Annual Report 2013 v1 81790 IFC Year in Review In FY13, our investments climbed to an all-time high of nearly $25 billion, leveraging the power of the private sector to create jobs and tackle the world’s most pressing development challenges. Total Assets IFC Financial Highlights 2013 2012 2011 2010 2009 Dollars in millions Dollars in millions, as of and for the years ended June 30* 80,000 Net income (loss) attributable to IFC $ 1,018 $ 1,328 $ 1,579 $ 1,746 $ (151) Grants to IDA $ 340 $ 330 $ 600 $ 200 $ 450 60,000 Income before grants to IDA $ 1,350 $ 1,658 $ 2,179 $ 1,946 $ 299 Total assets $ 77,525 $ 75,761 $68,490 $ 61,075 $51,483 40,000 Loans, equity investments and debt securities, net $34,677 $31,438 $ 29,934 $25,944 $ 22,214 Estimated fair value of equity investments $ 13,309 $ 11,977 $ 13,126 $ 10,146 $ 7,932 KEY RATIOS 20,000 Return on average assets (GAAP basis) 1.3% 1.8% 2.4% 3.1% -0.3% Return on average capital (GAAP basis) 4.8% 6.5% 8.2% 10.1% -0.9% 0 Cash and liquid investments as a percentage of next three years’ 09 10 11 12 13 estimated net cash requirements 77% 77% 83% 71% 75% Debt-to-equity ratio 2.6:1 2.7:1 2.6:1 2.2:1 2.1:1 Total resources required ($ billions) $ 16.8 $ 15.5 $ 14.4 $ 12.8 $ 10.9 Total resources available ($ billions) $ 20.5 $ 19.2 $ 17.9 $ 16.8 $ 14.8 Net Income (Loss) Total reserve against losses on loans to total disbursed loan portfolio 7.20% 6.60% 6.6% 7.4% 7.4% Attributable to IFC *See Management’s Discussion and Analysis and Consolidated Financial Statements for details on the calculation of these numbers: Dollars in millions http://www.ifc.org/ifcext/annualreport.nsf/Content/AR2013_Financial_Reporting 2,000 IFC Operational Highlights 2013 2012 2011 2010 2009 1,500 Dollars in millions, for the year ended June 30 NEW INVESTMENT COMMITMENTS 1,000 Number of projects 612 576 518 528 447 500 Number of countries 113 103 102 103 103 For IFC’s own account $18,349 $ 15,462 $ 12,186 $ 12,664 $ 10,547 0 CORE MOBILIZATION* –500 Syndicated loans1 $ 3,098 $ 2,691 $ 4,680 $ 1,986 $ 1,858 09 10 11 12 13 Structured finance – – – $ 797 $ 169 IFC initiatives & other $ 1,696 $ 1,727 $ 1,340 $ 2,358 $ 1,927 Asset Management Company (AMC) Funds $ 768 $ 437 $ 454 $ 236 $ 8 Public- Private Partnership (PPP)2 $ 942 $ 41 – – – Total core mobilization $ 6,504 $ 4,896 $ 6,474 $ 5,377 $ 3,962 INVESTMENT DISBURSEMENTS For IFC’s own account $ 9,971 $ 7,981 $ 6,715 $ 6,793 $ 5,640 Syndicated loans 3 $ 2,142 $ 2,587 $ 2,029 $ 2,855 $ 1,958 COMMITTED PORTFOLIO Number of firms 1,948 1,825 1,737 1,656 1,579 For IFC’s own account $49,617 $ 45,279 $ 42,828 $38,864 $34,502 Syndicated loans 4 $ 13,633 $ 11,166 $ 12,387 $ 9,302 $ 8,299 ADVISORY SERVICES Advisory Services program expenditures $ 232.0 $ 197.0 $ 181.7 $ 166.4 $ 157.8 Share of program in IDA countries 5 65% 65% 64% 62% 52% *Financing from entities other than IFC that becomes available to client due to IFC’s direct involvement in raising resources. 1. Includes B- Loans, Parallel Loans and A- Loan Participation Sales (ALPS). 2. Third-party financing made available for public-private partnership projects due to IFC’s mandated lead advisor role to national, local, or other government entity. 3. Includes B- Loans and Agented Parallel Loans. 4. Includes B- Loans, A- Loan Participation Sales (ALPS), Agented Parallel Loans, and Unfunded Risk Participations (URPs). 5. All references in this report to percentages of advisory program expenditures in IDA countries and fragile and conflict-affected areas exclude global projects. THE POWER OF PARTNERSHIPS _1 IFC Annual Report 2013 ABOUT IFC IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector in developing countries. Established in 1956, IFC is owned by 184 member countries, a group that collectively determines our policies. Our work in more than 100 developing countries allows companies and financial institutions in emerging markets to create jobs, generate tax revenues, improve corporate governance and environmental performance, and contribute to their local communities. IFC’s vision is that people should have the opportunity to escape poverty and improve their lives. 2_ This report summarizes IFC’s role in helping the private sector create jobs and opportunity in developing countries. It highlights how we spur innovation (pages 32–39), influence policy (pages 40–47), provide a demonstration effect for others (pages 48–55), and strive to maximize our development impact (pages 56–63). THE POWER OF PARTNERSHIPS _3 4 to 9 Leadership Perspectives 10 to 25 26 to 29 The Power IFC’s of Partnerships Global Results 30 to 63 65 to 69 30 How IFC Creates Opportunity 65 Measuring Up 70 to 77 78 to 110 Our Business and Expertise 70 Our People and Practices 78 111 Stay Connected 4_ IFC ANNUAL REPORT 2013 Leadership Perspectives A Letter from WORLD BANK GROUP PRESIDENT JIM YONG KIM We are at an auspicious moment in Earlier this year, we in the World Bank Group set two specific and measurable goals for ourselves and our partners in the history. Thanks to the successes of the development community: effectively ending extreme poverty by shrinking the share of people living on less than $1.25 a past few decades and a favorable economic day to 3 percent by 2030, and promoting shared prosperity by outlook, developing countries now have an raising the incomes of the poorest 40 percent of the population in every developing country. unprecedented opportunity: the chance to These are ambitious goals, and success is far from end extreme poverty within a generation. inevitable. Nearly five years after the global financial crisis began, in 2008, the world’s economic recovery remains fragile. This opportunity must not be squandered. Developed countries struggle with high unemployment and weak economic growth. Developing countries are growing more slowly than before the crisis. Moreover, the fight against poverty will become increasingly difficult as we push toward our target, since those who remain poor will be the hardest to reach. Other challenges could pose new threats to poverty reduction. Conflict and political instability present major risks, because they increase poverty and create long-term obstacles to development. Moreover, a warming planet could increase the prevalence and size of drought-affected areas, and make extreme weather events more frequent, with unpredictable costs in terms of lives and financial resources. Yet, I remain optimistic that achieving the goals is within our reach. Doing so will require systemic and relentless collaboration from the World Bank Group, our 188 member countries, and other partners. IFC will play an important role by mobilizing the power of the private sector to create jobs and opportunity where they are needed most. THE POWER OF PARTNERSHIPS _5 This year, IFC provided a record of nearly $25 billion in financing for private sector development, $6.5 billion of which was mobilized from investment partners. This year, IFC provided a record of nearly $25 billion IFC is also making important strides in helping the in financing for private sector development, $6.5 billion private sector address climate change. Earlier in 2013, IFC of which was mobilized from investment partners. Nearly issued the world’s largest “green” bond, raising $1 billion that half of IFC’s 612 investment projects took place in the poor- will be directed to climate-related projects across the globe. est countries served by the International Development In addition, IFC helped over 10 building developers in Asia, Association. More than $5 billion went to support private Latin America, and other regions adopt more energy-efficient sector development in Sub-Saharan Africa, and more than designs. These are the types of steps we must take to ensure $2 billion went to South Asia. that climate change does not wipe out the hard-won develop- IFC Asset Management Company, an IFC subsidiary ment gains the world has achieved in recent decades. that mobilizes capital from third-party investors for invest- ment in developing countries, increased its assets under management to $5.5 billion. This represents a significant milestone for a company set up just four years ago. In addition, IFC mobilized more than $3 billion from other investors in the form of syndicated loans. This Annual Report shows the crucial role IFC has played in providing support for small and medium entrepre- neurs, expanding access to finance for the poor, creating jobs, and generating opportunities for women. In Côte d’Ivoire, for example, IFC arranged a financing — package that will allow the Azito power plant to increase JIM YONG KIM energy production by 50 percent without using additional World Bank Group President gas. This will help reduce power shortages in the country and support its economic recovery. In Latin America, IFC is extending quality healthcare to poor communities in the Brazilian state of Bahia with a highly innovative public-private partnership model. And, working under a joint strategy with the World Bank, IFC is bringing new opportunity to Myanmar, a country whose economic development has lagged signifi- cantly behind that of its East Asian counterparts. 6_ IFC ANNUAL REPORT 2013 Leadership Perspectives A Letter from IFC EXECUTIVE VICE PRESIDENT AND CHIEF EXECUTIVE OFFICER YONG CAI JIN-­ Across the world, the challenges of For IFC, this represents a tremendous opportunity: to engage the creativity and resources of the business community to development are vast — a ​ nd growing. So change the world for the better. By helping companies over­ are the needs of entrepreneurs, investors, come obstacles to sustainable growth, we help them create opportunity and improve lives. We enlist them as partners and businesses in developing countries, in the global effort to end extreme poverty and promote shared prosperity. which struggle to overcome constraints in We believe strongly in the power of partnerships to finance, infrastructure, employee skills, make a transformational difference. As the world’s largest global development institution focused on the private sector, and the regulatory environment. we worked this year with nearly 2,000 private sector clients and a wide array of governments, donors, and other stake­ holders. The result was another record year for IFC — ​ we invested and mobilized more money for private sector devel­ opment than ever before, helping s ­ ustain development in more than 100 countries. Our new investments climbed to an all-­ time high of nearly $25 billion in FY13, including funds mobilized from other investors, providing capital to more than 600 projects and companies across the world. We invested $18.3 billion for our own account and mobilized $6.5 billion from other investors. In a time of declining official aid flows to developing countries, these investments had an impact in every region of the world. We now have an investment portfolio of nearly $50 billion in nearly 2,000 companies in 126 countries. This diversification has contributed to our strong risk-­ adjusted returns — ​and to our development impact. At the end of 2012, our investments provided jobs for 2.7 million people in developing countries. With our support, our clients treated 17.2 million patients, educated 1 million students, and improved opportunities for 3.1 million farmers. They generated power for 52.2 million customers, and distrib­ uted water to 42 million. THE POWER OF PARTNERSHIPS _7 We believe strongly in the power of partnerships to make a transformational difference. We focused strongly on promoting prosperity in the equity risk capital in the critically important infrastruc- world’s poorest and most fragile regions. ture sector. In FY13, nearly half of our projects— totaling more than I am confident IFC can achieve even greater impact $6 billion— were in the poorest countries served by the World going forward. This year was my first as IFC’s CEO, and Bank’s International Development Association, most of them I traveled to nearly three dozen countries— in every region in Sub-Saharan Africa. About two-thirds of our advisory pro- of the world— to meet with our clients and staff. I saw first- gram expenditures were in IDA countries. Our investments hand what we can achieve by being ambitious, unafraid of in fragile and conflict-affected regions climbed to nearly risk, client-focused, and open to new ideas. We can tackle $600 million. the big problems that have long hindered development— Our Advisory Services achieved significant results for such as access to finance, energy and climate change, and our clients— businesses and governments alike. Development- food security. effectiveness ratings for Advisory Services reached a record IFC is a unique organization, one that has managed of 75 percent while client-satisfaction ratings climbed to an to combine a businesslike commercial approach with a pas- all-time high of 90 percent. The advice we provide is a crucial sionate, focused commitment to achieving meaningful and element of the value we bring to our clients, and in FY13 we measurable development impact. Strong, profitable growth achieved notable progress in providing client solutions that builds resources for greater development impact in the future. integrate investment and advice— we had active advisory Developing countries need transformative solu- projects with 250 investment clients. tions. Working with our partners, IFC is well positioned to In FY13, our advice helped mobilize almost $1 billion provide them. in private investment through public-private partnerships, which are expected to improve infrastructure and health services for millions of people. In addition, we helped more than 40,000 small and medium enterprises obtain $4.5 billion in financing secured with movable property, through our work with collateral registries. We also provided — training and capacity-building to about 350,000 people— JIN-YONG CAI including farmers, entrepreneurs, and managers of small and IFC Executive Vice President medium enterprises. and Chief Executive Officer In addition, IFC Asset Management Company continued to grow, increasing its assets under management to $5.5 billion across six investment funds, with a strong mix of reputable investors. It has launched two new funds— including the IFC Catalyst Fund, which focuses on climate-smart investments, and the Global Infrastructure Fund, which will invest scarce 8_ IFC ANNUAL REPORT 2013 MANAGEMENT TEAM Our seasoned team of executives ensures that IFC’s resources enhance IFC’s uniqueness. The team shapes our strategies are deployed effectively, with a focus on maximizing development and policies, positioning IFC to help improve the lives of impact and meeting the needs of our clients. IFC’s Management more poor people in the developing world. Our executives are Team benefits from years of development experience, a diversity vital in maintaining IFC’s corporate culture of performance, of knowledge, and distinct cultural perspectives—qualities that accountability, and engagement. Jingdong Hua Janamitra Devan Jean Philippe Prosper Saadia Khairi Karin Finkelston Dorothy Berry Vice President, Vice President, Vice President, Sub- Vice President, Vice President, Vice President, Treasury and Financial and Private Saharan Africa, Latin Risk Management Asia-Pacific Human Resources, Syndications Sector Development America and the and Portfolio Communications, and Caribbean Administration THE POWER OF PARTNERSHIPS _9 Ethiopis Tafara Dimitris Jin-Yong Cai Nena Stoiljkovic Gavin Wilson Rashad Kaldany Jorge Familiar Tsitsiragos Calderon Vice President, IFC Executive Vice Vice President, CEO, IFC Asset Vice President General Counsel Vice President, President and CEO Business Advisory Management and Chief Operating Vice President and Europe, Central Services Company Officer Corporate Secretary Asia, Middle East (not pictured) and North Africa 10 _ IFC ANNUAL REPORT 2013 ANNUAL REPORT 2013 With a global presence in more than 100 countries, a network of more than 900 financial institutions, and nearly 2,000 private sector clients, IFC is uniquely positioned to create opportunity where it’s needed most. We use our capital, expertise, and influence to help change the world for the better— to eliminate extreme poverty and to boost shared prosperity. THE POWER OF PARTNERSHIPS _ 11 That’s the power of partnerships. 12 _ IFC ANNUAL REPORT 2013 Partnerships take connections No institution can solve the challenges of development on its own. But IFC has a distinctive power to bring together a variety of players to address the challenges collectively. We work with our network of partners to craft innovative solutions that make good things happen in difficult places. THE POWER OF PARTNERSHIPS _ 13 We can end extreme poverty in a generation and boost shared prosperity. 14 _ IFC ANNUAL REPORT 2013 Partnerships take ambition In a world in which the needs of developing countries far exceed the available resources, it takes ambition to make a lasting difference in the lives of the poor. We are stepping up to the challenge, unafraid to take risks, and finding new ways to maximize our development impact. THE POWER OF PARTNERSHIPS _ 15 We can end extreme poverty in a generation and boost shared prosperity. 16 _ IFC ANNUAL REPORT 2013 Partnerships take focus Our clients hold the key to sustainable private sector development in the poorest countries and regions of the world. We use our distinctive combination of broad global knowledge and deep local expertise to align their needs with the opportunities for transformational development in emerging markets. THE POWER OF PARTNERSHIPS _ 17 We can end extreme poverty in a generation and boost shared prosperity. 18 _ IFC ANNUAL REPORT 2013 In all our projects, we aim to do the things that no one else is able or inclined to. We seek to achieve maximum impact— profitably and efficiently, while ensuring we have the funds required to continue our growth. THE POWER OF PARTNERSHIPS _ 19 We can end extreme poverty in a generation and boost shared prosperity. 20 _ IFC ANNUAL REPORT 2013 THE POWER OF PARTNERSHIPS _ 21 Partnerships can improve lives Our work helps expand employment, improve health and education, and broaden access to finance for those who need it most. In 2012, our clients supported 2.7 million jobs, treated 17.2 million patients, and expanded opportunities for more than 3 million farmers. 2.7 17.2 3.1 million jobs were million patients were million farmers supported by IFC treated by IFC clients. benefited from our clients in 2012. work with clients. 22 _ IFC ANNUAL REPORT 2013 THE POWER OF PARTNERSHIPS _ 23 Partnerships can promote prosperity We help create the conditions needed for sustained prosperity. In 2012, our advice helped governments in 43 countries adopt 76 reforms to strengthen the investment climate. Clients we invested in distributed power to nearly 46 million customers and contributed about $27 billion to government revenues. 76 $27 46 investment-climate billion in government million customers reforms achieved in revenues, generated by received power because 43 countries. IFC clients. of IFC investments. 24 _ IFC ANNUAL REPORT 2013 THE POWER OF PARTNERSHIPS _ 25 Partnerships can transform the world Harnessing the creativity of the private sector, we can help end extreme poverty — within a generation. We can help lift the incomes of the poorest 40 per- cent of the population — in every developing country. Achieving these goals would change the world. 26 _ IFC ANNUAL REPORT 2013 IFC’S GLOBAL IMPACT Our record investments and advice helped achieve significant impact for the poor. Nearly half our investment projects were in the world’s poorest countries. We helped our clients support 2.7 million jobs and provide more than $265 billion in loans to micro, small, and medium enterprises in 2012. Our advice helped governments in 43 countries adopt 76 reforms related to the investment climate. $4.8 BILLION Latin America and the Caribbean THE POWER OF PARTNERSHIPS _ 27 $25 BILLION in investments, including $18.3 billion in commitments for our own account $1.7 $3.3 BILLION BILLION South Asia Europe and Central Asia $3.5 $2.9 BILLION BILLION East Asia and the Pacific Sub-Saharan Africa $2.0 BILLION Middle East and North Africa 28 _ IFC ANNUAL REPORT 2013 FY13 COMMITMENTS FY13 COMMITMENTS Dollar amounts in millions BY ENVIRONMENTAL AND SOCIAL CATEGORY Total $18,349 (100%) Commitments Number of BY INDUSTRY Category ($ millions) Projects Trade Finance $6,477 (35.3%) A $884 17 Financial Markets $3,647 (19.9%) B $5,490 167 Infrastructure $2,247 (12.2%) C $6,764 269 Consumer & Social Services $1,635 (8.9%) FI $1,751 48 Manufacturing $1,314 (7.2%) FI-1 $450 14 Agribusiness & Forestry $1,278 (7.0%) FI-2 $2,203 59 Funds $890 (4.9%) FI-3 $807 38 Telecommunications & Information Technology $472 (2.6%) Total $18,349 612 Oil, Gas & Mining $389 (2.1%) IFC’S LARGEST COUNTRY BY REGION EXPOSURES1 Latin America and the Caribbean $4,822 (26.28%) June 30, 2013 (Based on IFC’s Account) Sub-Saharan Africa $3,501 (19.08%) Europe and Central Asia $3,261 (17.77%) Committed % of Country Portfolio Global East Asia and the Pacific $2,873 (15.66%) (Global Rank) ($ millions) Portfolio Middle East and North Africa $2,038 (11.11%) India (1) $4,453 9% South Asia $1,697 (9.25%) China (2) $3,002 6% Global $156 (0.85%) Turkey (3) $2,856 6% Some amounts include regional shares of investments that are officially classified as global projects. Brazil (4) $2,690 5% Russian Federation (5) $2,145 4% BY PRODUCT Mexico (6) $1,584 3% Loans1 $8,519 (46.43%) Nigeria (7) $1,334 3% Guarantees2 $6,959 (37.93%) Egypt, Arab Republic of (8) $1,130 2% Equity3 $2,732 (14.89%) Ukraine (9) $963 2% Risk-management products $138 (0.75%) Colombia (10) $947 2% 1. Includes loan-type, quasi-equity products. 1. Excludes individual country shares of regional and global 2. Includes trade finance. projects. 