IGNOU : M.COM : IBO 1 : UNIT 13 : Q - 5. Discuss the achievement of the International Finance Corporation in promoting investment in private sector?

 Ans. INTERNATIONAL FINANCE CORPORATION

International Finance Corporation (IFC), a member of the World Bank Group was founded in 1956 to stimulate economic growth in developing countries by promoting private enterprises in these countries. Three major principles guiding IFC's activities are :

i) The catalytic principle: IFC should seek above all to be as catalyst in helping private investors and markets to make good investments.

ii) The business principle: IFC should function like a business in partnership with private sector and take some commercial risks, so that its funds although backed by public sources are transferred under market disciplines.

iii) The principle of special contribution: IFC should participate in an investment only when it makes a special contribution that supplements or complements the role of market operators

The International Finance Corporation (IFC), a member of the World Bank Group, shares the primary objective of all bank Group institutions : to improve the quality of the lives of people in its developing member countries.

Today IFC is the largest multilateral source of loan and equity financing for private sector projects in the developing world. IFC finances and provides advice for private sector ventures and projects in developing countries in partnership with private investors and, through its advisory work, helps governments create conditions that stimulate the flow of both domestic and foreign private savings and investment. Its particular focus is to promote economic development by encouraging the growth of productive enterprises and efficient capital markets in its member countries. IFC participates in an investment only when it can make a special contribution that complements the role of market operators. It also plays a catalytic role, stimulating and mobilizing private investment in the developing world by demonstrating that investments there can be profitable. Since its founding in 1956, IFC has committed more than $21.2 billion in financing for its own account and ha: arranged $15 billion in syndications and underwriting for 1,852 companies in 125 developing countries.

IFC coordinates its activities with the other institutions in the World Bank Group the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA) and the Multilateral Investment Guarantee Agency (MIGA) but is legally and financially independent, with its own Articles of Agreement, shareholders, financial structure, management and staff. Its share capital is provided by its 174 member countries, which collectively determine its policies and activities. Strong shareholder, support and a substantial paid-in-capital base have allowed IFC to raise most of the funds for its lending activities through its triple-A rated bond issues in the International financial markets.

IFC provides advisory services, particularly in connection with privatization and corporate restructuring, private infrastructure and the development of capital markets. These services are offered under (i) Technical Assistance trust Funds Programme (TATF) established in 1968, (ii) The Foreign Investment Advisory service (FIAS), established in 1986. In 1989, it began operating the African Management Services company (AMSCO) to work with African countries. IFC's Africa Enterprise Fund (AEF) provides finaicial assistance to small and medium enterprises in Africa. In 1995, a new facility-the Enterprises Support Service, (ESSA) was established to provide technical assistance to businesses after they secure financing.