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Chart showing IFC project ratings

Is the New Model IFC a Good Deal for IDA Countries?

For much of the last decade, the World Bank’s private sector arm, the International Finance Corporation (IFC), has delivered a share of its profits as grants to the World Bank Group’s soft lending arm for governments, the International Development Association (IDA). In the last couple of years that pattern has reversed.

graph compares median private capital inflow/GDP ratios over time for LICs, lower-middle-income countries (LMICs), and upper-middle-income countries (UMICs

Three Surprises about Private Capital Flows to Low-Income Countries

The formidable challenge of financing the Sustainable Development Goals has focused attention on the role of private capital in filling huge finance gaps. But for low-income countries (LICs), which receive only about 5 percent of total cross-border private capital flows to developing countries, there is little confidence that external private capital will make a significant contribution.

More Mobilization and Impact: Adapting MDB Private Finance Models

There is an urgent need to change PSW business models to maintain their financial sustainability while doing much better on mobilization and development impact. Two factors are critical for meeting this challenge: enhanced risk management capability and greater flexibility regarding risk-adjusted returns.

The World Bank’s Preference for Private Finance: Explained

Last year the World Bank adopted a new “cascade” approach that intended to maximise finance for development by prioritising private solutions wherever possible. In what world would this “cascade” algorithm make sense? Without a good answer to that question, the cascade risks looking like ideology rather than sound development finance advice.

The Pitfalls of Leverage Targets

Since the 2015 financing for development agreement, donor governments and their development finance institutions have all been singing from the same hymn sheet: we must do more to mobilize private investment. Here I will argue that setting leverage targets in isolation might not get us what we want: more investment in developing countries. Overall investment volumes in chosen markets may make a better target, but any incentives must be soft to minimize the temptation to put public money where it is not needed.

DFIs Embark on a Voyage of Rediscovery

Development finance institutions (DFIs) have long resisted the idea that they ought to support coordinated national development strategies in the countries that they invest in, but if conversations around private roundtables at the recent World Bank/IMF meetings are anything to go by, that’s where they may be heading. And if so, it may be the private sector itself that leads them there.

The Good, the Bad, and the Ugly: How Do Tax Incentives Impact Investment?

There are arguments for and against “spending through the tax system.” On one hand tax incentives are relatively easy to implement; they don’t require an outlay of cash and they make use of information that revenue agencies already collect. But on the other, loading the tax system with too many policy objectives conflicts with the drive for a coherent, simple, transparent tax system. Despite decades of advice from international organisations to curtail tax incentives, they remain a popular tool for governments.