3. Includes equity-type, quasi-equity products. COMMITTED PORTFOLIO For IFC’s own account as of June 30, 2013 Total $49,617 (100%) BY INDUSTRY Financial Markets $14,563 (29%) Infrastructure $9,358 (19%) Manufacturing $6,385 (13%) Agribusiness & Forestry $4,251 (9%) Consumer & Social Services $4,215 (8%) Funds $3,733 (8%) Trade Finance $3,081 (6%) Oil, Gas & Mining $2,359 (5%) Telecommunications & Information Technology $1,667 (3%) Other $5 (0%) BY REGION Europe and Central Asia $10,994 (22%) Latin America and the Caribbean $10,993 (22%) Sub-Saharan Africa $7,833 (16%) East Asia and the Pacific $7,726 (16%) Middle East and North Africa $5,793 (12%) South Asia $5,582 (11%) Global $696 (1%) Amounts include regional shares of investments that are officially classified as global projects. THE POWER OF PARTNERSHIPS _ 29 FY13 INVESTMENT SERVICES DOTS SCORE BY INDUSTRY IFC’S CLIENT LEADERSHIP AWARD IFC Total 716 (29,674) 66% Every year, IFC recognizes an organ- Funds 84 (1,199) 79% ization that reflects our values and Infrastructure 101 (4,805) 73% symbolizes our shared commitment to Financial Markets 219 (11,813) 70% sustainable development. We present our Agribusiness & Forestry 79 (3,215) 68% Client Leadership Award to a corporate Oil, Gas & Mining 28 (2,200) 64% client that best demonstrates leadership, Consumer & Social Services 94 (2,045) 56% innovation, and operational excellence. Telecommunications & Information Technology 31 (1,067) 55% This year, the award went to Vegpro Manufacturing 80 (3,329) 49% Group, a dynamic agribusiness company Numbers at the left end of each bar are the total number of companies rated. in Kenya. It has been an IFC client for Numbers in parentheses represent total IFC investment ($ millions) in those projects. nearly two decades. Vegpro is engaged in a tricky market: FY13 INVESTMENT SERVICES DOTS SCORE BY REGION supplying fresh food to supermarkets in the European Union. As shoppers IFC Total 716 (29,674) 66% demand high-quality, ready-to-eat Latin America and the Caribbean 159 (8,007) 74% vegetables, growers must assure year- East Asia and the Pacific 98 (3,922) 70% round supply and quick delivery while Middle East and North Africa 80 (3,283) 65% complying with strict environmental and Europe and Central Asia 168 (8,477) 64% safety standards. Sub-Saharan Africa 121 (3,094) 61% But the company’s creative approach South Asia 81 (2,707) 60% has transformed it into Kenya’s largest Numbers at the left end of each bar are the total number of companies rated. vegetable producer, with an annual Numbers in parentheses represent total IFC investment ($ millions) in those projects. turnover of $100 million. All of the fresh produce it supplies to the retail market FY13 ADVISORY SERVICES PROGRAM EXPENDITURES is certified, which usually means higher Dollar amounts in millions income for suppliers— 4,000 of whom are small-scale farmers. Total 231.9 (100%) Vegpro is one of Kenya’s largest BY REGION private employers, with 7,000 employees. About three-quarters of them are Sub-Saharan Africa 65.4 (28%) women— who enjoy starting wages that East Asia and the Pacific 38.5 (17%) are almost 50 percent higher than the Europe and Central Asia 36.4 (16%) average daily minimum, in addition to South Asia 33.6 (14%) benefits such as free primary healthcare Latin America and the Caribbean 25.5 (11%) and counseling. Middle East and North Africa 20.4 (9%) Global 12.2 (5%) BY BUSINESS LINE Investment Climate 74.8 (32%) Access to Finance 62.6 (27%) Sustainable Business 55.0 (24%) Public-Private Partnerships 39.5 (17%) WEIGHTED AND UNWEIGHTED INVESTMENT SERVICES DOTS SCORES FY11 FY11 582 67% $21,181 76% FY12 FY12 668 68% $26,610 75% FY13 FY13 716 66% $29,674 73% Unweighted Weighted Numbers at the left end of each bar for unweighted DOTS score are the total number of companies rated. Numbers at the left end of each bar for weighted DOTS score represent total IFC investment ($ millions) in those projects. FY11 and FY12 weighted scores have been restated to reflect methodology changes (see page 82). 30 _ IFC ANNUAL REPORT 2013 INTRODUCTION HOW IFC CREATES OPPORTUNITY INNOVATION, INFLUENCE, DEMONSTRATION, IMPACT IFC brings a distinctive set of comparative advantages to help reduce poverty and foster inclusive economic growth— by leveraging the power of the private sector. Consider the scale of the challenge: This is what we do best. We work in more than 100 developing countries, » Across the world, 1.2 billion people struggle on less than connecting clients and using our expertise to help them $1.25 a day. achieve sustainable growth— by financing private sector » About 600 million jobs must be created within a decade— investment, mobilizing capital in international financial just to accommodate young people entering the workforce. markets, and providing advice to businesses and governments. » Nearly 1 billion people go hungry each day. This work enables companies to grow and create jobs, » $1 trillion a year in financing is needed to modernize improve corporate governance and environmental perfor- infrastructure in developing countries. mance, and contribute to their local communities. We go wherever we are needed most, and deploy our These are needs that can’t possibly be filled without tapping resources wherever they will achieve the greatest impact. In the capital and creativity of the private sector. Private enter- everything we do, we ask ourselves four questions: prises create nine out of every 10 jobs in developing countries. They spur innovation, produce the goods and services people » Are we helping reduce poverty and promoting need to improve their lives, and generate most of the tax shared prosperity? revenue that governments need to provide essential services » Are we achieving maximum impact? for their citizens. » Are we doing the type of things that no one else is The private sector, in short, provides the most time- able or inclined to? tested means of ending poverty quickly and sustainably. » Are we doing so profitably and efficiently? But private sector development doesn’t occur in a vacuum. It happens only when governments and the private sector can work together to ensure that businesses operate and grow in ways that promote prosperity for all. 1.2 billion people subsist on less than $1.25 a day—nearly one out of every five people on the planet. THE POWER OF PARTNERSHIPS _ 31 TABLE OF CONTENTS PARTNERING FOR INNOVATION PARTNERING FOR DEMONSTRATION Pages 32 through 39 Pages 48 through 55 PARTNERING FOR INFLUENCE PARTNERING FOR IMPACT Pages 40 through 47 Pages 56 through 63 32 _ IFC ANNUAL REPORT 2013 INNOVATION How IFC Creates Opportunity PARTNERING FOR It takes creativity to address the most urgent challenges of development — to end poverty, to tackle the dangers of climate change, to introduce modern healthcare to remote corners of the world. For more than half a century, IFC has innovated to strengthen private sector development wherever it’s needed most. We have helped businesses in developing countries create and preserve jobs— by providing loans and investment to enable them to grow quickly and sustainably, and by providing advice that helps them to innovate, raise standards, and mitigate risks. THE POWER OF PARTNERSHIPS _ 33 INNOVATION 34 _ IFC ANNUAL REPORT 2013 INNOVATION Healthcare IMPROVING SERVICES IN THE MOST CHALLENGING AREAS We are bringing together governments, the private 17.2 sector, and civil society organizations in innovative ways to help the poor. million patients received healthcare through our clients in 2012. THE POWER OF PARTNERSHIPS _ 35 utside the Hospital do Subúrbio in the as likely to go to a private hospital or clinic as to a Left: A patient O is treated at Brazilian city of Salvador, all seems tran- public facility. Hospital do quil: white stucco buildings, manicured In some of the world’s most challenging Subúrbio. lawns, and palm trees swaying in the markets, IFC is helping bring together governments, Brazil’s first public-private gentle breeze. Inside, it’s another story. the private sector, and civil society organizations to partnership The state-of-the-art hospital— which serves some improve the quality of healthcare. Since we launched in health has of the city’s poorest neighborhoods— has conducted our Health in Africa Initiative in 2007, we have dramatically improved emer- more than 1.8 million medical procedures since it supported legal, regulatory, and institutional reforms gency hospital opened three years ago. It also has created 1,200 jobs to improve patient safety and the quality of private services for 1 million people under a public-private partnership that IFC helped health services in eight countries. in the state the government set up. Last year, the hospital was Our advice led to the enactment of the Kenya of Bahia. named one of the world’s 100 most innovative proj- Health Bill of 2012, which creates equal opportunity Above: A road ects by KPMG, a consulting firm. for public and private healthcare providers and is show in the Hospital do Subúrbio’s success illustrates what expected to result in expanded coverage for up to Indian state of Meghalaya can be achieved when government authorities join 20 million Kenyans. In South Sudan— where the encourages forces with the private sector to address a major maternal mortality rate is one of the world’s highest— low-income development challenge. Brazil and other developing our advice helped the government set up the Drug households to enroll in the countries have achieved remarkable health advances and Food Control Authority, which will help improve state’s universal in recent years. Yet significant obstacles remain. The the quality of medicines available in the country. health insurance benefits often don’t reach people who need them We also see significant opportunity to improve program, which IFC supported most— the poor. the quality of healthcare in India’s low-income jointly with the The private sector is an essential part of states. In the state of Meghalaya, where health insur- World Bank. the solution. In sub-Saharan Africa, where public ance is limited, we helped the government arrange a resources remain scarce, the private sector provides public-private partnership that makes health insur- about 60 percent of the financing available for ance available to all 3 million of the state’s residents, healthcare. A poor woman with a sick child is just regardless of income. 36 _ IFC ANNUAL REPORT 2013 INNOVATION Climate Change ADDRESSING GLOBAL WARMING IFC is providing financing and advice to help he science is unequivocal: without T countries mitigate and adapt to a formidable concerted action to reduce greenhouse global threat. emissions, the world could grow warmer by 4 degrees Celsius within this century. The consequences could be devastating— unprecedented heat waves, drought, and floods that put prosperity out of reach for millions of people in developing countries and roll back decades of prog- ress in development. Combating the dangers of climate change will be costly: up to $100 billion a year for developing countries. But it can be done if the resources and creativity of the private sector are tapped. IFC is finding ways to unlock private capital for climate-smart projects. We’re helping finance the development of innovative technologies and encour- aging a shift toward energy efficiency and renewable energy. We also provide financing and advice to help countries mitigate and adapt to climate change. Since 2005, IFC has invested $10.5 billion in climate-related investments, including $2.5 billion just in FY13. We issued the world’s largest “green” bond this year, raising $1 billion specifically for climate-related investments— an achievement that THE POWER OF PARTNERSHIPS _ 37 $10.5 billion has been channeled to climate- related investments since 2005. Above: IFC is support- underscored the private sector’s growing demand our Excellence in Design for Greater Efficiencies— or ing the construction for triple-A-rated green bonds. We also launched EDGE— tool, we have established an international of South Africa’s first concentrated-solar- the IFC Catalyst Fund— an innovative fund of funds, green-building standard that is helping our clients power plants, which managed by IFC Asset Management Company, save money while reducing emissions. will use mirrors to reflect and concen- focused on climate-related investments. In FY13, we made our first investments trate sunlight to heat In South Africa, we provided an innovative through financial intermediaries in new green steam that can power financing package— which included $225 million buildings— including mortgages for energy-efficient turbines. in funds mobilized through loan syndications homes in India. Along with the World Bank, we and $41.5 million in donor funds— to support the have also advised Russian policymakers on ground- construction of the region’s first concentrated-solar- breaking legislation that will enable millions of power plants. The Khi Solar One and KaXu Solar One homeowners to obtain new financing for energy- projects, which use mirrors to reflect and concen- efficiency improvements. trate rays of sunlight to heat steam that can power turbines, will help diversify South Africa’s energy generation away from coal-fired power. We are working to address the environmental challenge posed by expanding cities. Buildings account for 15 percent of global greenhouse emis- sions— a number that is expected to climb in coming Above top: The Real Solare housing development decades as more people in developing countries in Mexico was one of IFC’s first projects to receive EDGE certification by achieving a 20 percent reduction in energy, migrate to cities in search of work. water, and materials. We see a significant opportunity to make a Above bottom: IFC’s investment in the South African difference by helping construction companies adopt solar-power plants will help diversify energy generation more affordable, energy-efficient designs. Through away from coal-fired plants. 38 _ IFC ANNUAL REPORT 2013 INNOVATION Access to Finance REACHING THE POOR THROUGH FINANCIAL INSTITUTIONS Through more than 900 financial institutions, IFC has increased access to finance for small and medium enterprises—and for millions of people. onstance Adae’s small shop burned to the C ground in Accra. Seeing her business wiped out overnight, she feared the worst— not knowing how to recover her lost income or repay her loans. Adae didn’t know it then, but she had insur- ance built into the loan that financed her business. Modest payouts arranged by IFC client MicroEnsure enabled Ghana’s Vanguard Assurance to send Adae a rapid settlement. She was able to reopen her shop— which sells plastic containers— after only a brief interruption. Innovative solutions have the potential to narrow the access-to-finance gap in emerging markets, which is still large. More than 2 billion adults don’t have access to savings accounts or credit, and 200 million small and medium businesses lack access to credit. Backed by financing from us, MicroEnsure is now partnering with mobile operator Telenor to use its technology platforms as distribution channels to take financial services to even more low-income individuals in Africa and Asia. Its client base is expected to reach 11 million people by 2017, up from 4 million today. To establish and maintain inclusive financial systems, IFC has built up a network of intermediaries— more than 900 financial institu- tions operating in over 100 developing countries. It allows us to support far more micro, small, and medium enterprises than we would be able to on our own. It also enables us to reach sectors that are THE POWER OF PARTNERSHIPS _ 39 Above: Constance Adae’s small shop burned to the ground, but payouts arranged by IFC client MicroEnsure helped her reopen her business after only a brief interruption. strategic priorities but often lack private sector capital— for example, women-owned 2 businesses or underserved regions such as conflict-affected states. In 2012, our financial-intermediary billion adults don’t clients provided more than $265 billion in have access to savings loans to micro, small, and medium accounts or credit. enterprises. In Haiti, we joined forces with the Microinsurance Catastrophe Risk Organisation, or MiCRO, in a $2 million 200 project that is expected to provide afford- able insurance to help 70,000 women micro entrepreneurs protect their liveli- hoods against earthquakes, hurricanes, million small and medium businesses floods, and other natural disasters. lack access to credit. Beyond direct investments in finan- cial intermediaries, IFC has also played a catalytic role in expanding access to finan- cial services— by improving access to credit information, promoting best practices in risk management, and introducing environ- mental and social standards. We helped Vietnam develop an online registration system that tracks which movable collateral— such as machinery or vehicles— has been pledged by borrowers to secure their loans. As a result, banks can better assess lending risks, allowing small enterprises without land to obtain loans more easily. 40 _ IFC ANNUAL REPORT 2013 INFLUENCE How IFC Creates Opportunity PARTNERING FOR As the world’s largest development institution focused exclusively on the private sector, IFC plays a significant role in influencing the course of private sector development. Our leadership position enables us to help shape the policy agenda. We are helping the Group of 20 advanced and developing economies on a variety of important development matters— ranging from food security to access to finance for small enterprises. And a growing number of development finance institutions are adopting our approach to creating jobs, measuring results, and raising corporate-governance standards. THE POWER OF PARTNERSHIPS _ 41 INFLUENCE 42 _ IFC ANNUAL REPORT 2013 INFLUENCE Job Creation THE SUREST PATHWAY OUT OF POVERTY Our investment clients directly supported 2.7 million jobs last year—and that was only a small part of our overall effect on employment. Above: Once unemployed, Ramu Rawat got a job with IFC client OCL. Today, he supervises 200 workers at his own construction firm in one of India’s poorest states. THE POWER OF PARTNERSHIPS _ 43 Yet 200 million people are unemployed today, most of them women and young people in developing countries. Without work, they can’t care for themselves or their families. Addressing this challenge isn’t possible without the private sector, which accounts for 90 percent of the jobs in developing countries. IFC is playing a leading role in identi- fying ways to help the private sector strengthen employment. We conducted a study— with the support of our donor partners— that found that a weak investment climate; inad- equate infrastructure; limited access to finance for micro, small, and medium enterprises; and insufficient training pose a particular threat to employment. Removing these obstacles would significantly increase job creation. Encouraged by our findings, nearly 30 leading international finance institutions pledged to work with us to address the job crisis. In 2012, our investment clients directly supported 90% 2.7 million jobs. Direct job creation, however, tends to be only a small fraction of our overall employment effects. Our study showed that indirect job effects— through the supply and distribution chains— can be large multiples of of the jobs in the developing world the direct effects. are generated by the We also supported financial institutions that provided private sector. about $265 billion in loans to micro, small, and medium enter- prises— which in turn employed over 100 million people. This year, we provided $285 million and mobilized an amu Rawat used to spend his days idling around his additional $350 million to support Etileno XXI, Mexico’s R village in Odisha, one of India’s poorest states. With first major private sector petrochemicals project in more no experience to offer, he couldn’t find a job. than 20 years. It is expected to create 9,000 jobs during the Then he noticed the IFC-financed plant that construction phase and 3,000 direct and indirect jobs when local firm OCL India Ltd. had built in his area. Rawat operations start in 2015. went to the gate and asked for a job. The company hired him to do some manual work. Recognizing his drive and atti- tude, it put him on his way— not just to a job, but to a career. Today Rawat has his own contracting company, supervising 200 workers. Jobs are the surest path out of poverty. They also Above right: Etileno XXI is Mexico’s first major private sector petrochemicals project in more than are the cornerstone of development—boosting living stan- 20 years. It is expected to create 3,000 jobs, directly dards, raising productivity, and fostering social cohesion. and indirectly. 