fast-track the development of much-needed
infrastructure, support the seven poorest states, and respond to the financial crisis. See Video

The strategy was arrived at after a series of consultations with a broad range of stakeholders,
including members of the government and civil society.

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The strategy envisages total proposed lending of US$14 billion for 2009 - 2012. As private
financing dries up in the wake of the global financial crisis, the Bank has agreed to provide an
additional US$ 3 billion as part of the total financing envelope of US$ 14 billion.

The strategy is implemented through lending, dialogue, analytical work, engagement with the
private sector, and capacity building exercises.

The Banks previous four-year Country Strategy for 2005-2008 focused on lending for
infrastructure, human development, and improving rural livelihoods.


The Banks method of operation is not to implement World Bank projects, but to provide
financing and advice for projects which are owned and supported by the Indian government
and the people and form part of their overall development agenda.

Various financing options are available based upon the type of assistance needed. It is
important to note that the implementation of projects is managed by the government itself.
The government designates an office, referred to as the Project Implementing Agency (PIU),
which is responsible for aspects such as procurement and selection of consultants and day-to-
day work, monitoring, and evaluation.

The Banks operational policies set guidelines to ensure that projects meet its own criteria
such as social and environmental standards. Projects are evaluated to capture and share
lessons for similar projects in future.

At the end of June 30, 2010, the World Bank group had 75 active projects in the country. The
net commitment for these projects was about $21.4 billion. New lending in FY10
(1 July 2009- 30 June 2010) amounted to $9.3 billion.
Total IBRD/IDA Commitments as on June 30, 2010 (FY10): $21.4 billion
(by fiscal year, in nearest $ billions)

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Commitments FY05 FY06 FY07 FY08 FY09 FY10

New Lending
2.9 1.4 3.7 2.7 2.3 9.3

Total Commitments (Active Projects)

12.8 11.3 14.3 13.8 14.9 21.4

Total No. of Active Projects

64 56 67 60 61 75


Difficult of doing business in India in rank.

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Poverty reduction in Pakistan, Bangladesh, India, Vietnam, and China related to


Development of country on education basis.

Development of countries on health basis.

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The future of both Bretton Woods institutions remains uncertain. Both the IMF and
World Bank escaped the efforts of the Republican U.S. Congress in the mid-1990s to
sharply curtail and even eliminate both organizations. These agencies have been less
successful in answering the charges from the left, as the IMF retains its demand for
"structural adjustments" and the World Bank still favours funding for large, project-
driven funding. While both the IMF and the World Bank have instituted some reforms,
they have been unable to appease the concerns of outraged environmentalists, labor
unionists, and nationalists and advocates of indigenous peoples in the developing
Still, as this essay has suggested, these two organizations are really the misguided
target for the legitimate concerns people of all ideological stripes have had about the

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rapid pace of globalization in the past half century. It is likely this globalization would
have occurred whether or not there had been a Bretton Woods conference, and it is all
but certain it will continue in the future regardless of the policies pursued by the IMF
and World Bank. While it is true that they have often been too driven by U.S. foreign
policy concerns, in the end the influence of both institutions has been widely
overstated. And despite their mistakes during the past half century, they have rarely
been given credit for many of the little things they do well. For example, both
institutions perform economic surveillance over most of the world's economy, a
valuable task that no other international or private organization could perform with
such skill. Both agencies also serve as a store of expert knowledge and wisdom for
countries throughout the world that lack trained specialists. While neither the IMF nor
the World Bank has met the lofty goals of their founders or wielded the nefarious
influence charged by their critics, they have and should continue to play a small but
important role in promoting prosperity and economic stability worldwide.


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International Banking & Finance- Vishwanathan

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