This blog entry also appeared on the Huffington Post.
Private capital flows to emerging markets have been badly hit by the recession. But the International Finance Corporation -- the private sector arm of the World Bank Group -- has managed to provide financing for private sector projects in the amount of $14.5 billion, including $4.0 billion mobilized through syndications and other initiatives. According to its annual results released a couple of weeks ago, IFC invested in 447 projects, of which half were in IDA countries. IFC reported income of $299 million for the fiscal year ended June 30, 2009. This is less than the $16.2 billion of financing provided in FY08 but is still a very large amount. And despite the recession, IFC's net income for the fourth quarter of FY09 was $384 million versus $271 million for the same period last year.
IFC’s press release sums up its results for FY09 as follows: Last year, IFC client companies had outstanding loans of more than $9 billion to about 8.5 million microfinance borrowers, and over $90 billion worth of outstanding loans to 1.3 million small and midsize businesses. IFC clients also provided utility services for 200 million people, and phones to 220 million customers. They provided 2.1 million jobs. Our clients also served 5.5 million health patients, and helped educate 1.2 million students. More people in developing countries gained access to critical services like telecommunications, water, electricity and gas distribution. IFC clients purchased about $47 billion worth of local goods and services, and contributed about $23 billion to government revenues.
If IFC stays on its current path, its portfolio will become larger than the World Bank in about five years. This is a staggering result for IFC whose portfolio was in the $2 to $4 billion range less than a decade ago. More interestingly, it points to the fact that demand for financing in emerging markets is shifting away from traditional public sector–led concessional financing towards private sector-focused financial instruments. The development community would be wise to note this change -- and to focus on new financial instruments that will help businesses and governments mitigate risk and make new investments. A recent publication by Nancy Lee, Guillermo Perry and Nancy Birdsall sets out an agenda for the multilateral development institutions as market developers for new risk-mitigation financial products. The IFC’s numbers -- even in these tough times -- appear to back up their arguments.