44 _ IFC ANNUAL REPORT 2013 INFLUENCE World Bank Group COLLABORATING TO REVITALIZE MYANMAR Through joint initiatives, the World Bank and IFC Myanmar clear its arrears to the World Bank’s International Development Association, or IDA. are leveraging our comparative advantages and The World Bank is providing $165 million in enhancing the impact of our work. zero-interest loans to the country to help it address its most urgent needs. This is in addition to an ix decades of conflict and economic isolation $80 million grant for community-driven devel- S have impoverished Myanmar— three quarters of its people go without elec- tricity, half its roads are impassable when it rains, and large numbers of children are malnourished. The future, however, looks brighter. In 2011, the country began a transition to a more democratic opment that enables villagers to improve schools, clinics, roads, and the water supply. At the same time, IFC is working to improve the investment climate and expand access to finance in Myanmar, in order to support the growth of the domestic private sector, attract world-class foreign investors, and stimulate job creation. We form of government and a market-oriented economic also are working with the Bank and the Multilateral system. Those developments offer the potential for Investment Guarantee Agency to promote the a major change: restoring one of the world’s poorest country’s essential infrastructure services, with an countries to its historic role as one of Asia’s most initial focus on the electricity and telecommunica- dynamic economies. tions sectors. That is a complex undertaking— and it will IFC also began to invest in Myanmar for take time. Despite Myanmar’s ample natural the first time. We provided a $2 million loan to resources, the country faces significant obstacles help our Cambodian client ACLEDA Bank set up to development. To achieve its potential, it must a new microfinance institution in the country. strengthen economic governance, rebuild infrastruc- The new institution aims to provide loans to more ture, modernize its legal and regulatory frameworks, than 200,000 people— most of them women entre- and find ways to bring prosperity to all its people. preneurs— by 2020. Those are areas in which IFC and the World In addition to the loan, IFC is strengthening Bank can play a critical role, leveraging the distinctive the institution’s capacity to deliver microfinance capabilities of each institution. Working under a joint services, enhancing its risk management practices, and strategy, our institutions began this year by helping helping it to develop a responsible finance strategy. THE POWER OF PARTNERSHIPS _ 45 example, IFC supports the G-20’s Global Partnership for Financial Inclusion and manages the SME Finance Innovation Fund announced by U.S. President Barack Obama in 2010. We also manage the Women’s Finance Hub, a G-20 initiative to share knowledge and best practices on ways to expand access to finance for women entrepreneurs. Small and Medium Enterprises We provide investment and advi- sory services to such enterprises in HELPING BUSINESSES about 80 countries, focusing on every THRIVE phase of their development: improving the investment climate, building management skills, and expanding access to finance and markets. In 2012, our clients provided 5.8 million loans to IFC supports the development of small and medium small and medium enterprises, totaling $241 billion. enterprises by improving the investment climate, building In India, we advised the state of managerial skills, and expanding access to finance. Bihar in implementing reforms to its tax regime to encourage formalization abil al Jabari and his family have run a small N for small businesses. We also helped it grocery store in downtown Cairo for the past six strengthen an online filing and payment decades. It has a group of devoted customers, but system. The changes increased tax reve- al Jabari wanted to bring in new business. nues and allowed more small companies So he installed an electronic payment system to enjoy the benefits of joining the developed by IFC client Fawry, which allows al Jabari’s formal economy. customers to make purchases with credit cards and to pay cell- In Sri Lanka, we worked with phone bills. Nation Trust Bank to open the first That is crucial in a country where almost everyone relies business-training center in the coun- Above: Egyptian on cash for transactions, a relatively inefficient way of doing try’s Eastern Province. Through our entrepreneurs such business. The new system attracted dozens of new customers SME Toolkit, an online resource that as Nabil al Jabari to his store, raising revenues by 15 percent, al Jabari says. provides training and management are attracting new customers, thanks Small and medium enterprises, or SMEs, are a critical tools for small businesses, we are to an electronic force for prosperity in developing countries, accounting for helping up to 30,000 small-business payment system two-thirds of employment. IFC plays a prominent global role owners become more competitive and developed by IFC client Fawry. in expanding opportunities for these businesses— through reach new markets. our partnership with the Group of 20 leading economies and Above right: Manoj Kumar, owner of a through our own investment and advisory initiatives. small watch-shop in That is why we invested $6 million in Fawry this year. the Indian state of Our financing will help the firm expand its network of 20,000 Bihar, has benefited from tax-policy payment terminals— potentially stimulating the growth of reforms that encour- many small businesses across Egypt. age small businesses to join the formal We serve as a technical adviser to the G-20 on a variety economy. of initiatives to expand access to finance for SMEs. For 46 _ IFC ANNUAL REPORT 2013 INFLUENCE Food Security EXPANDING OPPORTUNITY FOR SMALL FARMERS We help our clients raise agricultural productivity in developing countries and work to ensure food is available to people who need it most. THE POWER OF PARTNERSHIPS _ 47 ore than 2 billion people— a M third of mankind— depend on food produced by small farmers. Such farmers tend to be the norm in regions of the world where hunger is greatest. Helping these farmers increase their productivity and linking them to markets is an essential way to feed the nearly 1 billion people in the world who go hungry every day. It’s essential for managing food stocks at a time when global demand for higher-quality food is rising and when climate change poses risks that could hurt agricul- tural productivity. Above: Haitian This year, IFC and GAFSP’s farmer Hermilus Strengthening agribusiness is a private sector window jointly invested Lovana has bene- priority for IFC— because it is essen- fited from affordable $10 million in Root Capital, a social tial for food security and because it is insurance provided investment fund, to help it expand by IFC client essential for raising incomes for the Microinsurance access to working capital and markets poor, three-quarters of whom live in Catastrophe Risk for 300,000 small farmers over the next rural areas. Organisation.. four years. Our approach is comprehensive. Weather, pests and crop disease, We work with the private sector to land degradation, and market failures increase the supply of affordable food can make farming a risky enterprise. and to ensure it is available to people Through our innovative Global Index who need it most. We also work with Insurance Facility— which we launched financial institutions, commodity with the World Bank and several donor trading firms, companies, and civil partners— we helped about 119,000 society organizations to help large and small-scale farmers in seven countries small farmers overcome obstacles to in Sub-Saharan Africa and in Sri Lanka higher productivity and become part of to insure their crops and livestock the agriculture supply chain. against risks of severe weather events Across East Asia and the Pacific, such as floods and drought. for example, IFC has worked with major coffee buyers— such as Ecom Coffee— to help farmers achieve the quality and sustainability certifications they need to sell coffee in international markets. These certifications have helped thou- sands of farmers increase productivity 3.1 and boost revenues. million farmers were IFC plays a prominent role in supported by IFC global initiatives to strengthen food clients in 2012. security. We manage the private sector window of the Global Agriculture and Food Security Program (GAFSP), a multilateral fund set up to help the Group of 20 leading economies deliver Left: A farmer in Vietnam on its food-security commitments. The harvests coffee for Ecom, a global commodity trading company that private sector part of this fund enables uses inclusive business models, IFC to reach even the smallest farmers helping producers increase and rural enterprises, by blending donor productivity and boost revenues. financing with commercial credit. 48 _ IFC ANNUAL REPORT 2013 DEMONSTRATION How IFC Creates Opportunity PARTNERING FOR We have a long history of setting a good example. We were investing in “emerging markets” decades before they became a popular asset class for global investors. In fact, we coined the phrase. In the mid-1980s, we launched the world’s first global investment fund to channel capital toward listed companies in developing countries. The new capital flows lifted many local businesses to international prominence, creating jobs that reduced poverty in countless cities and villages. Today, we continue to demonstrate the rewards of investing in challenging markets. THE POWER OF PARTNERSHIPS _ 49 DEMONSTRATION 50 _ IFC ANNUAL REPORT 2013 DEMONSTRATION Infrastructure PROMOTING PROSPERITY IN AFRICA IFC delivers landmark projects with high impact on the poor—notably in frontier countries and regions, where our services are most needed. Above: Expansion of the Azito Thermal Power Plant, in Côte d’Ivoire, will improve access to electricity for Ivoirians and help sustain the country’s economic growth. THE POWER OF PARTNERSHIPS _ 51 bout 1.2 billion people— nearly a fifth of We provided $125 million for our own account A humanity— live without electricity. An estimated 880 million people lack access to safe water, and more than 1 billion people don’t have access to either an all-weather road or telephone services. Infrastructure shortages in the developing world are a key constraint to economic growth. for the Azito project. Acting as lead arranger, we mobilized the balance from five European devel- opment finance institutions and the West African Development Bank. In areas of Sub-Saharan Africa that are not yet connected to the grid, we’re stepping up our Lighting Africa project with the World Bank and With more efficient infrastructure, millions can our donor partners. We are helping people switch benefit from access to clean water and safe sani- from inefficient and expensive fuel-based lighting tation. Companies can take their goods to market sources such as kerosene lamps to more affordable more quickly and cheaply. Countries with a and climate-smart alternatives— such as solar modern infrastructure are better able to attract lamps and dynamo-powered lights similar to those foreign investment. used on bicycles. Expanding and modernizing infrastructure The program has already improved access to are priorities for IFC— particularly in Africa, and clean lighting for 6.9 million people in the African particularly in the transport and power sectors. We continent, avoiding the emission of over 138,000 tons invest in projects that can promote prosperity in of greenhouse gases— equivalent to taking 26,000 some of the poorest countries, and help governments cars off the road. We are leading a similar initiative design and implement public-private partnerships. in Asia, aiming to provide off-grid lighting products In Sub-Saharan Africa— where the need for to 2 million people in rural areas of India by 2015. infrastructure improvement is most urgent— IFC is taking the lead to support the expansion of energy 6.9 generation. In FY13, we invested more than $1 billion in infrastructure projects in the region, including funds mobilized from other investors. Our work included several innovative solar-power projects (see page 37). million have improved access to clean light- In Côte d’Ivoire, which is emerging from ing because of the years of political turmoil, we arranged a $345 million World Bank’s Lighting package to modernize the Azito Thermal Power Africa project. Plant. Modernization will enable the plant to generate 50 percent more energy without using any additional gas. The plant will become one of the largest independent power generators in the region, helping ease power shortages and producing signif- Above center: An Azito plant technician performs a check on gas pipes. icant savings for Ivoirians who now have to rely on expensive backup electricity systems. Above right: A young girl breaks into a smile on seeing her house well-lit after sunset. IFC’s Lighting Asia program in India is expected to bring lighting to 2 million people. 52 _ IFC ANNUAL REPORT 2013 DEMONSTRATION Mobilization OPENING NEW MARKETS FOR PRIVATE INVESTMENT By bringing together other investors, we combine knowledge and expertise—and maximize the development impact of our projects. oreign investments in the capital markets of developing 2009 by IFC and Japan Bank for International F countries have increased in recent years. But only a fraction of these investments go to the smallest and poorest countries. Eighty percent of total portfolio flows into developing countries go to just 14 of the largest emerging-market countries. Investors continue to have little interest in smaller countries, where capital markets tend to be less liquid and more risky as a result. IFC is playing an important role in addressing that imbalance. Cooperation. The fund is managed by IFC Asset Management Company. The investment is expected to increase access to finance for up to 16,000 small businesses and generate about 170,000 jobs— both directly and indirectly— by 2017. In Bangladesh, we led a consortium of This year we committed $100 million to a $500 million global fund that investors to provide about $345 million in financing— brings together large, institutional investors to invest primarily in listed including $190 million from our own account— to equity securities of private sector firms in these smaller markets— the telecommunications operator Grameenphone. The so-called Next 50. investment will help the company extend mobile Mobilizing capital from other investors is a key component of services to remote areas of the country. IFC’s business model. Encouraging additional private sector investment IFC also mobilizes capital through syndicated to leverage our activities allows us to achieve more than we could on our loans, which allows other investors to participate in own. It also enables us to pool knowledge and expertise. the loans we make. In FY13, syndicated loans totaled In FY13, we worked with banks, international financial institu- $3.1 billion, accounting for nearly half of the funds tions, sovereign funds, pension funds, and other partners to mobilize we mobilized. $6.5 billion for investment in developing countries. We did that Above: An employee through several programs— including our Syndicated Loan Program at a small business $3.1 (see page 73)—and also through our subsidiary, IFC Asset Management supported by Sri Lanka’s Commercial Company, which has $5.5 billion in assets under management across Bank of Ceylon, which six funds focused on specific sectors or regions. received a $75 million loan from IFC and IFC In Sri Lanka, this approach allowed us to increase funding for small billion in syndicated Asset Management and medium enterprises— which are critical to rebuilding the economy loans were issued in Company. after decades of conflict. We provided a $75 million long-term loan to FY13, accounting for Commercial Bank of Ceylon, the country’s largest private sector bank. nearly half of the funds The investment was made through IFC Capitalization Fund— we mobilized. a $3 billion global equity and subordinated debt fund established in THE POWER OF PARTNERSHIPS _ 53 South-South Investment A VITAL FORCE FOR DEVELOPMENT Our projects encourage the transfer of technology from one country to another— boosting regional integration and job creation. or all their economic achievements in recent Above: A worker and services. We also enable regional companies F at a factory in years, the needs of developing countries to develop into transnational corporations that can South Africa remain vast. operated by a compete on a global level. Sub-Saharan Africa alone will need subsidiary of We also mobilize funds from other investors India’s Apollo investments of over $90 billion per year over Tyres. IFC’s to promote South-South investment. In FY13, our the next decade to meet infrastructure demands investment will syndications program contributed significantly in such as roads, rail networks, power, and water and help increase this area. Emerging-market financial institutions production by sanitation projects. The Middle East and North a third. increased their participation in our loan syndi- Africa will need up to $100 billion a year to boost cations— doubling their commitments from the economic competitiveness and sustain recent eco- previous year and accounting for 29 percent of the nomic growth rates. $3.1 billion in IFC syndicated loans for the year. These needs represent significant opportu- This year, IFC and two funds managed by IFC nities for private enterprises from other developing Asset Management Company bought a $204 million countries— which have shown a robust appetite to equity stake in Morocco’s Banque Centrale Populaire expand into untapped emerging markets. Developing to help the bank expand across sub-Saharan Africa— countries now account for more than a third of where access to finance, especially for smaller firms, foreign direct investment in emerging markets. remains a challenge. Leveraging our global reach, IFC has been an We also invested $11 million in a subsidiary important facilitator of South-South investment— of India’s Apollo Tyres to help the company expand which we see as an important way to stimulate production at one of its tire factories in South Africa. regional integration, job creation, and economic The company makes tires for cars, buses, and trucks. development. In FY13, our investments in such Our financing will help Apollo Tyres produce projects climbed to nearly $1.7 billion, accounting about 13,000 tires a day at its factory in the city of for nearly 10 percent of IFC commitments for our Ladysmith— an increase of about a third. own account. By supporting such projects, we help stimu- late the transfer of knowledge and technology from one developing country to another, and expand the availability of previously hard-to-obtain goods 54 _ IFC ANNUAL REPORT 2013 DEMONSTRATION Local Capital Markets AN EFFECTIVE WAY TO SPUR GROWTH trong local capital markets are the founda- S As the first international issuer tion for a prosperous private sector. They of local-currency bonds in many reduce countries’ dependence on foreign countries, IFC often provides a debt, protecting economies from sudden model for other issuers. swings in international capital flows. Such markets create access to long-term local- currency finance and help mobilize funds to finance infrastructure and other areas essential for the growth of the private sector— the key engine of job creation in developing countries. IFC is a global advocate for efficient local capital markets, and we play an important role in their development in emerging countries. We often are the first international issuer of local-currency bonds in these countries. In issuing bonds, we work closely with regulators and investors to help improve the regulatory framework, encourage greater partic- ipation in the local markets, and provide a model for other international issuers. THE POWER OF PARTNERSHIPS _ 55 $10 billion in local- currency financing has been provided by IFC. Over the years, IFC has issued bonds in In China, we have made a total of six local- 12 local currencies— including the Brazilian real, currency investments so far to expand access to the Russian ruble, the Nigerian naira, the Malaysian finance, promote food safety, and help increase the ringgit, and the Chinese renminbi. We have provided availability of high-quality and affordable drugs. over $10 billion in local-currency financing across Those investments reflected an earlier achieve- 58 currencies— more than any other international ment— our 2011 agreement with Chinese banks to finance institution. swap U.S. dollars into Chinese renminbi to provide In Nigeria this year, we were the first local-currency loans. We were the first multilateral foreign institution to issue a naira-denominated institution to sign such an agreement. bond, raising the equivalent of $75 million that Smaller enterprises often face the greatest will be used to support IFC’s development program difficulty in obtaining local-currency financing, in the country. All investors were Nigerian pension a challenge IFC is helping them overcome. In the funds, asset managers, and banks looking to diver- Dominican Republic this year, we issued the first sify their portfolios. We worked with the Nigerian local-currency bond by an international finance government and regulators to help them develop institution, raising $10 million that we invested in a framework that encourages more corporate two microfinance institutions— Fondesa, which issuances in the local markets. In addition, we issued tends to make small loans of less than $1,000; and the first inflation-indexed bond by a foreign issuer La Nacional, which finances low-income mortgages in Russia. with an average home value of about $30,000. 56 _ IFC ANNUAL REPORT 2013 IMPACT How IFC Creates Opportunity PARTNERING FOR IFC plays a leading role in development — by leveraging the power of the private sector to create opportunity in emerging countries, in ways that promote prosperity for all. We achieve development impact by venturing where other investors often hesitate to go: in the poorest countries and regions of the world, and in places torn by conflict and instability. We achieve it by helping our clients find ways to create opportunity across the entire supply chain. We achieve it by rigorously tracking our results against the goals we set for ourselves. THE POWER OF PARTNERSHIPS _ 57 IMPACT 58 _ IFC ANNUAL REPORT 2013 IMPACT Conflict-Affected Areas GENERATING CONDITIONS FOR SUSTAINABLE GROWTH Our projects in fragile and conflict-affected roadband Internet is a revolutionary areas aim to create jobs and help governments rebuild infrastructure. B technology— capable of empowering indi- viduals, unlocking business opportunities, and boosting economies. In war-torn Afghanistan, however, it’s a technology beyond the reach of virtually the entire population. IFC is working to change that by helping the country’s largest mobile-phone operator extend high-speed broadband services to 80 percent of the population in key cities. The $65 million in long-term financing we provided this year to the company, Roshan, will help it acquire a 3G license and strengthen its broadband network. That will also help Roshan expand the array of innovative services it offers to improve the lives of ordinary Afghans. One of them is M-Paisa, a mobile-banking service that gives people without bank accounts a quick, safe, and secure way to send and receive money— through their phones. Another THE POWER OF PARTNERSHIPS _ 59 $577 million was invested in conflict-affected areas during FY13. is Roshan’s Telemedicine project, which helps Our work in fragile and conflict-affected Above top: IFC is helping Roshan, bring better healthcare services to isolated areas countries often begins with advisory work to lay Afghanistan’s larg- of the country. the foundation for investment. Working with the est mobile-phone Conflict and instability are a leading cause of World Bank and our donor partners, we supported operator, to expand its network, bringing poverty across the world. Recognizing that most the adoption of over 60 investment-climate reforms cellular and Internet of the world’s poor will live in fragile and conflict- in 22 conflict-affected states between 2010 and 2012. services to many affected areas in coming decades, we are intensifying More than 40 of these reforms were in Africa. people long left off the grid. our focus on creating opportunity in these areas. In Burundi, for example, we helped the In FY13, we invested about $580 million in country implement reforms that doubled the number Above bottom: A street vendor serves food in fragile and conflict-affected areas. Our advisory of businesses registered— to nearly 1,350 in 2012 Yangon, Myanmar. expenditures in these areas totaled approximately from 674 in 2010. As the country’s business climate $40 million, or 18 percent of our advisory program. has improved, foreign investment has grown. Our goal is to create jobs, remove constraints Trade finance can also make a critical differ- to sustainable business growth, and help govern- ence for conflict-affected states, which tend to ments rebuild infrastructure. To do so, we aim to be locked out of international trade. Since FY10, expand the availability of power and credit. We are IFC has supported trade in 24 of these countries, also helping strengthen the business environment enabling more than $510 million in trade amid chal- for local enterprises while enabling them to reach lenging conditions. new markets. 