The World Bank Group has made increasingly strong and explicit commitments to fragile and conflict-affected states, putting them at the top of the development policy agenda. These commitments are promising, but give rise to significant operational challenges for the various arms of the World Bank Group, including the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA). The bank also faces steady pressure from shareholders to scale up involvement in fragile states while also improving absorptive capacity and project effectiveness.
In this report, Benjamin Leo, Vijaya Ramachandran, and Ross Thuotte assess the Bank’s private-sector interventions in African fragile states. They summarize and analyze project-level data from IDA, IFC, and MIGA and introduce a new framework to assist in the design and implementation of projects in fragile states. They argue that the World Bank must align its projects with three principal criteria: (1) the constraints that businesses cite as the most binding limitations to growth; (2) the host governments’ priorities for business climate improvements or strategic economic sectors; and (3) the sectors in which World Bank Group projects have been most effective over time. The authors find that alignment with the above criteria varies widely across the Bank’s subsidiaries:
- IDA exhibits very strong alignment with government priorities and reasonably good prioritization in sectors with higher project outcome ratings, but it has a more mixed performance focusing on what businesses cite as their most binding constraints.
- IFC and MIGA projects are only modestly aligned with the private sector’s most binding constraints or the priorities the governments. Their projects have, instead, been heavily concentrated in low-risk areas, such as the extractive sector, leading the authors to conclude that the IFC lacks a comprehensive, systematic strategy in African fragile states.