International Finance Corporation, the globe’s largest development institution focused on the private sector in developing countries, has agreed a partnership with Berenschot, a leading consultancy in the Netherlands. As part of the alliance, the consultants will support organisations and institutions with obtaining (co-)financing from the IFC, and advise the IFC on potential financing opportunities.
Today, nearly 1 billion people still face poverty, defined by the World Bank as humans that live on less than $1.90 a day*. Despite the gloomy picture, decades ago the globe’s financial outlook was considerably bleaker. In 1981, nearly 2 billion people found themselves living with roughly sixty dollars a month (2015 PPP), and even by 2004 the number of very poor still stood at 1.5 billion. The strong reduction in extreme poverty – over the past two decades more than 800 million people have been lifted out of their financial woes – follows from a range of economic developments, and a growing united frontier that strives to bolster income redistribution and tackle extreme poverty.
Besides governments and CSR-driven donation from the mass affluent, one of the key players in the landscape is the World Bank, an international financial institution that has the sole aim of fighting poverty and promoting sustainable development, through among others providing loans and grants to developing countries for capital programmes. In 2015 alone, the World Bank committed nearly $60 billion in loans, grants, equity investments, and guarantees to its members and private businesses in need of funding, up from $51 billion in 2012. The organisation, currently led by Jim Yong Kim (the 12th President since the institution was established in 1944 together with the IMF), consists of five institutions, of which four engage in financing activities**.
- International Bank for Reconstruction and Development (IBRD) lends to governments of middle-income and creditworthy low-income countries;
- International Development Association (IDA) provides interest-free loans, or credits, and grants to governments of the poorest countries;
- International Finance Corporation (IFC) provides loans, equity, and advisory services to stimulate private sector investment in developing countries;
- Multilateral Investment Guarantee Agency (MIGA) provides political risk insurance and credit enhancement to investors and lenders to facilitate foreign direct investment in emerging economies.
With nearly $24 billion in commitments, the IRBD represents the largest share of the World Bank’s spending, followed by the IDA, which this year has committed $19 billion. IFC, the institution focused on private sector development, has strengthened its efforts vis a vis last fiscal year, mobilising $10.5 billion, of which $9.3 billion was actually disbursed***. The remainder of the $60 billion 2015 budget is spent by MIGA (which issued $2.8 billion in political risk and credit enhancement guarantees) and the World Bank’s Trust Funds programme.
World Bank partners
To support the execution and monitoring of funding, the World Bank has an army of financial and resource partners across the globe****, of which Berenschot, a Netherlands-based management consultancy, is the latest to join the ranks. The consulting firm has struck an alliance with the IFC, with the aim to increase the IFC’s participation in projects by Dutch organisations in developing markets. The IFC has off late performed several investments in Dutch firms, such as $25 million in funding to support Heineken’s recent $50 million expansion in Rwanda, yet both parties believe significant value remains untapped, with the collaboration aimed at generating more new IFC funded projects, as well as boosting the overall level of IFC (co-)funding.
The IFC’s decision to work with Berenschot builds on the firm’s growing footprint in developing markets. The consulting firm, founded in 1938, has in recent years through its international unit (‘Berenschot International’) supported dozens of Western companies with their expansion to markets in Eastern Europe, Asia, Africa and Latin America. Services span a wide range of topics, ranging from strategy setting and market entry advice to supporting the setup of organisational processes and governance, as well as financing and the realisation of operational efficiencies in operations. In particular in fast growing Africa the consultancy has built a foothold – last year Berenschot opened offices in Ghana and South Africa (a country plagued with a high unemployment), and together with the Rotterdam School of Management and The Netherlands-African Business Council (NABC) conducted large-scale research into business and trade in Africa (the outcomes have been published in the book ‘Doing Business in Africa’).
In the coming months, the IFC and Berenschot International will jointly engage with corporates that are contemplating investing in Africa and advise them on opportunities. Clients across all industries will be served, with a focus however on infrastructure, manufacturing, agribusiness, services, and financial markets.
* The international poverty line of $1.90 a day was determined by the World Bank in April this year. Since its inception the baseline has changed three times, to reflect growing wealth and purchasing power parity exchange rates (PPPs). When launched in 1990, the poverty line stood at $1 a day, and since it has been raised to $1.08 per day (1993) and $1.25 (2005).
** The fifth institution of the World Bank is the International Centre for Settlement of Investment Disputes (ICSID), which provides international facilities for conciliation and arbitration of investment disputes.
*** Commitments refer to intentions and agreements, while disbursements relate to actual payments made.
**** Financial partners contribute to a grant pool, for instance as part of their wider Corporate Social Responsibility requirements. Resource Partners do not contribute financial resources but support World Bank policy setting and the implementation of projects.