60 _ IFC ANNUAL REPORT 2013 IMPACT Gender BOOSTING DEVELOPMENT and business-skills training to small and THROUGH EQUALITY medium enterprises that are owned or operated by women across the Coca-Cola value chain. Addressing obstacles to women’s empowerment is The first step was a $50 million IFC invest- an important way to promote shared prosperity ment in Access Bank Nigeria to help it increase lending to women entrepreneurs. and poverty reduction. We also arranged and syndicated a $130 million financing package to support the expansion of Peru’s Belcorp, a door-to-door omen’s participation in the work- sales cosmetics company that employs close to W force has grown over the past decades. Yet women remain signifi- cantly underrepresented. This inequality is not only unfair. It’s also bad economics. Failing to tap the economic potential of women puts a brake on poverty reduction and limits growth and opportu- 9,000 people— 74 percent of them women. The investment will also help the building of a new plant in Mexico and the firm’s expansion to new markets in Latin America. In China, we stepped up our financing to support the growth of Chindex, a leading private healthcare network that has been instrumental nity. Expanding women’s participation can raise in raising the quality of local health services. productivity and improve a variety of develop- Founded by two women, the company is dedi- ment outcomes. cated to empowering its female staff through IFC works to strengthen women’s roles as leadership and training initiatives. Women leaders, entrepreneurs, employees, consumers, and make up 75 percent of Chindex’s workforce. stakeholders. We provide a combination of invest- Since 2010, our Banking on Women ment and advice to help our clients expand access to program has invested more than $600 million finance for women, deliver business-skills training in support of women-owned small enter- for women entrepreneurs, and recognize the busi- prises in developing countries. That included a ness case for creating opportunities for women. $470 million investment in Brazil’s Banco Itau— Above: Beatriz Cortez, a beauty consultant We also work with our clients to improve working the program’s largest investment, and its first in affiliated with IFC conditions and to dismantle barriers to women’s Latin America. We provided $100 million from client Belcorp in Peru, enjoys a light moment participation in business. our own account and mobilized $370 million with her daughter. This year, we teamed up with The Coca-Cola through loan syndications. Belcorp’s expansion Company in a $100 million, three-year project to IFC also is a lead sponsor of the Global is expected to create significant jobs and provide access to finance for thousands of women Banking Alliance for Women, an initiative that entrepreneurial oppor- entrepreneurs in Africa and other emerging markets. brings together about 30 financial institutions tunities for women. IFC will work through its network of local and committed to leveraging the women’s market regional banking institutions to provide financing around the world. THE POWER OF PARTNERSHIPS _ 61 ore than two-thirds of the world’s M poorest people— who survive on less than $1.25 a day— live in middle-income coun- tries. These countries also are home to large numbers of people without access to clean water, reliable power, or decent health and education services. IFC focuses on the needs of the poor, regardless of their location. Our approach is to help middle- income countries find creative ways to ensure that their rising prosperity is shared by all citizens. We also work to strengthen rural development and address the challenges of unemployment, urbaniza- tion, and climate change. Supporting companies that adopt inclusive business models is an important element of our work. Over the past nine years, we have invested more than $9 billion in businesses that provide goods, services, and jobs to people at the base of the economic pyramid— by integrating the working poor into their supply chains. We have worked with more than 350 inclusive-business clients in more than 80 countries. This year, we provided a $15.6 million loan to finance the construction or renovation of 47 preschool facilities in Chuvashia Republic, a predominantly rural province in Russia. The project will open up spaces for more than 7,000 students and create jobs for teachers— many of whom will be women. Middle-Income Countries In Turkey, we provided financing and advice PROMOTING to help introduce a technology that will enable one of the country’s largest paper companies to expand PROSPERITY FOR ALL production without increasing the consumption of water— a key input for the paper industry. Our $8 million loan to cardboard maker Modern Karton will help it build a wastewater-recovery system to Our work in middle-income countries helps conserve and reuse water. them tackle challenges such as urbanization, Thriving private enterprises in middle-income countries can set an important example for others— rural development, and climate change. not only by venturing into less-developed areas of their own country but also by stepping out into poorer countries. IFC helps make that happen. This year, we invested $6 million in an Istanbul-based education firm, Plato, to help it expand vocational training in Turkey and several Middle Eastern and Central Asian countries. The investment was our first under our E4E Initiative for Arab Youth, which aims to strengthen job skills in a region where youth unemployment is high. Plato is expected to strengthen employment opportunities Above: Students learn at a Plato training center in Istanbul. IFC’s investment in the education firm will help it expand for up to 6,000 students. vocational training in Turkey and other Middle Eastern and Central Asian countries. 62 _ IFC ANNUAL REPORT 2013 IMPACT IDA Countries CREATING OPPORTUNITY FOR THE POOREST We focus on improving lives in the world’s most challenging areas. In FY13, nearly half of our projects were in the poorest countries. Above: IFC’s investment in Kenya Tea Development Agency is financing a new warehouse that is expected to raise farmers’ incomes, create jobs, and provide stability in a sector that benefits over 4 million Kenyans. THE POWER OF PARTNERSHIPS _ 63 n the poorest countries, the need to improve I lives is urgent. Unable to attract investment, many of these countries have no option but to rely on official aid— which often is not sufficient. These are the 82 countries eligible to borrow from the International Development Association, or IDA— the World Bank’s fund for the poorest. For IFC, they represent an opportunity to make a critical difference where we are needed most. Our investments in IDA countries have grown nearly tenfold over the past decade, totaling $6.6 billion in FY13 alone. Of this amount, a record $1.2 billion was mobilized through loan syndications. IDA countries accounted for about half of all IFC investment projects and over 60 percent of advisory projects in recent years. In addition, we’ve contrib- uted more than $2.5 billion to IDA’s general fund since 2007— including $340 million in FY13. $13 billion has been com- Through our Global Trade Finance Program, mitted to IDA countries we have provided more than $13 billion in guar- through IFC’s Global antees to businesses in IDA countries since Trade Finance 2005— $3.3 billion in FY13 alone. This enabled small Program since 2005. and medium enterprises to obtain much-needed finance to expand and join the global trading system. We aim to invest wherever we can do the most good. In Kenya— where tea exports generate more than $1 billion a year in earnings, benefiting 10 percent of the population— we helped the country’s largest producer of black tea, the Kenya Tea Development Agency. Our $12 million investment financed a 200,000-square-foot facility that is expected to raise farmers’ income and provide stability in a sector that accounts for two-thirds of the region’s jobs. We are helping Lao People’s Democratic Republic develop its hydropower sector as a way to promote economic growth and alleviate poverty. We are supporting the revision of the country’s water law after launching a program to increase the share of new hydro projects that follow high social and environmental standards. In small IDA countries where the local banking systems tend to be underdeveloped, IFC works with local financial institutions to strengthen their capabilities and help them grow. Our work with Bai Tushum and Partners, in the Kyrgyz Republic, has enabled it to develop into the country’s first microfinance bank, serving more than 25,000 customers. In landlocked Bhutan, we invested $28 million this year in Bhutan National Bank— the coun- Above top: In the Kyrgyz Republic, a loan from IFC client Bai try’s largest-ever foreign direct investment— to Tushum enabled Adalat Murzuraimova to buy cattle and lease strengthen its capacity to serve micro, small, and land. She has used her farm income to educate her daughter. medium enterprises and help it adopt international Above bottom: Kenya Tea Development Agency obtains its tea best practices in banking and corporate governance. from small-scale farmers such as this couple. 64 _ IFC ANNUAL REPORT 2013 Table of Contents MEASURING UP PG. Our Strategic Focus Areas Scorecard 65 Creating Opportunity Where 66 67 It’s Needed Most 68 OUR BUSINESS AND EXPERTISE PG. Where We Work Our Three Businesses Our Industry Expertise 70 71 72 76 OUR PEOPLE AND PRACTICES PG. The IFC Way Our Staff 78 How We Measure Development Results 79 80 88 Our Governance 90 Accountability 92 Partnerships 94 Managing Risks 96 Working Responsibly 98 Independent Assurance Report on a Selection of Sustainable Development Information 101 Financial Summary 104 THE POWER OF PARTNERSHIPS _ 65 Measuring up 66 _ IFC ANNUAL REPORT 2013 OUR STRATEGIC FOCUS AREAS IFC strives to deliver what cannot be obtained elsewhere. We offer clients a unique combination of investment and advice designed to promote sustainable private sector development in emerging markets. We call that special edge our “additionality.” Using it to maximize our development impact is a cornerstone of our strategy. Our activities are guided by five strategic priorities that allow us to help where we are most needed, and where our assistance can do the most good. STRENGTHENING THE FOCUS ON FRONTIER MARKETS IDA countries, fragile and conflict situations, and frontier regions of middle- income countries ADDRESSING CLIMATE ADDRESSING CONSTRAINTS CHANGE AND ENSURING TO PRIVATE SECTOR GROWTH ENVIRONMENTAL AND IN INFRASTRUCTURE, SOCIAL SUSTAINABILITY HEALTH, EDUCATION, AND THE FOOD SUPPLY CHAIN Developing new business models and financing instruments, and Increasing access to basic setting and raising standards services and strengthening the agribusiness value chain STRATEGIC AREAS OF FOCUS DEVELOPING LOCAL BUILDING LONG-TERM FINANCIAL MARKETS CLIENT RELATIONSHIPS IN EMERGING MARKETS Building institutions, mobilizing resources, and introducing Using the full range of our innovative financial products products and services to guide clients’ development and assist cross-border growth THE POWER OF PARTNERSHIPS _ 67 SCORECARD IFC’s Performance on Strategic Focus Areas Indicator Performance FY13 FY12 DEVELOPMENT RESULTS Investment Companies Rated High (DOTS Score)1 66% 68% Advisory Projects Rated High2 76% 72% Focus Areas FRONTIER MARKETS IDA: Number of Investment Projects 288 283 IDA: Commitments (millions) $6,649 $5,864 IDA: Share of Advisory Services Program in IDA Countries, % 3 65% 65% Frontier Regions: Number of Investment Projects 59 42 Fragile and Conflict Situations: Number of Investment Projects 44 45 Fragile and Conflict Situations: Share of Advisory Services Program, % 18% 18% Commitments in Sub-Saharan Africa (millions) $3,501 $2,733 Commitments in Middle East and North Africa (millions) $2,038 $2,210 LONG-TERM CLIENT RELATIONSHIPS INCLUDING SOUTH-SOUTH Number of South-South Investment Projects 47 41 Commitments in South-South Investment Projects (millions) $1,674 $1,515 CLIMATE CHANGE, ENVIRONMENTAL AND SOCIAL SUSTAINABILITY Climate-related investments (millions) 4 $2,509 $1,621 INFRASTRUCTURE, HEALTH AND EDUCATION, FOOD SUPPLY CHAIN Commitments in Infrastructure, Health and Education, and Agribusiness and Food Supply Chain (millions)5 $6,934 $6,034 LOCAL FINANCIAL MARKETS Commitments in Financial Markets (millions) 6 $10,124 $9,375 Commitments in Micro, Small and Medium Enterprises (millions)7 $7,192 $6,077 Notes: 1. DOTS scores: percentage of client companies with high development outcome ratings as of June 30 of the respective year, based on projects approved over a rolling six-year period (FY13 ratings are based on approvals from 2004–2009). 2. For Advisory Services, development effectiveness ratings are for calendar years 2012 and 2011. 3. FY12 and FY13 figures reflect improved methodology for measuring Advisory Services expenditures in IDA countries, incorporating regional projects. 4. “Climate-related” is an attribute of a project involving Climate Mitigation, Climate Adaptation and/or Special Climate activities. For more details on these terms and activities, please visit www.ifc.org/ghgaccounting. 5. Commitments in Infrastructure (excluding Oil, Gas and Mining), Communications & Information Technologies, Subnational Finance, Health & Education, and Agribusiness & Food Supply Chain. 6. Commitments of IFC’s Financial Markets excluding Investment Funds and Private Equity. 7. Includes direct MSME borrowers, financial institutions with more than 50% of their business clients being MSMEs, and any other investments that specifically target MSMEs as primary beneficiaries. 68 _ IFC ANNUAL REPORT 2013 CREATING OPPORTUNITY IFC and our clients make a wide range of contributions in WHERE IT’S NEEDED MOST developing countries. Our clients’ success can have ripple effects across an economy, giving many people— including the poor— a chance to improve their lives. EAST ASIA AND EUROPE AND LATIN AMERICA AND THE PACIFIC CENTRAL ASIA THE CARIBBEAN 31.1 Million 6.14 Million 903,000 CUSTOMERS SUPPLIED 20-FOOT SHIPPING CONTAINERS STUDENTS EDUCATED WITH GAS TRANSPORTED (EQUIVALENT) 684,000 $12 Billion $83 Billion MICRO, SMALL, AND MEDIUM IN GOODS AND SERVICES PURCHASED IN MSME LOANS MADE ENTERPRISES REACHED FROM DOMESTIC SUPPLIERS $420 Million 1.7 Million $400 Million IN FINANCING SECURED PEOPLE EXPECTED TO IN NEW INVESTMENTS DUE WITH MOVABLE PROPERTY RECEIVE IMPROVED ACCESS TO INDUSTRY REFORM AND FOR 38,000 FIRMS TO INFRASTRUCTURE SERVICES INVESTMENT-PROMOTION WORK AND $390 MILLION MOBILIZED WITH GOVERNMENTS THROUGH PUBLIC-PRIVATE PARTNERSHIPS THE POWER OF PARTNERSHIPS _ 69 MIDDLE EAST AND SUB-SAHARAN SOUTH ASIA NORTH AFRICA AFRICA 244,000 120 Million 11.1 Million JOBS PROVIDED PHONE CONNECTIONS CUSTOMERS SUPPLIED WITH POWER (GENERATION + DISTRIBUTION) 3.6 Million 620,000 $4 Billion PATIENTS CARED FOR FARMERS REACHED IN FINANCING SECURED WITH MOVABLE PROPERTY FOR 3,600 FIRMS $180 Million $310 Million 3 Million IN NEW FINANCING FOR FIRMS IN NEW INVESTMENTS DUE WITH IMPROVED CORPORATE TO INDUSTRY REFORM AND PEOPLE RECEIVED GOVERNANCE PRACTICES INVESTMENT-PROMOTION WORK OFF-GRID LIGHTING WITH GOVERNMENTS 70 _ IFC ANNUAL REPORT 2013 Our Business and Expertise Our experience — in every region of the world, and in nearly every industry — allows us to provide a unique set of advantages to our clients. THE POWER OF PARTNERSHIPS _ 71 WHERE WE WORK As the largest global development institution focused on the private sector, IFC operates in more than 100 countries. We are able to apply lessons learned in one region to solve problems in another. We help local companies make better use of their own knowledge, by matching it to opportunities in other developing countries. OUR OFFICES 72 _ IFC ANNUAL REPORT 2013 OUR THREE BUSINESSES IFC’s three businesses— Investment PRODUCT LINES Services, Advisory Services, and Asset IFC INVESTMENT LOANS SERVICES Management— are mutually reinforcing, IFC finances projects and compa- nies through loans from our own delivering global expertise to clients in account, typically for seven to 12 developing countries. years. We also make loans to inter- They give us a special advantage mediary banks, leasing companies, and other financial institutions for in helping the private sector create on-lending. opportunity— our investment and advice Our investment services provide a While IFC loans traditionally broad suite of financial products and have been denominated in the cur- can be tailored to a client’s specific needs, services that can ease poverty and rencies of major industrial nations, and in ways that add value. Our ability to spur long-term growth by promoting we have made it a priority to struc- attract other investors brings additional sustainable enterprises, encouraging ture local-currency products. IFC entrepreneurship, and mobilizing has provided local-currency financ- benefits, introducing our clients to new ing in more than 50 local currencies. resources that wouldn’t otherwise sources of capital and better ways of be available. In FY13, we made commitments doing business sustainably. Our financing products are for nearly $8.5 billion in new loans, designed to meet the needs of each bringing our total committed loan project. We provide growth capital, portfolio to around $31.5 billion. but the bulk of the funding comes EQUITY from private sector owners, who also bear leadership and manage- Equity investments provide devel- ment responsibility. opmental support and long-term In FY13, we invested about growth capital that private enter- $18.3 billion in 612 projects, of which prises need. We invest directly in $6.6 billion went to projects in IDA companies’ equity, and also through countries. In addition, we mobilized private-equity funds. In FY13, equity $6.5 billion to support the private investments accounted for nearly sector in developing countries. We $2.7 billion of commitments we now have a $50 billion portfolio of made for our own account. investment commitments span- This brought our own-account ning nearly 2,000 companies in equity portfolio to $12 billion, on 126 countries. a cash basis, in 819 companies in 118 countries. IFC generally invests between 5 and 20 percent of a company’s equity. We often encourage the com- panies we invest in to broaden share ownership through public listings, thereby deepening local capital markets. We also invest through profit-participating loans, convert- ible loans, and preferred shares. THE POWER OF PARTNERSHIPS _ 73 In FY13, IFC Borrowers in the infrastructure TRADE FINANCE BLENDED FINANCE invested about sector received 51 percent of our The IFC Global Trade Finance total syndications volume. More IFC sometimes combines conces- Program guarantees trade-related payment obligations of approved $18.3 than a third of financing we pro- vided through syndications— a sional funds— typically from donor partners— with our own resources financial institutions. The program billion in record $1.2 billion— went to bor- to finance initiatives and achieve extends and complements the 612 projects, rowers in IDA countries. We also development impact that would capacity of banks to deliver trade of which achieved our highest-ever volume otherwise be unattainable. We have finance by providing risk mitigation $6.6 billion went applied this approach in three areas for borrowers in sub-Saharan on a per-transaction basis for more to projects in of strategic priority: climate change, IDA countries. Africa— $868 million. than 200 banks across more than agribusiness and food security, and 80 countries. STRUCTURED FINANCE finance for small and medium enter- In FY13, trade finance accounted During FY13, prises. In FY13, we committed more IFC made IFC uses structured and securitized for nearly $6.5 billion of the com- products to provide cost-effective than $155 million of donor funds, commitments mitments we made for IFC’s own for nearly forms of financing that would not catalyzing more than $2.5 billion of account. Our Global Trade Liquidity otherwise be readily available to IFC and private sector financing. Program has supported $24.4 billion in trade in developing countries $8.5 clients. Products include partial credit guarantees, structured liquid- since it was launched in 2009. billion in new ity facilities, portfolio risk transfer, loans. securitizations, and Islamic finance. SYNDICATIONS We use our expertise in structur- IFC’s Syndicated Loan Program, the ing— along with our international oldest and largest syndicated lending triple-A credit rating— to help clients program among multilateral devel- diversify funding, extend maturities, opment banks, is an important tool and obtain financing in their cur- for mobilizing capital to serve devel- rency of choice. opment needs. In FY13, it accounted for nearly half the funds mobilized CLIENT RISK-MANAGEMENT SERVICES by IFC. In FY13, IFC syndicated about IFC provides derivative products to $3.1 billion in B-loans and parallel our clients to allow them to hedge loans, provided by more than 60 their interest rate, currency, or co-financiers— including commer- commodity-price exposures. IFC cial banks, funds, and development mediates between clients in develop- finance institutions. This resulted ing countries and derivatives market in a $13.6 billion syndicated makers in order to provide clients loan portfolio. with full market access to risk- management products. 