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Last week, the United States Supreme Court heard oral arguments in Jam et al v. International Finance Corporation. At stake: the extent to which international organizations including the IFC enjoy immunity from prosecution in US courts.
In November 2015, CGD published a report titled Unintended Consequences of Anti–Money Laundering Policies for Poor Countries. Today we release a follow-up to that report. Policy Responses to De-risking: Progress Report on the CGD Working Group’s 2015 Recommendations takes stock of accomplishments to date, notes where work remains, and recommends concrete actions for international institutions, governments, banks, and others to continue addressing de-risking.
While energy advocates have mostly focused on the 600 million people in sub-Saharan Africa that lack access to electricity at home, the region’s power shortages are especially damaging to firms. Companies across the continent suffer from unreliable power supplies, affecting productivity, employment, and growth.
Moving beyond low income countries makes sense for an institution focused on ending extreme poverty. But does the IFC follow through by focusing on the countries that are home to the extreme poor? Not really.
Policies put in place to counter financial crimes have unfortunately had a chilling effect on banks’ willingness to do business in markets perceived to be risky—due in part to the high price of compliance. Even as changes are being made to address this problem, financial institutions are developing solutions in the form of new cutting-edge technologies to help them comply better and faster with anti-money laundering regulations.
IFC Spokesman Frederick Jones has replied to our blog on the IFC’s risk appetite. First off, thanks to Fred and the IFC for replying. The Corporation has a unique role to play in global development finance and we’re keen for that role to grow, so we’re happy that the report has generated so much conversation about IFC’s portfolio, both within and outside IFC. And second, we commend IFC for its plans to do more in poor countries and those that are classified as fragile states—it is where the Corporation can have the most impact and where it is most needed.
Since the publication of our paper on the IFC’s project portfolio last week, we have received several helpful comments from readers. They plausibly suggest that the portfolio may be (even) less risky than we suggested, with even more space to pivot towards the low income countries where the IFC can make the most difference. But until the IFC publishes more information, we won’t really know.
The IFC is designed to catalyze investments in countries that investors might consider too risky to invest in alone. But our recent analysis of IFC’s portfolio found that it is shying away from risky investments, raising serious questions about whether the IFC is focusing on the places where it can make the most difference.
On Friday, the World Bank’s chief economist, Paul Romer, told the Wall Street Journal that the Bank unfairly influenced its own competitiveness rankings. He highlighted the case of Chile which suffered lower rankings on the Doing Business index during the Bachelet administration versus the Piñera years, and recalculated these rankings on his personal blog. Today, he issued a clarification of his views.