74 _ IFC ANNUAL REPORT 2013 BUSINESS LINES We provide PUBLIC-PRIVATE PARTNERSHIPS IFC ADVISORY ACCESS TO FINANCE advice in IFC provides support for govern- SERVICES IFC helps increase the availability and affordability of financial ser- 105 ments to design and implement public-private partnerships in infra- vices for individuals and for micro, countries, structure and other basic public small, and medium enterprises. We with more than services. Our advice helps maximize help our financial clients provide 660 active the potential of the private sector projects. to increase access to public services broad-based financial services and build the financial infrastructure such as electricity, water, health, Private sector development requires necessary for sustainable growth In FY13, our and education while enhancing their total advisory quality and efficiency. At the end of more than finance. Experience and employment. At the end of FY13, program FY13, we had an active portfolio of shows the powerful role advisory we had an active portfolio of 263 expenditures services can play in strengthening projects— valued at $342.6 million— 103 PPP projects in 53 countries, val- reached the development impact of IFC’s that promoted access to finance in ued at about $126 million. In FY13, more than investments, unlocking investment 72 countries. In FY13, our advisory our advisory program expenditures by the private sector, and helping businesses expand and create jobs program expenditures reached about $62.6 million, of which $232 in the area reached $39.5 million. SUSTAINABLE BUSINESS (see page 84). 61 percent was in IDA countries, million, of which Companies need more than and 13 percent was in fragile and 65 percent was IFC works with clients to promote in IDA countries sound environmental, social, gov- financial investment to thrive. They conflict-affected areas. and 18 percent in ernance, and industry standards; need a regulatory environment that conflict-affected enables entrepreneurship. They need INVESTMENT CLIMATE catalyze investment in clean energy areas. advice on best business practices. IFC helps governments implement and resource efficiency; and sup- Our work includes advising national reforms that improve the business port sustainable supply chains and and local governments on how to environment and encourage and community investment. We work in improve their investment climate retain investment, thereby fostering several sectors including agribusi- and strengthen basic infrastruc- competitive markets, growth, and ness and forestry; manufacturing ture. We help companies improve job creation. We also help resolve and services; infrastructure; oil, corporate governance, strengthen legal and policy weaknesses that gas, and mining; and financial mar- risk management, and become more inhibit investment. At the end of kets. At the end of FY13, we had an sustainable— financially, environ- FY13, IFC had an active portfolio of active portfolio of 157 sustainable- mentally, and socially. 143 investment-climate projects in business projects in 58 countries, We operate in 105 countries, 65 countries, valued at $288.9 mil- valued at $279.7 million. In FY13, with more than 660 active proj- lion. In FY13, our advisory program our advisory program expendi- ects. Funding comes from donor expenditures in these projects tures related to this area totaled partners, IFC, and clients. In FY13, totaled $74.8 million, of which $55 million. advisory services program expendi- 76 percent was in IDA countries, tures totaled $232 million, up from and 29 percent was in fragile and $197 million in FY12. In all, 65 per- conflict-affected areas. cent of our program was in IDA countries, and 18 percent in fragile and conflict-affected areas. THE POWER OF PARTNERSHIPS _ 75 AMC FUNDS for International Development, and Sumitomo Mitsui Banking Corporation. IFC ASSET IFC CAPITALIZATION FUND Since its start through the end of FY13, the MANAGEMENT The $3 billion IFC Capitalization Fund fund made six investment commitments COMPANY totaling $101.8 million. consists of an equity fund of $1.3 billion and a subordinated debt fund of $1.7 bil- IFC RUSSIAN BANK CAPITALIZATION FUND lion. Launched in 2009, the fund helps strengthen systemically important banks The $550 million IFC Russian Bank in emerging markets, bolstering their abil- Capitalization Fund was launched in 2012 ity to cope with financial and economic to invest in commercial banking institu- IFC Asset Management Company LLC, a downturns. The fund is jointly supported tions in Russia. The fund, which had its wholly owned subsidiary of IFC, mobilizes by a $2 billion capital commitment from the final close in June 2013, has commitments and manages funds for investment in devel- Japan Bank for International Cooperation from IFC, the Russian Ministry of Finance, oping and frontier markets. It was created and a $1 billion investment from IFC. From and Russia’s Vnesheconombank, or VEB. in 2009 to provide investors with access to its inception through the end of FY13, the As of the end of FY13, the fund made IFC’s emerging-markets investment pipe- fund made 29 investment commitments two investment commitments totaling line and to expand the supply of long-term totaling nearly $2.1 billion. $78.2 million. capital to these markets, enhancing IFC’s development goals and generating profits IFC AFRICAN, LATIN AMERICAN, AND IFC CATALYST FUND CARIBBEAN FUND for investors by leveraging IFC’s global The IFC Catalyst Fund invests in funds that reach, standards, investment approach, and The $1 billion IFC African, Latin American, provide growth capital to companies devel- track record. and Caribbean Fund was launched in 2010 oping innovative ways to address climate As of June 30, 2013, AMC had approx- and has commitments from IFC, the Abu change in emerging markets. It also invests imately $5.5 billion in assets under Dhabi Investment Authority, the Dutch directly in those companies. As of FY13, management. It manages six investment pension fund manager PGGM, Korea the investors in the fund include IFC, the funds on behalf of a wide variety of institu- Investment Corporation, State Oil Fund United Kingdom’s Department of Energy tional investors, including sovereign wealth of the Republic of Azerbaijan, a Saudi and Climate Change, the U.K. Department funds, pension funds, and development government fund, and an international for International Development, the State finance institutions. pension fund. The fund co-invests with IFC Oil Fund of the Republic of Azerbaijan, and in equity and equity-related investments the Government of Canada. across a range of sectors in sub-Saharan Africa, Latin America, and the Caribbean. IFC GLOBAL INFRASTRUCTURE FUND From its inception through the end of FY13, The IFC Global Infrastructure Fund the fund made 19 investment commitments co-invests with IFC in equity and equity- totaling $609.9 million. related investments in the infrastructure sector in emerging markets. As of FY13, THE AFRICA CAPITALIZATION FUND the fund’s investors include IFC, the State The $182 million Africa Capitalization Oil Fund of the Republic of Azerbaijan, the Fund was launched in 2010 to invest in sys- Transport for London Pension Fund, and temically important commercial banking an Asian sovereign wealth fund. institutions in Africa. Among its investors are the Abu Dhabi Fund for Development, African Development Bank, CDC Group, European Investment Bank, OPEC Fund 76 _ IFC ANNUAL REPORT 2013 OUR INDUSTRY EXPERTISE IFC’s leadership role in sustainable AGRIBUSINESS AND FORESTRY micro, small, and medium enter- prises than we would be able to on private sector development reflects a Agribusiness has an important role our own. special advantage— the depth and breadth to play in poverty reduction. The Working through financial inter- agricultural sector often accounts mediaries enables IFC to encourage of expertise we have acquired over more for at least half of GDP and employ- them to become more involved in than 50 years of helping emerging-market ment in many developing countries, sectors that are strategic priorities which makes it a priority for IFC. firms succeed and grow. IFC provides support for the pri- such as women-owned businesses and climate change, and in under- We have moved to leverage our vate sector to address rising demand served regions such as fragile and global industry knowledge— across our in an environmentally sustainable conflict-affected states as well as and socially inclusive way. To help in housing, infrastructure, and investment and advisory services— to clients finance inventories, seeds, social services. tackle the biggest development challenges fertilizers, chemicals, and fuel for In FY13, our commitments in farmers, IFC offers working-capital of the coming years. financial markets totaled about facilities. To facilitate trade and $3.6 billion, about 20 percent of lower costs, we pursue investments commitments for IFC’s own account. in infrastructure such as ware- houses and cold-storage facilities. CONSUMER AND SOCIAL SERVICES To bring land into sustainable IFC is the world’s largest multilat- production, we work to improve eral investor in private healthcare productivity by transferring tech- and education. We work to increase nologies and making the best use access to high-quality health and of resources. education while also supporting In FY13, our new commitments job-creating sectors such as tour- in agribusiness and forestry totaled ism, retail, and property. We help nearly $1.3 billion, accounting for improve standards of quality and about 7 percent of commitments for efficiency, facilitate the exchange IFC’s own account. of best practices, and create jobs for FINANCIAL MARKETS skilled professionals. In addition to making direct Sound, inclusive, and sustainable investments in socially responsible financial markets are vital to devel- companies, our role includes sharing opment as they ensure efficient industry knowledge and expertise, resource allocation. IFC’s work with funding smaller companies, raising financial intermediaries has helped medical and education standards, strengthen financial institutions and helping clients expand services and overall financial systems. It has to lower-income groups. In FY13, also allowed us to support far more THE POWER OF PARTNERSHIPS _ 77 In FY13, our our new commitments in consumer and reducing poverty in developing IFC’s mission in the oil, gas, and commitments in and social services totaled about countries. IFC’s manufacturing mining sector is to help developing financial markets $1.6 billion, or nearly 9 percent clients tend to create or maintain countries realize these benefits. We totaled about of IFC’s commitments for our more employment than those in any provide financing and advice for own account. other sector. private sector clients, and also help $3.6 INFRASTRUCTURE We have increased our activi- ties in the sector, which includes governments adopt effective regula- tions and strengthen their capacity billion, about Modern infrastructure spurs eco- construction materials, energy- to manage these industries across 20 percent of nomic growth, improves living efficient machinery, chemicals, the value chain. commitments and equipment for solar and wind We support private investment standards, and can represent an for IFC’s own opportunity to address emerg- power. We invest in companies in these industries, and we work to account. ing development challenges, that are developing new products ensure that local communities enjoy including rapid urbanization and and markets, and restructuring and concrete benefits. In FY13, our new climate change. modernizing to become internation- commitments in the sector totaled It is also an area in which the ally competitive. $390 million, or about 2 percent of private sector can make a significant As these industries represent commitments for IFC’s own account. contribution, providing essential some of the most carbon-intensive sectors, we are helping clients TELECOMMUNICATIONS, MEDIA, services to large numbers of people, AND TECHNOLOGY efficiently, affordably, and profitably. develop and undertake investments This is IFC’s focus: supporting pri- that help reduce carbon emissions Modern information and com- vate infrastructure projects whose and energy consumption. munication technologies make it innovative, high-impact business In FY13, our new commitments easier for the poor to obtain access models can be widely replicated. in the manufacturing sector totaled to services and resources. They We help increase access to power, $1.3 billion, or about 7 percent of expand opportunity and make transport, and water by financing commitments for IFC’s own account. markets and institutions more infrastructure projects and advising efficient. IFC works to extend the client governments on public-private OIL, GAS, AND MINING availability of such technologies. partnerships. We mitigate risk and Industries that can harness natural We channel investments toward leverage specialized financial struc- resources are vital for many of the private companies that build mod- turing and other capabilities. In world’s poorest countries. They are ern communications infrastructure FY13, our new commitments in this a key source of jobs, energy, govern- and information-technology sector totaled $2.2 billion, or about ment revenues, and a wide array of businesses, and develop climate- 12 percent of commitments for IFC’s other benefits for local economies. In smart technologies. own account. many countries, large-scale sustain- IFC increasingly helps clients able investments in these industries move beyond their own national MANUFACTURING can create equally large-scale gains borders and into other developing in economic development. markets. In FY13, our new commit- The manufacturing sector plays a ments in this sector totaled about vital role in creating opportunity $470 million. 78 _ IFC ANNUAL REPORT 2013 Our people and practices IFC’s commitment to alleviating poverty and creating opportunity for the developing world’s most vulnerable people is reflected in our corporate culture. THE POWER OF PARTNERSHIPS _ 79 THE IFC WAY Our history shows we learn from expe- OUR VISION THE WAY WE WORK rience and take on new challenges. That people should have the » We help our clients succeed in a Our staff is better positioned than ever opportunity to escape poverty and changing world improve their lives » Good business is sustainable, and to maximize IFC’s development impact. sustainability is good business OUR VALUES More than half of us are based in devel- » One IFC, one team, one goal Excellence, Commitment, Integrity, » Diversity creates value oping countries, close to the clients and » Creating opportunity Teamwork, and Diversity communities we serve. We are also more requires partnership OUR PURPOSE » Global knowledge, local know-how diverse than ever— nearly two-thirds of To create opportunity for people » Innovation is worth the risk our staff hail from developing countries. to escape poverty and improve » We learn from experience A strong corporate culture is central to their lives by catalyzing the means » Work smart and have fun for inclusive and sustainable » No frontier is too far or too difficult any organization’s ability to succeed and growth, through: adapt to new challenges. The IFC Way is » Mobilizing other sources of finance a way of being, defining, and solidifying for private enterprise development » Promoting open and competitive IFC’s culture and brand, and a process markets in developing countries that engages staff at all levels and in all » Supporting companies and other regions to inform management decision private sector partners where there is a gap making. It includes our vision, our core » Helping generate productive jobs corporate values, our purpose, and the and deliver essential services to the poor and vulnerable way we work. To achieve our purpose, IFC offers development-impact solutions through firm-level interventions (Investment Services, Advisory Services, and the IFC Asset Management Company); pro- moting global collective action; strengthening governance and standard-setting; and business- enabling-environment work. 80 _ IFC ANNUAL REPORT 2013 HOW WE MEASURE DEVELOPMENT RESULTS Measuring the results of our work is We are also now studying the extent to which IFC’s activities change the critical to understanding how well our THE IFC behavior of other market partici- DEVELOPMENT strategy is working— and whether IFC is pants in areas unrelated to our own GOALS projects. These changes in behav- reaching people and markets that most ior— what we call demonstration need our help. effects— may include things like a Our results measurement system bank starting to lend in a new sector, a new developer financing a project features three mutually reinforcing similar to the one implemented with components: the IFC Development IFC support, or a government rep- The IFC Development Goals are licating reform instituted by an IFC targets for reach, access, or other Goals, a monitoring system to measure client government. tangible development outcomes that development results, and systematic Understanding the impact of projects signed or committed by evaluations of the impact of both our our activities and feeding into our IFC are expected to deliver during operations the lessons we learn from their lifetime. investment and advisory work. results measurement continues to Two such goals— pertaining to Besides development results, we be a priority. To strengthen our abil- health, education, and financial also track IFC’s “additionality”— the ity to do this, we began testing and services— moved from testing into implementing additional monitoring implementation in FY13 and are distinctive advantages and benefits of instruments, and additional evalua- fully integrated into IFC’s corporate our involvement in a project. tive approaches. scorecard and incentives for man- These efforts will contribute to agement. They will soon apply also the achievement of two overarching to long-term performance awards World Bank Group goals— ending for staff. extreme poverty by 2030 and boost- Whether being tested or imple- ing shared prosperity. We have also mented, the IFC Development Goals continued to work closely with other have proved useful in steering IFC’s development finance institutions, business to where it has the biggest or DFIs. We are currently leading impact. The goals also are encourag- a collective effort aimed at harmo- ing staff to work across departments nizing a set of core indicators for and advisory business lines, adopt- GOALS monitoring development results of ing cross-cutting and programmatic investment operations. approaches to enhance develop- Our collaboration with DFIs was ment impact. further strengthened following the We plan for one additional goal launch of IFC’s Jobs Study (see page to be implemented in FY14— track- 43 for more details). About 30 other ing the number of people for whom institutions agreed to collaborate we increase or improve sustainable with us to help create more and farming opportunities. better jobs. We are now working on EVALUATION MONITORING implementing the recommendations of the study. THE POWER OF PARTNERSHIPS _ 81 because their outcome and impact results THE IFC DEVELOPMENT GOALS had not been achieved by the review dates. MONITORING AND 1: Agribusiness We continue to report on development TRACKING RESULTS Increase or improve sustainable results for our entire portfolio and have farming opportunities them assured by an external firm. 2: Health and Education Improve health and education services EVALUATING 3. Financial Services RESULTS Increase access to financial services for individuals, microenterprises, and We use our Development Outcome SME clients Tracking System to monitor the devel- opment results of IFC’s investment and 4: Infrastructure advisory services. Increase or improve infrastruc- For Investment Services, DOTS covers— ture services after certain exclusions— 1,727 companies under supervision. This report focuses on Evaluation has been integral to IFC’s 5: Economic Growth 716 out of about 780 investments approved results measurement since 2005, when Increase the value added by IFC clients between 2004 and 2009, which are mature IFC first began working with external to their respective country’s economy enough to be rated and recent enough to evaluators to generate useful lessons and 6: Climate Change be relevant. The FY13 ratings reflect our produce impartial assessments of develop- Reduce greenhouse emissions clients’ 2012 data and performance. Every ment effectiveness. By revealing the factors year, the group of investments we report on for success or failure, evaluations help us shifts by one year. understand what we need to do more of— The report also addresses the current and less of— to achieve IFC’s mission. At any given reach of all active investments in IFC’s IFC’s investment in evaluation has time, there are portfolio. Reach indicators measure grown rapidly, and we now have more than more than 20 evaluations ongoing at any given time, the number of people reached by IFC clients— or the dollar benefit to particular covering both investment and advisory 20 stakeholders, regardless of IFC’s invest- services. Our evaluations are undertaken at project, programmatic, or thematic levels, ment size. evaluations as well as at the level of donor-funded ongoing, DOTS does not typically track cer- tain projects, including projects that are facilities, countries, and regions. covering both expansions of existing ones, split projects, Our evaluation strategy is focused on investment and advisory and certain financial products such as maximizing opportunities for learning. services. rights issues. It has four main objectives: (1) to credibly For Advisory Services, DOTS covers all articulate IFC’s development impact; (2) to projects that are active, completed, or on learn how to maximize the effectiveness hold, dating back to FY06. The FY13 ratings of IFC interventions; (3) to provide useful are defined as a review of 149 completion business intelligence to clients and part- reports filed in 2012, of which 124 could be ners; and (4) to exchange knowledge with assessed. The rolling average is based on a others outside IFC. review of 494 completion reports filed in These strategic objectives shape our calendar years 2010 through 2012, of which evaluation work program. Our portfolio of 396 were assessed. evaluations is selected to address knowl- Advisory projects that could not be edge gaps, learn lessons from successful assessed for development effectiveness and unsuccessful initiatives, assess oper- were excluded from the analysis, because ations never before evaluated, and deliver they were non-client-facing projects or evaluation services to interested clients. In particular, the new strategy focuses 82 _ IFC ANNUAL REPORT 2013 attention on the poverty-reduction reached increased by 61 percent to HOW IFC MONITORS RESULTS and job-creation effects of our work 3.5 million. Meanwhile, our clients DOTS allows for real-time tracking of development that typically cannot be captured by in South Asia provided 120 million results throughout the project cycle. At the outset of a monitoring and tracking alone. phone connections, accounting for project, IFC staff members identify appropriate indi- The new evaluation strategy 63 percent of total phone connec- cators with baselines and targets. They track progress complements the work of the tions reported by IFC clients. throughout supervision, which allows for real-time Independent Evaluation Group (see By region, our strongest perfor- feedback into operations, until project closure. page 92)— which reports directly mance was in Latin America and the This report provides the DOTS score— the percent- to the Board of Directors and is Caribbean, where the percentage age of projects that have achieved a high rating (in the charged with providing its own of clients rated high rose 2 points to top half of the rating scale)— for IFC overall and by assessments and lessons of experi- 74 percent. The progress reflected region, industry, and business line. ence. IEG’s evaluations incorporate stronger performance by clients in Ratings are based on qualitative assessments pro- findings from IFC’s own monitoring Colombia, Mexico, and Peru. It also vided by project teams. They are reviewed centrally and evaluations. IFC’s evalua- reflected improved performance of by the Development Impact Department, with the tion staff works closely with IEG financial markets operations, as well support of an automated system of flags that helps to discuss work programs, share as solid performance of clients in identify deviations from rating requirements. knowledge, and align efforts when- funds, infrastructure— mainly elec- For Investment Services, the overall DOTS score ever possible. tric power and transportation— and is a synthesis of four performance areas (financial, consumer and social services (espe- economic, environmental and social, and broader cially health and education). private sector development impacts). The weighting INVESTMENT Our clients in the Middle East of each area is informed by standardized industry- RESULTS and North Africa also showed specific indicators, comparing actual results against improved results, with 65 percent absolute benchmarks. To obtain a high rating, a of investment operations rated project must make a positive contribution to the host high— an increase of 5 points over country’s development. the previous year. The increase Over the past five years, DOTS This year, we excluded trade-finance clients from reflected improved results in finan- ratings have been broadly stable, the weighting to ensure methodological consistency cial markets, specifically in Egypt. staying within a five-percentage- in the calculation of both weighted and unweighted The rating also increased because of point range. In FY13, IFC’s scores. Accordingly, we restated the weighted DOTS positive results in the health sector. development results for investment scores shown on page 29. In Europe and Central Asia, the services continued to exceed our For Advisory Services, the overall DOTS score or share of clients rated high rose to long-term target of 65 percent, with development-effectiveness rating is a synthesis of the 64 percent from 61 percent— mainly 66 percent of our investment clients overall strategic relevance, efficiency, and effective- because of solid performance by rated high. ness (as measured by project outputs, outcomes, and clients in the infrastructure and Across the world, our clients impacts). At project completion, intended results are funds sectors in Russia, and because continued to increase their devel- compared with achieved results. of continued improvement in the opment reach. In Latin America The DOTS score is part of IFC’s corporate score- results of manufacturing clients and the Caribbean, the number of card and cascades into department scorecards and in Turkey. loans to micro, small, and medium incentives for individual staff members. Our ratings weakened in East enterprises rose about 110 percent to Asia and the Pacific, Sub-Saharan 14.4 million. In Sub-Saharan Africa, Africa, and South Asia. In East Asia the number of farmers reached and the Pacific, 70 percent of our increased by almost 80 percent to clients were rated high, a decline over 675,000. In the Middle East and of 10 points from the previous year. North Africa, the number of patients THE POWER OF PARTNERSHIPS _ 83 The drop reflected the deteriorating The funds sector shipping, and logistics sectors. Even performance of manufacturing com- had the best per- so, the DOTS score for the sector panies— predominantly in China, formance, with continued to be well above the where slower growth compressed IFC average. margins. It also reflected the weaker performance of clients in financial 79% In the agribusiness and forestry sector, 68 percent of our clients were markets, specifically in Indonesia. of clients rated rated high— a decline of 4 points In Sub-Saharan Africa, 61 percent high— thanks from FY12. The drop was mostly due of clients were rated high— a decline to better to deteriorating ratings of clients in performance of of 3 points that reflected deteri- Sub-Saharan Africa and South Asia. new and existing oration among clients in Ghana, investments, In oil, gas, and mining, 64 percent Tanzania, and Cameroon. Clients in particularly of clients were rated high, down the funds sector showed improved in Europe and from 69 percent in FY12. The exit results, while ratings declined in Central Asia of high-performing clients from the agribusiness and forestry. and in Latin reporting cohort was the main rea- In South Asia, 60 percent of our America and son for the decline this year, while the Caribbean. clients were rated high in FY13— the sector continued to suffer from down from 73 percent in FY12. The political uncertainties in the Middle decline reflected the weak perfor- East and North Africa and from the mance of Indian companies, which commercial difficulties of some cli- account for 90 percent of the region’s ents in Latin America. rated portfolio. In the consumer and social At the industry level, ratings services sector, the percentage of improved for clients in the funds investments rated high went from sector, were steady in financial 57 percent to 56 percent amid a dete- markets, and declined in all other rioration in the tourism sector and in sectors. Clients’ development reach, East Asia. The percentage of clients however, continued to be significant rated high in the telecommunica- (see page 86). tions, media, and technology sectors The funds sector had the best declined a point to 55 percent. performance, with 79 percent Our clients in this sector are often of clients rated high— thanks to start-ups, so their odds of success better performance of new and generally tend to be lower. existing investments, particularly In the manufacturing sector, in Europe and Central Asia and in 49 percent of clients were rated Latin America and the Caribbean. high— a decline of 14 points from the The performance of investments previous year. Performance deteri- in the financial markets sector orated across all regions, with the remained stable, with 70 percent largest declines occurring among of clients rated high. clients in the Middle East and North In the infrastructure sector, the Africa and in South Asia. share of projects rated high fell by 3 points to 73 percent, mainly because of weaker performance of clients in the warehousing, storage, 84 _ IFC ANNUAL REPORT 2013 phones; and provided capacity LEARNING FROM OUR WORK building to almost 350,000 people IN CONFLICT-AFFECTED COUNTRIES ADVISORY RESULTS (76 percent in IDA countries), To maximize opportunities for learning, IFC increas- including to farmers, entrepre- ingly conducts global, regional, programmatic, and neurs, and management of small thematic evaluations and meta-evaluations of our work— and medium enterprises. in addition to evaluations of individual projects. » We helped governments in Recently an external consulting fi rm completed Development effectiveness ratings 43 countries adopt 76 investment a mid-term review of our Confl ict-Affected States in and client satisfaction both reached climate reforms (55 reforms Africa program. The program, also known as CASA, record highs for IFC Advisory in IDA countries, including was launched in 2008 to enhance the delivery of IFC Services in FY13. Development 26 reforms in fragile and conflict- Advisory Services in fragile and conflict-affected states. effectiveness ratings increased for affected situations). It now serves eight countries— Burundi, Central African the fourth consecutive year, with » We provided governments Republic, Côte d’Ivoire, Democratic Republic of Congo, 76 percent of 124 advisory projects with industry-level reform and Guinea, Liberia, Sierra Leone, and South Sudan. that closed during the year and investment-promotion support that The review found that CASA’s focus on private sec- could be assessed for development have contributed to an estimated tor development addresses one of the most important challenges in post-conflict reconstruction. According to effectiveness being rated high. $750 million in new investments. stakeholder feedback, no other agency addresses private Outcomes could be assessed for all » We helped firms improve corpo- sector development in these countries as comprehen- 124 projects, and impacts could be rate governance practices, which sively as IFC does through the CASA program. evaluated for 73 percent of them. contributed to additional financing CASA promotes private sector development in one Ratings improved for operations of $200 million, $150 million of of three ways: first, it facilitates tailored and coordi- in IDA countries— climbing to which was from IFC. nated Advisory Services projects; second, it provides 78 percent in FY13 from 74 percent » We worked with 149 financial funds to support implementation of projects; and in FY12. Ninety percent of clients intermediaries, in partnership third, it promotes knowledge management, including reported satisfaction with IFC with IFC Investment Services, that the dissemination of IFC tools, lessons learned, and Advisory Services work in FY13. provided over 14.2 million micro- best practice. To strengthen our impact, finance and SME loans (15 percent Based on the review, the consulting firm recom- Advisory Services undertakes in IDA countries) totaling nearly mended that IFC build on the program’s success by going programmatic approaches that $103 billion; we also worked beyond a country-by-country approach and leveraging harness contributions from across with 20 financial intermediaries the distinctive strengths of all four of IFC’s advisory our four business lines: Access that provided 207,000 housing business lines— Access to Finance, Investment Climate, to Finance, Investment Climate, finance loans, totaling more than Public-Private Partnerships, and Sustainable Business. Public-Private Partnerships, and $7.3 billion. Such an approach, it said, would help build key relation- Sustainable Business. Here are a few » We helped improve financial ships and enhance CASA’s effectiveness. selected highlights from 2012 across markets infrastructure through The firm also recommended that IFC extend CASA’s Advisory Services: working with collateral regis- reach by establishing similar programs in new coun- » We helped governments sign tries that facilitated over 40,000 tries and advocating for wider adoption of this model nine public-private partnership SMEs to receive $4.5 billion in within the World Bank Group. IFC’s senior management has endorsed expanding the program to 18 countries contracts (six in IDA countries, financing secured with movable in sub-Saharan Africa and is implementing other including one in fragile and conflict- property, and helped create, recommendations. affected situations), expected to strengthen or license four credit improve access to infrastructure bureau operators. and health services for over 3 mil- » We helped firms avoid green- lion people (1.7 million in fragile house gas emissions estimated at and conflict-affected situations), and 3.7 million metric tons annually mobilize $750 million in pri- (calculation based on method- vate investment. ologies in place before adoption » We helped 3 million people receive of a standardized methodology off-grid lighting; helped 1.3 mil- in 2012). lion people gain access to village THE POWER OF PARTNERSHIPS _ 85 DOTS PERFORMANCE CATEGORIES: INVESTMENT SERVICES THE IFC DEVELOPMENT GOALS Examples of Specific FY13 Percent Performance General Indicators Indicators Assessed FY13 IDG of Target Category and Benchmarks against Targets Goal IDG Target Commitments Achieved Financial Performance Returns to fi nanciers, Return on invested Increase or improve Benefit 760,000 76% e.g., financial returns capital, return on equity, sustainable farming 1 million people at or above weighted project implemented on opportunities people average cost of capital time and on budget Improve health and Benefit 7.06 million 167% Economic Performance Returns to society, e.g., Economic return on education services 4.22 million people economic returns at or invested capital, number people above 10 percent or the of connections to basic weighted average cost services, loans to small Increase access to fi nancial Benefit 41.25 million 147% of capital enterprises, people services for microfinance 28.05 million people employed, tax payments clients people Environmental and Project meets IFC’s Environmental and social Increase access to fi nancial Benefit 1.04 million 90% Social Performance Performance Standards management systems, services for SME clients 1.15 million people effl uent or emission people levels, community Increase or improve Benefit 36.74 million 186% development programs infrastructure services 19.75 million people Private Sector Project contributes to Demonstration effects people Development Impact improvement for the (other firms replicating a Reduce greenhouse-gas Reduce by 6.20 million 127% private sector beyond new approach, product, emissions 4.90 million metric metric tons the project company or service), linkages to tons of CO2 equivalent other private companies, per year corporate governance improvements DOTS PERFORMANCE CATEGORIES: ADVISORY SERVICES Examples of Specific Performance General Indicators Indicators Assessed Category and Benchmarks against Targets Strategic Relevance Potential impact on Client contributions, local, regional, national alignment with country economy strategy Efficiency Returns on investment in Cost-benefit ratios, advisory operations project implemented on time and budget Effectiveness Outputs, outcomes, Improvements in and impacts. Project operations, investments contributes to enabled, increase improvement for the in revenues for client, the beneficiaries, beneficiaries, cost and the broader private savings from policy sector reforms 86 _ IFC ANNUAL REPORT 2013 DEVELOPMENT REACH BY IFC’S INVESTMENT CLIENTS FIVE-YEAR PERFORMANCE ADVISORY SERVICES DOTS SCORE, FY09–FY13 Portfolio Portfolio % Rated High CY11 CY12 Investments 100% Employment (millions of jobs)1 2.5 2.7 Microfinance loans2 76% 80% Number (million) 19.7 22.0 67% 62% Amount ($ billions) 19.84 24.03 72% 60% SME loans2 56% Number (million) 3.3 5.8 40% Amount ($ billions) 181.25 241.30 Customers reached with services 20% Power generation (millions)3 47.0 52.2 Power distribution (millions) 49.2 45.7 0% Water distribution (millions) 4 38.7 42.1 FY09 FY10 FY11 FY12 FY13 Gas distribution (millions)5 22.4 33.8 Phone connections (millions) 6 172.2 192.0 FIVE-YEAR PERFORMANCE Patients reached (millions)7 13.0 17.2 INVESTMENT SERVICES DOTS SCORE, FY09–FY13 % Rated High Students reached (millions) 0.9 1.0 Farmers reached (millions) 3.3 3.1 100% Payments to suppliers and governments Domestic purchases of goods and services ($ billions) 49.84 46.19 80% Contribution to government revenues or savings ($ billions) 21.73 27.00 67% 68% 66% These figures represent the reach of IFC clients as of the end of CY11 and CY12. 71% 71% CY11 and CY12 portfolio data are not strictly comparable, because they are based on 60% a changed portfolio of IFC clients. In many cases, results reflect also contributions from Advisory Services. 1. Portfolio figures for employment include jobs provided by Funds. 40% 2. Portfolio reach figures represent SME and microfinance outstanding loan portfolio of IFC clients as of end of CY11 and CY12, for MSME-oriented financial institutions/ projects. 268 and 285 clients were required to report their end-of-year SME and microfinance portfolios in CY11 and CY12, respectively. 252 and 269 clients did so for 20% CY11 and CY12, respectively. The missing data were extrapolated. 3. CY11 total Power Generation customers revised due to the restatement of one client value in East Asia and the Pacific. 0% 4. CY11 total Water Distribution customers revised due to the restatement of one client FY09 FY10 FY11 FY12 FY13 value in Sub-Saharan Africa. 5. One client in East Asia and the Pacific contributed 31.14 million of Gas Distribution customers in CY12. 6. One client in South Asia contributed 112.7 million of phone connection customers in CY12. 7. CY11 total Patients Reached revised due to the restatement of one client value in Europe and Central Asia. THE POWER OF PARTNERSHIPS _ 87 INVESTMENT SERVICES DOTS SCORE BY INVESTMENT SERVICES DOTS SCORE BY REGION, PERFORMANCE AREA, FY13 FY12 VS. FY13 % Rated High % Rated High Development Outcome 66% IFC Total 68% 73% 66% Financial Performance 50% Latin America and the Caribbean 72% 58% 74% Economic Performance 60% East Asia and the Pacific 80% 69% 70% Environment & Social 67% Middle East and North Africa 60% Performance 69% 65% Private Sector Development 77% Europe and Central Asia 61% Impact 83% 64% Unweighted Weighted Sub-Saharan Africa 64% 61% South Asia 73% INVESTMENT SERVICES DOTS SCORE BY INDUSTRY, 60% FY12 VS. FY13 FY12 FY13 % Rated High IFC Total 68% ADVISORY SERVICES DOTS SCORE 66% BY BUSINESS LINE Funds 73% % Rated High 79% Infrastructure 76% IFC Total 76% 73% 71% Financial Markets 70% Sustainable Business 87% 70% 75% Agribusiness & Forestry 72% Investment Climate 75% 68% 70% Oil, Gas & Mining 69% Access to Finance 74% 64% 75% Consumer & Social Services 57% Public-Private Partnerships 50% 56% 55% Telecoms and IT 56% FY13 FY11 to FY13 55% Manufacturing 63% ADVISORY SERVICES DOTS SCORE 49% BY REGION FY12 FY13 % Rated High IFC Total 76% 71% South Asia 92% 84% Europe and Central Asia 76% 80% Latin America and the Caribbean 76% 79% Sub-Saharan Africa 72% 67% East Asia and the Pacific 67% 68% Middle East and North Africa 64% 50% FY13 FY11 to FY13 88 _ IFC ANNUAL REPORT 2013 OUR STAFF IFC’s employees are diverse. They are WHERE WE WORK our most important asset. Representing Location FY05 FY13 more than 140 countries, our staff brings Washington, D.C. 1,350 (55%) 1,737 (43%) innovative solutions and global best Field Offices 1,083 (45%) 2,278 (57%) Total IFC Staff 2,433 4,015 practices to local clients. NATIONAL ORIGINS—ALL FULL-TIME STAFF Our offices are in 109 cities in 99 countries. More than half of us— National Origins FY05 FY13 Developed Countries 1,004 (41%) 1,502 (37%) 57 percent— are based in field offices, Developing Countries 1,429 (59%) 2,513 (63%) an increasing percentage that reflects Total 2,433 4,015 our commitment to decentralization. NATIONAL ORIGINS—ALL STAFF AT OFFICER LEVEL AND HIGHER Most IFC staff also hail from developing National Origins FY05 FY13 countries, 63 percent in all, a diversity Developed Countries 690 (50%) 1,163 (44%) that enriches our perspective and Developing Countries 682 (50%) 1,462 (56%) underscores our focus on areas where Total 1,372 2,625 private sector development can have the GENDER—ALL FULL-TIME STAFF biggest impact. Gender FY05 FY13 Male Staff 1,194 (49%) 1,880 (47%) Female Staff 1,239 (51%) 2,135 (53%) Total 2,433 4,015 GENDER—ALL STAFF AT OFFICER LEVEL AND HIGHER Gender FY05 FY13 Male Staff 911 (66%) 1,507 (57%) Female Staff 461 (34%) 1,118 (43%) Total 1,372 2,625 THE POWER OF PARTNERSHIPS _ 89 IFC’s staff COMPENSATION BENEFITS PROGRAMS represents more than IFC’s compensation guidelines are part of the World IFC provides a competitive package of benefits, including Bank Group’s framework. The international compet- medical insurance and a retirement plan. Washington- 140 itiveness of compensation is essential to our capacity to attract and retain a highly qualified, diverse staff. based employees are covered by Aetna, contracted through an open procurement process. Other staff countries. The salary structure of the World Bank Group for staff members are covered by Vanbreda, an international recruited in Washington, D.C., is determined with ref- healthcare provider. Medical insurance costs are erence to the U.S. market, which historically has been shared— 75 percent is paid by IFC and 25 percent by 63% globally competitive. Salaries for staff hired in countries outside the United States are based on local competitive- the insured. IFC’s pension is part of the World Bank Group plan, of our staff ness, determined by independent local market surveys. based on two benefit components: first, years of service, hail from Based on the World Bank Group’s status as a multilateral salary, and retirement age; second, a cash savings plan, developing organization, staff salaries are determined on a net-of- which includes a mandatory contribution of five per- countries. tax basis. cent of salary, to which IFC adds 10 percent annually. Legacy pension benefits from earlier World Bank Group VARIABLE PAY PROGRAMS pension plans include termination grants and additional 57% IFC’s variable pay programs consist of several components, including recognition, annual, and cash payouts. are based in long-term performance awards that support IFC’s high- field offices. performance culture. These awards are designed to encourage teamwork, reward top performance, and sup- port IFC’s strategic priorities, such as projects in Fragile and Conflict-Affected States. STAFF SALARY STRUCTURE (WASHINGTON, D.C.) During the period July 1, 2012, to June 30, 2013, the salary structure (net of tax) and average net salaries/benefits for World Bank Group staff were as follows: STAFF AVERAGE MARKET AT GRADE SALARY/ AVERAGE GRADES REPRESENTATIVE JOB TITLES MINIMUM ($) REFERENCE ($) MAXIMUM ($) LEVEL (%) GRADE BENEFITSa GA Office Assistant 25,100 32,600 42,400 0.0% 34,269 19,591 GB Team Assistant, Information Technician 31,700 41,200 57,700 0.7% 41,379 23,657 GC Program Assistant, Information Assistant 39,100 50,900 71,300 9.2% 53,698 30,699 GD Senior Program Assistant, Information Specialist, Budget Assistant 46,200 60,100 84,200 7.5% 66,204 37,849 GE Analyst 62,100 80,700 113,000 9.6% 77,073 44,063 GF Professional 82,500 107,300 150,200 19.8% 100,089 57,221 GG Senior Professional 111,300 144,700 202,500 31.4% 137,075 78,366 GH Manager, Lead Professional 151,700 197,200 254,900 18.4% 188,958 108,027 GI Director, Senior Advisor 202,200 264,500 303,300 2.9% 249,266 142,505 GJ Vice President 276,700 310,000 347,100 0.4% 309,632 177,016 GK Managing Director, Executive Vice President 304,000 344,700 379,100 0.1% 354,189 195,637 Note: Because World Bank Group (WBG) staff, other than U.S. citizens, usually are not required to pay income taxes on their WBG compensation, the salaries are set on a net-of-tax basis, which is generally equivalent to the after- tax take-home pay of the employees of the comparator organizations and fi rms from which WBG salaries are derived. Only a relative small minority of staff will reach the upper third of the salary range. a. Includes medical, life and disability insurance; accrued termination benefits; and other nonsalary benefits. 90 _ IFC ANNUAL REPORT 2013 OUR GOVERNANCE Our Place in the World Bank Group In working toward a world free EXECUTIVE COMPENSATION of poverty, we collaborate closely with other members of the Bank The salary of the President of the The World Bank Group is a vital source Group, including: World Bank Group is determined by » The International Bank for the Board of Directors. The salary of financial and technical assistance structure for IFC’s Executive Vice Reconstruction and Development, to developing countries. Established which lends to governments of President and CEO is determined by positioning a midpoint between the in 1944, its mission is to fight poverty middle-income and creditworthy salary structure of staff at the high- low-income countries. with passion and professionalism, for » The International Development est level, as determined annually lasting results. Association, which provides by independent U.S. compensation interest-free loans— called market surveys, and the salary of IFC is one of five members of the Bank the World Bank Group President. credits— to governments of the Group, though it is a separate legal entity poorest countries. The compensation of our executive leadership is transparent. IFC’s with separate Articles of Agreement, » The Multilateral Investment Guarantee Agency, which provides Executive Vice President and CEO, share capital, financial structure, guarantees against losses caused Jin-Yong Cai, received a salary of management, and staff. Membership in by noncommercial risks to inves- $350,000, net of taxes. There are tors in developing countries. no executive incentive compensa- IFC is open only to member countries tion packages. » The International Centre for of the World Bank. As of June 30, 2013, Settlement of Investment Disputes, OUR MEMBER COUNTRIES—STRONG IFC’s total cumulative paid-in capital which provides international SHAREHOLDER SUPPORT facilities for conciliation and arbi- of about $2.4 billion was held by 184 tration of investment disputes. Capital Stock by Country member countries. These countries guide Grand Total 100.00% United States 23.69% OUR BOARD IFC’s strategy, programs, and activities. Japan 5.87% Each of our member countries IFC works with the private sector to appoints one governor and one alter- Germany 5.36% create opportunity where it’s needed nate. Corporate powers are vested France 5.04% United Kingdom 5.04% in the Board of Governors, which most. Since our founding in 1956, we have Canada 3.38% delegates most powers to a board of committed more than $144 billion of our 25 directors. Voting power on issues India 3.38% own funds for private sector investments brought before them is weighted Italy 3.38% Russian Federation 3.38% according to the share capital each in developing countries, and we have director represents. Netherlands 2.34% mobilized billions more from others. The directors meet regularly at 174 Other Countries 39.14% World Bank Group headquarters in Washington, D.C., where they review and decide on investments and provide overall strategic guid- ance to IFC management. The President of the World Bank Group is also President of IFC. THE POWER OF PARTNERSHIPS _ 91 FAR LEFT ROW: No. 5 - John Whitehead, New Zealand; No. 4 - Roberto B. Tan, Philippines; No. 3 - Satu Santala, Finland 9 18 6 7 12 14 5 8 19 SECOND ROW LEFT: No. 7 - Shaolin Yang, China; No. 6 - Marie-Lucie Morin, Canada; 15 22 23 4 10 13 20 No. 2 - Agapito Mendes Dias, Sao Tome and Principe; No. 1 - Merza Hasan, Kuwait 16 24 2 11 3 17 21 THIRD ROW LEFT: No. 9 - Vadim Grishin, Russian Federation; No. 8 - Gwen Hines, United 1 Kingdom; No. 10 - Mukesh N. Prasad, India 25 MIDDLE ROW: No. 12 - Piero Cipollone, Italy; No. 14 - Ibrahim M. Alturki (alt.), Saudi Arabia; No. 13 - Omar Bougara, Algeria; No. 11 - Mansur Muhtar, Nigeria FIRST RIGHT ROW: No. 18 - Denny H. Kalyalya, Zambia; No. 19 - César Guido Forcieri, Argentina; No. 15 - Gino Alzetta, Belgium; No. 16 - Hideaki Suzuki, Japan; No. 17 - Ingrid-Gabriela Hoven, Germany SECOND RIGHT ROW: No. 20 - Juan José Bravo, Mexico; No. 21 - Sara Aviel (alt.), United States FAR RIGHT ROW: No. 22 - Hervé de Villeroché, France; No. 23 - Frank Heemskerk, Netherlands; No. 24 - Jörg Frieden, Switzerland; No. 25 - Sundaran Annamalai, Malaysia 92 _ IFC ANNUAL REPORT 2013 ACCOUNTABILITY INDEPENDENT EVALUATION GROUP and 51 percent of eligible advisory IEG validates OFFICE OF THE COMPLIANCE projects. IEG communicates these ADVISOR OMBUDSMAN The Independent Evaluation Group generates lessons from evaluations ratings to IFC and aggregates them in its annual evaluation of World 45% The Office of the Compliance Advisor Ombudsman is the inde- to contribute to IFC’s learning Bank Group’s results and perfor- of eligible IFC pendent recourse mechanism for agenda. IEG is independent of IFC mance. That most recent IEG report investment management and reports directly IFC and the Multilateral Investment found that IFC’s overall development projects and to IFC’s Board of Directors. It aims 51 percent of Guarantee Agency. CAO helps results have been relatively stable on to strengthen IFC’s performance eligible advisory address complaints from people a three-year rolling average. and inform its strategies and projects. affected by IFC and MIGA projects, Another IEG evaluation this year future directions. and reports directly to the World covered the Global Trade Finance IEG’s Biennial Report on Bank Group President. Program. IEG reported that the pro- Operations Evaluation, which CAO’s goal is to enhance the envi- gram significantly improved IFC’s focused on assessing, monitor- ronmental and social performance of engagement in trade finance and has ing, and evaluation in IFC and projects and to foster greater public been effective in helping expand the MIGA, reported that IFC has an accountability of IFC and MIGA. supply of trade finance by mitigating advanced results management sys- Through its three roles, CAO helps risks that would otherwise inhibit tem to gather, analyze, and apply resolve disputes between local com- the activity of commercial banks. investment and advisory project munities and IFC clients; provides This year IEG relaunched information. IEG found that IFC has independent oversight of IFC’s envi- E-LRN, a database of lessons from made strides in developing, aggre- ronmental and social compliance; IFC investment projects since gating, disclosing, and strategically and provides independent advice to 1996. E-LRN gives access to more using its development indicators. the President and IFC management. than 3,000 lessons from 15 years The data from the Development During the year, CAO addressed of evaluations. The lessons are Outcome Tracking System are used 42 cases in 19 countries. These searchable and easily accessible to in corporate and departmental cases related to IFC invest- staff, helping improve IFC’s develop- scorecards and corporation-wide ments in extractive industries, ment effectiveness. development goals. IEG’s evaluation infrastructure, agribusiness, man- IEG’s reports are disclosed on its provided important input to refine ufacturing, advisory services, and website: http://ieg.worldbank and strengthen IFC’s results man- financial intermediaries. group.org. agement system. In its compliance role, CAO han- IEG validates 45 percent of dled 12 audits of IFC’s performance. eligible IFC investment projects CAO determined it had sufficient THE POWER OF PARTNERSHIPS _ 93 basis to close two regarding IFC’s CAO addressed sector in Indonesia and sugar indus- investments in palm oil in Indonesia try in Nicaragua, respectively. and agribusiness in Peru. Seven audits are in process, while CAO is 42 CAO this year revised its Operational Guidelines in consulta- monitoring IFC’s response to three cases in tion with civil society, IFC/MIGA, audits related to metals manufac- 19 countries. and other stakeholders. The revised turing in Mozambique, the power guidelines were implemented sector in Kosovo, and global finan- in March and aim to improve cial intermediaries. CAO’s effectiveness. The financial intermediaries More information about CAO is audit analyzed 188 IFC investments available at www.cao-ombudsman.org and raised concerns about IFC’s approach to supporting appropriate environmental and social man- agement capacities in its financial intermediary clients, and identified challenges in the way IFC monitors the environmental and social impact of such investments. IFC is working on an action plan to address CAO’s audit findings. CAO’s dispute-resolution team is working in Albania, Cambodia, Cameroon, Chad, Colombia, Indonesia, India, Mexico, Mongolia, Nicaragua, Papua New Guinea, Peru, South Africa, and Uganda helping communities and IFC cli- ents address issues of concern. CAO closed a labor complaint related to a financial intermediary client in Africa, and is monitoring settle- ments for two cases in the palm oil 94 _ IFC ANNUAL REPORT 2013 PARTNERSHIPS FORMING PRODUCTIVE sustainable business, corporate In FY13, » The Government of Denmark sup- PARTNERSHIPS governance, and a more robust more than ported our resource efficiency and investment climate globally, as well clean energy programs in Egypt IFC works with governments, cor- porations, foundations, and other as support conflict-affected states in Africa. We also extended the $254 and Tunisia. » The Government of the French multilateral organizations and Netherlands-IFC Partnership to million was Republic continued its cooper- development institutions to foster work together on sustainable busi- committed by ation with IFC on the Business innovative partnerships that create donor partners ness, investment climate, access to Law Reform Program in Sub- prosperity and eradicate poverty. to support IFC’s finance, public-private partnerships, Saharan Africa. As the largest global development advisory work. and conflict situations. » Germany’s Gesellschaft für institution focused on the private In Asia, we established the Pacific Internationale Zusammenarbeit sector in developing countries, IFC, together with our partners, strives to address urgent develop- Partnership with Australia and New Zealand to help drive regional $44 contributed to IFC’s work with financial institutions to improve private sector development. We billion was their social and environmental ment challenges. also deepened our partnership with provided by risk-management activities, while Our collaborative approach Japan to further our activities in international the Federal Ministry for Economic emphasizes the power of long-term Asia and sub-Saharan Africa. financial Cooperation and Development partnerships, maintains a focus on institutions Here are a few additional high- helped IFC explore opportunities results measurement and efficiency, for private sector lights of our work with partners for green-growth investments. and leverages the contributions of development in FY13: in 2011. » The Netherlands’ Ministry of our partners. » Austria’s Federal Ministry of Foreign Affairs supported job cre- WORKING WITH DONOR PARTNERS Finance renewed its commit- ation in the Middle East and North ment to enhance collaboration in Africa, water-related activities in IFC maintains long-term relation- Eastern Europe and Central Asia, South Asia, investment-climate ships with its donor partners, with with a focus on public-private reforms in Sub-Saharan Africa, whom we work to promote private partnerships, agribusiness, and and the Global SME Finance sector development across the globe. sustainable energy. Likewise, the Innovation program. In addition, Our donor partners strongly Development Bank of Austria the Netherlands provided much- support the work of IFC Advisory supported increased investments needed trade financing through a Services, to which they committed in renewable energy and energy contribution to our Global Trade more than $254 million in FY13. In efficiency in East Africa. Liquidity Program. addition, a number of these partners » The Bill & Melinda Gates » Norway’s Ministry of Foreign have deepened their collaboration Foundation and IFC continued Affairs provided additional funding with IFC by investing alongside us cooperation in the water and to IFC’s Conflict-Affected States in on various investment initiatives. sanitation sector, and in access Africa Initiative. In cooperation with the global to finance, launching a market » The Republic of South Africa, donor community, IFC launched development project for house- through the Department of Trade several strategic partnerships hold sanitation in Kenya and a and Industry, renewed its commit- in FY13, which blended flexible mobile financial services project ment to IFC’s private sector devel- financing, thought leadership, and in Tanzania. opment activities in Africa. knowledge sharing to maximize our » The Government of Canada con- » The Swedish International development impact. tributed to strengthening the Development Cooperation Agency We created the Canada-IFC investment climate in Sub-Saharan became a partner in our pri- Partnership Fund to address Africa and Latin America and the vate sector development work pressing development issues in the Caribbean as well as enhancing in Ethiopia. extractive and financial sectors food security in East Asia and the » Switzerland’s State Secretariat and to promote gender equality Pacific. Canada also supported our for Economic Affairs supported worldwide. We strengthened the climate-change activities as an IFC’s work in investment climate, Luxembourg-IFC and Ireland-IFC investor in the IFC Catalyst Fund. access to finance, infrastructure, Partnerships to jointly promote and environmental and social risk THE POWER OF PARTNERSHIPS _ 95 management globally. SECO also pro- Governments FY12 FY13 Every dollar invested by these institutions vided substantial support to IFC’s sus- New Zealand 0.00 4.00 unlocks $2 to $3 of investment from others. tainable business advisory activities, with IFC has teamed up with an array of Norway 4.85 2.01 a particular emphasis on activities that IFIs, pooling resources to share knowl- South Africa 0.00 0.67 strengthen gender equality. edge, expand reach, and maximize impact. Sweden 12.38 5.32 » The United Kingdom’s Department for Following the pattern of previous years, the Switzerland 57.15 63.51 International Development contributed private sector operations of IFIs continue United Kingdom 69.94 34.79 to our work on investment climate in their strong focus on the financial sector United States 14.14 5.78 Central Asia and Sub-Saharan Africa, and infrastructure, and additional areas of Total 247.28 239.61 regional trade and SME development in emphasis remain the Middle East, renew- South Asia, private-public partnerships in Institutional & Private able energy, and food security. Partners FY12 FY13 Central and South Asia, and job creation Collaboration among these institu- Blue Moon Fund Inc. 0.00 0.25 in the Middle East and North Africa. tions also continues to expand. Ongoing BNDESPAR 3.00 0.00 DFID also committed to the private areas of cooperation include the Master The Coca-Cola Company* 0.00 2.00 sector window of the Global Agriculture Cooperation Agreement with 17 develop- and Food Security Program. In addi- CTF 0.80 0.50 ment finance institutions. The agreement tion, DFID and the U.K. Department Disney Worldwide Services, Inc. 0.05 0.00 details how such institutions work for Energy & Climate Change made European Commission 8.90 0.00 together— through loan syndications— to a significant commitment to the IFC Bill & Melinda Gates Foundation 2.57 2.87 co-finance projects led by IFC. We also col- Catalyst Fund. Inter-American Development Bank 1.00 0.00 laborate on the Busan Initiative follow-up, » The United States Agency for International Kauffman Foundation 0.05 0.00 corporate governance, gender, and climate Development supported IFC’s business Marie Stopes International 0.00 3.87 change. Joint efforts on concessional reform activities in Eastern Europe and The MasterCard Foundation 37.45 0.03 finance, local-currency finance, integrity Central Asia, Latin America and the Nestlé SA* 0.00 1.00 issues, and harmonizing development indi- Caribbean, and the Middle East and Omidyar Network Fund, Inc. 0.00 0.07 cators continue to be led by IFC. North Africa. PepsiCo Foundation* 0.00 2.00 Since January 2012, IFC has been SABMiller PLC* 0.00 0.25 leading an outreach campaign in Europe FINANCIAL COMMITMENTS TO IFC UN Agencies/Entities 0.25 1.16 to promote the themes of the report ADVISORY SERVICES International Finance Institutions and (US$ Million Equivalent)* Total 54.08 14.01 *Contributor to the 2030 — Water Resource Group Development Through the Private Sector. Summary FY12 FY13 At the conference to launch IFC Jobs Study Governments 247.28 239.61 in January 2013, 28 institutions issued a WORKING WITH OTHER DEVELOPMENT Institutional/Multilateral Partners 10.95 1.66 INSTITUTIONS joint communiqué pledging to collaborate Corporations, Foundations, and to create more and better jobs (see page 43). NGOs 43.13 12.35 International finance institutions— includ- IFC also continues to build leadership Total 301.36 253.62 ing multilateral and bilateral development *Unaudited figures in corporate governance, for example finance institutions— play a critical role in through the IFI Corporate Governance Governments FY12 FY13 spurring the private sector to help improve Development Framework, which is based Australia 1.57 21.87 lives and reduce poverty. on IFC’s methodology, in collaboration Austria 25.55 12.70 They have a track record of success with almost 30 financial institutions. in difficult environments. They provide Canada 5.63 47.83 The following development finance insti- capital when private markets become Denmark 0.96 3.61 tutions have invested in funds managed by risk-averse. They provide advice that Finland 0.13 0.00 IFC Asset Management Company: strengthens markets and makes pri- France 0.03 2.65 » Japan Bank for International Cooperation vate sector development inclusive and Germany 0.60 1.15 » Abu Dhabi Fund for Development sustainable. Ireland 1.51 1.12 » African Development Bank Over the past decade, the private sector Japan 9.48 7.22 » CDC Group financing activities of international finance Korea 1.00 0.00 » European Investment Bank institutions in developing countries qua- Luxembourg 0.00 6.79 » The OPEC Fund for drupled to more than $44 billion in 2011. The Netherlands 42.37 18.59 International Development 96 _ IFC ANNUAL REPORT 2013 MANAGING RISKS PORTFOLIO MANAGEMENT track environmental and social per- New borrow- LIQUIDITY MANAGEMENT formance, and measures financial ings in the Portfolio management is an intrinsic and development results. international Liquid assets on IFC’s balance sheet part of managing IFC’s business to For projects in financial distress, markets totaled totaled $30.3 billion as of June 30, ensure strong financial and develop- our Special Operations Department the equivalent 2013, compared with $29.7 billion a ment results of our projects. determines the appropriate reme- of about year earlier. Most liquid assets are IFC’s management reviews dial actions. It seeks to negotiate held in U.S. dollars. The exposure our entire portfolio globally on a quarterly basis and reports on agreements with creditors and $12 arising from assets denominated in currencies other than U.S. dollars is shareholders to share the burden of the portfolio performance to the billion in FY13. hedged into U.S. dollars to manage restructuring so problems can be Board annually. Our portfolio worked out while the project contin- currency risk. The level of these teams, largely based in field offices, ues to operate. assets is determined with a view to complement global reviews with Investors and other partners ensure sufficient resources to meet asset-by-asset quarterly reviews. participating in IFC’s operations are commitments even during times of On the corporate level, IFC com- kept regularly informed on project market stress. bines the analysis of our $50 billion developments. IFC consults or seeks portfolio performance with projec- their input as appropriate. FY13 BORROWING IN tions of global macroeconomic and INTERNATIONAL MARKETS market trends to inform decisions TREASURY SERVICES Amount (USD about our future investments. IFC Currency equivalent) Percent IFC funds lending by issuing bonds also regularly tests the performance U.S. dollar 6,597,029,098 55.80% in international capital markets. of the portfolio against possible We are often the first multilateral Australian dollar 1,377,411,350 11.60% macroeconomic developments in institution to issue bonds in the local Brazilian real 891,776,917 7.50% emerging markets to identify and currencies of emerging markets. New Zealand dollar 792,480,000 6.70% proactively address risks. Stress tests Most of IFC’s lending is denomi- Japanese yen 605,262,000 5.10% serve as a basis to determine the nated in U.S. dollars, but we borrow Russian ruble 488,293,678 4.10% potential impact of macroeconomic in a variety of currencies to diversify Turkish lira 368,637,282 3.10% events on the IFC portfolio. access to funding, reduce borrowing On the project level, IFC actively costs, and help develop local capital monitors compliance with invest- markets. IFC’s borrowings have con- ment agreements, visits sites to tinued to keep pace with our lending. evaluate project status, and helps New borrowings in the international identify solutions to address poten- markets totaled the equivalent of tial problems. We systematically about $12 billion in FY13. THE POWER OF PARTNERSHIPS _ 97 CAPITAL ADEQUACY AND In FY13, IFC’s risks. Aggregating these risks deter- FINANCIAL CAPACITY debt-to-equity mines our estimate of the minimum ratio was amount of capital that we must hold Sound risk management plays a to retain IFC’s triple-A rating. crucial role in ensuring IFC’s ability to fulfill our development mandate. 2.6:1 IFC’s total resources available consist of paid-in capital, retained The very nature of IFC’s business, as well within earnings net of designations and a long-term investor in dynamic yet the 4:1 limit certain unrealized gains, and total volatile emerging markets, exposes prescribed by our financial loan-loss reserves. The excess avail- us to financial and operational risks. policies. able capital, beyond what is required Prudent risk management and a to support existing business, allows sound capital position enable us to for future growth of our portfolio preserve our financial strength and while also providing a buffer against play a countercyclical role during unexpected external shocks. times of economic and financial As of June 2013, total resources turmoil. In addition, IFC’s financial available reached $20.5 billion, strength results in low borrowing while the minimum capital require- costs, allowing us to provide afford- ment totaled $16.8 billion. As of June able financing to our clients. 2013, IFC’s debt-to-equity ratio was The soundness and quality of 2.6:1, well within the limit of 4:1 pre- IFC’s risk management and financial scribed by our financial policies. position can be seen in our triple-A credit rating, which has been main- tained since coverage began in 1989. We assess IFC’s minimum capital requirement in accordance with our economic capital framework, which is aligned with the Basel framework and leading industry practice. Economic capital acts as a common currency of risk, allowing us to model and aggregate the risk of losses from a range of different investment products as well as other 98 _ IFC ANNUAL REPORT 2013 WORKING RESPONSIBLY IFC’S APPROACH TO SUSTAINABILITY The IFC Performance Standards have SUSTAINABILITY IN PRACTICE become globally recognized as a lead- Businesses operate in a dynamic landscape. ing benchmark for environmental and IFC believes that sound economic growth, In a time of climate change, resource social risk management in the private driven by private sector development, is scarcities, and rising social pressures, envi- sector. They are reflected in the Equator crucial to poverty reduction. ronmental, social, and governance issues Principles, now used by 76 financial insti- In our investment and advisory activ- are increasingly important for businesses tutions around the world. In addition, ities across the globe, we consider four and for our clients. other financial institutions also reference dimensions of sustainability— financial, IFC believes that doing business sus- IFC’s Performance Standards in their poli- economic, environmental, and social. Being tainably drives positive development cies— including 15 European Development financially sustainable enables IFC and our outcomes. Our Sustainability Framework Finance Institutions and 32 Export Credit clients to work together to make a long- and advice to clients help them find oppor- Agencies from countries belonging to the term contribution to development. Making tunities for growth and innovation. It Organization for Economic Co-operation our projects economically sustainable also promotes sound environmental and and Development. ensures that they can contribute meaning- social practices, broadens our development IFC clients continue to indicate that fully to the host economies. impact, and encourages transparency our environmental and social expertise Ensuring environmental sustainabil- and accountability. is an important factor in their decision to ity in our clients’ operations and supply This framework articulates IFC’s work with us. Our annual client survey chains helps protect and conserve natural strategic commitment to sustainable shows that more than 90 percent of the resources, mitigate environmental degra- development and is an integral part of our clients that received support from us on dation, and address the global challenge of approach to risk management. It enables environmental and social matters found climate change. us to manage a diverse client base that our assistance to be helpful. They said it IFC is the first international finance includes both advisory and investment helped them improve relationships with institution to comprehensively incorpo- clients— many of which are finan- stakeholders, strengthen brand value and rate the concept of “ecosystem services” cial intermediaries. recognition, and establish sound risk- in our environmental and social policies. management practices. These are naturally occurring services that THE IFC PERFORMANCE STANDARDS benefit people and businesses— providing, When a project is proposed for At the core of the framework are eight financing, IFC conducts a social and envi- among other things, food, fresh water, and IFC Performance Standards that address ronmental review as part of our overall medicinal plants. They underscore the eco- a range of environmental and social issues due diligence. This review takes into nomic and societal benefits of maintaining facing the private sector. These standards account the client’s assessment of the a healthy environment. are designed to help clients avoid, mitigate, project’s impact and the client’s commit- With climate risk included in the and manage risk as a way of doing business ment and capacity to manage it. It also Sustainability Framework, IFC has scaled sustainably. They help them devise solu- assesses whether the project adhered to up the development of climate tools and tions that are good for business, good for the IFC Performance Standards. Where programs of climate risk assessment investors, and good for the environment there are gaps, we and the client agree on and adaptation for clients. and communities. an Environmental and Social Action Plan We support social sustainability by This can include reducing costs through to ensure that the standards are met over working to improve living and working improved energy efficiency, increasing time. We supervise our projects through- standards, strengthen communities, revenue and market share through envi- out the life of our investment, monitoring consult with indigenous peoples, and ronmentally and socially sound products client commitments to environmental and promote respect for key issues relevant and services, or forging better stakeholder social performance. to business and human rights. IFC’s relations through robust engagement. approach to gender is integrated and main- In situations where the Performance streamed throughout the Performance Standards cannot be applied appropri- Standards, reflecting the expectation that ately (for example, short-term and trade these issues will be general requirements finance), IFC has developed risk-screening protecting all workers, and reducing risks tools to achieve the objectives of the and impacts to all communities. These Sustainability Framework. THE POWER OF PARTNERSHIPS _ 99 standards recognize the importance of IFC also helps strengthen corporate gov- Our IFC Waste Challenge campaign both addressing differentiated impacts ernance by developing training materials encouraged over a dozen country offices and ensuring gender-responsive consulta- and institution-building tools and products. to implement new waste programs, and tion processes. This includes tools that can help compa- more than 830 staff from over 65 coun- IFC is committed to ensuring that the nies in the areas of corporate governance tries to make personal commitments to benefits of economic development are associations, codes and scorecards, board reduce waste via an online map, entitled shared with those who are poor or vul- leadership training, dispute resolution, and “IFC Pledge.” nerable, and that development takes place the training of business reporters. IFC headquarters set the first waste in a sustainable manner. We also see sus- Strong corporate governance depends on target: to reduce overall waste tonnage by tainability as an opportunity to transform diversity in board leadership. We strive to 10 percent and to improve its combined markets, drive innovation, and add value to increase the number of women who serve recycling/composting rate from 35 per- our clients by helping them improve their as nominee directors on the boards of our cent to 85 percent by FY15. A new waste business performance. clients. Nearly 20 percent of IFC nominee system was implemented, and an interim directors are women. We are committed to audit showed we are on track to meet CORPORATE GOVERNANCE increasing that share to 30 percent by 2015. or exceed our FY15 target. In addition, Improving corporate governance— among 58,876 pounds of office supplies and fur- OUR FOOTPRINT COMMITMENT niture at headquarters were donated to our clients and across the private sector in developing countries— is a priority for IFC. At IFC, we aim to make sustainability an charitable organizations. We provide advice on good practices for integral part of our culture and way of In FY12, carbon emissions from improving board effectiveness, strengthen- doing business. By continually improving IFC’s global internal business operations ing shareholder rights, and enhancing the our environmental and social performance, totaled about 47,800 metric tons of carbon governance of risk management, internal we commit to the same standards as we ask dioxide equivalent. IFC has collected and controls and corporate disclosure. We also of our clients. reported data on our global carbon foot- advise regulators, stock markets, and oth- IFC took a more global approach to print since FY07. ers with an interest in improving corporate our Footprint Commitment in FY13. For IFC continues to be carbon-neutral for governance. We are ramping up our corpo- example, electricity use constitutes nearly our global corporate operations. To offset rate governance programs in underserved 30 percent of our global carbon footprint. our carbon footprint, we purchased car- areas of the world— especially in Africa, We invested in a power management system bon credits from LifeStraw “Carbon for Latin America, and South Asia. for all networked IFC computers, laptops, Water”— a unique program that distributes Our experience allows IFC to apply and monitors. IFC’s first global electricity water filters to low-income communities so global principles to the realities of the reduction initiative is estimated to reduce they avoid boiling water using wood, which private sector in developing countries. computer-associated electricity use by a generates greenhouse gases. This project As a result, development banks and other third, with a payback period of just one year. is reaching over 800,000 families, provid- investors working in emerging markets We also took a global approach to ing 4.5 million people with safe drinking now look to IFC for leadership on corpo- reducing our solid waste footprint. We water in rural Kenya while reducing car- rate governance. announced our first global target to reduce bon emissions. We do this in a variety of ways— paper consumption by 15 percent by FY15. including establishing the IFC Corporate Governance Methodology, a system for FY12 CARBON EMISSIONS INVENTORY FOR IFC’S GLOBAL BUSINESS OPERATIONS evaluating corporate governance risks Metric Tons of Carbon Dioxide Equivalent and opportunities that is recognized Business Travel 33,195.94 tCO2e 69% as the most advanced of its kind among HQ Office Electricity 7,512.34 tCO2e 16% development finance institutions. This Country- Office Electricity 4,703.90 tCO2e 10% methodology is the basis for a common Other 2,404.83 tCO2e 5% approach to corporate governance now TOTAL EMISSIONS 47,817.02 tCO2e implemented by more than 30 development IFC’s FY12 carbon emissions totaled approximately 47,800 metric tons of carbon dioxide equivalent.(tCO2e), which includes emissions from carbon finance institutions working in some of the dioxide, methane, and nitrous oxide. most challenging markets. 100 _ IFC ANNUAL REPORT 2013 OUR ACCESS TO INFORMATION POLICY development impact indicators when the AIP came into effect in 2012, will begin dis- As a global institution with opera- playing calendar-year results following the tions in many regions and sectors, IFC publication of the Annual Report. affects a diverse range of stakeholders. Increased transparency regarding Transparency and accountability are investments through financial intermedi- fundamental to fulfilling our develop- aries includes the periodic disclosure of ment mandate. the list of names, locations, and sectors of IFC’s Access to Information Policy, high-risk sub-projects supported by IFC’s which came into effect in 2012, improves investments in Private Equity Funds. our ability to communicate our devel- IFC’s project-level and Annual Report opment impact and how we manage data sets are now also available on the environmental and social risk. This World Bank Group’s Open Finances increased transparency about our projects platform. This initiative increases the and investments allows for more informed accessibility of IFC’s project and financial dialogue and feedback. information, and enables users to slice and IFC now discloses information on the visualize the data as they choose. environmental, social, and development While IFC maintains provisions to pro- impact of our projects during all stages of tect commercially sensitive, deliberative, the investment cycle. These requirements, and confidential information, stakeholders which place a greater emphasis on results may now pursue an independent two-stage reporting, also apply to investments made appeals mechanism to challenge decisions through financial intermediaries— an not to disclose particular information. important and growing area of IFC’s IFC believes that greater transparency portfolio. can improve business performance and The disclosure of development results promote good governance. We believe that for IFC’s investment projects is being over time the changes will result in better phased in by region, with our Latin project outcomes, increased awareness America and the Caribbean, East Asia and on the part of affected communities, and the Pacific, and Europe and Central Asia stronger relationships with stakeholders. regions beginning disclosure in FY13. For more information, visit www.ifc.org All other regions will begin disclosure of /disclosure. development results in 2014. IFC’s advisory services projects, which began disclosing THE POWER OF PARTNERSHIPS _ 101 INDEPENDENT ASSURANCE REPORT ON A SELECTION OF SUSTAINABLE DEVELOPMENT INFORMATION In response to a request made by IFC, we performed a review on a selection of sustainable development information in the Annual Report for the financial year ending June 30, 2013, including quantitative indicators (“the Indicators”) and qualitative statements (“the Statements”). We selected statements that were deemed to be of particular stakeholder interest, and involved a potential reputation risk for IFC, together with statements on corporate responsibility management and performance. The Indicators and the Statements are related to the following material areas: MATERIAL AREAS STATEMENTS INDICATORS IFC Policy “The IFC Development Goals” (p. 80) “IFC’s approach to sustainability” (p. 98) Development effectiveness “How We Measure Development Results” (pp. 80–87) Investment projects Rated High: 66% (p. 86); and detailed values of investments and advisory services “Investment Results” (pp. 82–87) by industry (p. 87), by region (p. 87), and by performance area “Advisory Results” (pp. 84–87) (p. 87); and weighted and unweighted scores (p. 87) Advisory Projects Rated High: 76% (p. 86); and detailed values by business line (p. 87) and by region (p. 87) Reach “Local capital markets, an effective way to spur growth” (p. 54) Jobs supported (millions) 2.7 “Creating Opportunity Where It’s Needed Most” (pp. 68–69) Patients reached (millions) 17.2 Students reached (millions) 1.0 Gas distribution (millions of persons reached) 33.8 Power distribution (millions of persons reached) 45.7 Water distribution (millions of persons reached) 42.1 Number and amounts of microfi nance loans and SME loans for CY12 (p. 86) Number of loans Amount Type of loans (millions) ($ billions) Microloans 22.9 25.13 Small and medium loans 5.8 241.3 Environmental and social ratings “IFC Performance Standards” (p. 98) IFC commitments by Environmental “Sustainability in Practice” (pp. 98–99) and social category (p. 28) Commitments Number Category ($ millions) of projects A 884 17 B 5,490 167 C 6,764 269 FI 1,751 48 FI-1 450 14 FI-2 2,203 59 FI-3 807 38 Total 18,349 612 Sustainable business “Climate Change, addressing global warming” (pp. 36–37) Commitments in Climate-related investments for FY13 (p. 36): “Gender — boosting development through equality” (p. 60) “IFC Advisory Services” (p. 74) “Our Footprint Commitment” $2.5 billion Carbon Emissions (p. 99): 47.8 tCO2 equivalent in (p. 99) financial year 2012 Infl uence on Private Sector Development “Food Security, expanding opportunity for small farmers” (p. 47) “Job creation, the surest pathway out of poverty” (p. 43) “Small and medium enterprises, Helping Businesses Thrive” (p. 45) “Middle income countries, promoting Prosperity for all” (p. 61) Engagement in the poorest “Infrastructure — Promoting Prosperity in Africa” (p 51) and fragile countries “South-South investments, a vital force for development” (p. 53) “Generating Conditions for Sustainable Growth” (pp. 58–59) “IDA countries, creating opportunities for the poorest” (p. 63) Working with others “Mobilization, opening new markets for Private investment” (p. 52) “Working with Donor Partners” (pp. 94–95) “Working with Other Development Institutions” (p. 95) Asset management “IFC Asset Management Company” (p. 75) Evaluation of IFC’s activity “Independent Evaluation Group” (p. 92) “Office of the Compliance Advisor Ombudsman” (pp. 92–93) 102 _ IFC ANNUAL REPORT 2013 Our review aimed to provide limited assur- » We reviewed the content of the Annual INFORMATION ABOUT ance1 that: Report to identify key statements regard- THE REPORTING CRITERIA AND THE 1. the Indicators were prepared in accor- ing the sustainability and development STATEMENT PREPARATION PROCESS dance with the reporting criteria areas listed above. With regards to the Reporting Criteria and applicable during fiscal year 2013 (the » At the corporate level, we conducted the Statement preparation policies and “Reporting Criteria”), consisting in IFC interviews with more than 25 persons principles, we wish to make the follow- instructions, procedures and guidelines responsible for reporting to assess the ing comments: specific for to each indicator, a summary application of the Reporting Criteria or to of which is provided in the Annual substantiate the Statements. Relevance Report, for the indicators related to » At the corporate level, we implemented IFC presents sustainability information Commitments by Environmental and analytical procedures and verified, on a on its own impact and on environmental Social Category (p. 28) and Development test basis, the calculations and the consol- and social risks, impacts and outcomes of effectiveness of investments and advi- idation of the Indicators. projects it financed directly or through sory services (Monitoring and tracking » We collected supporting documents for financial intermediaries. This level of results, p. 81) and on IFC’s website for the Indicators or Statements, such as disclosure is in line with that of other the others. reports to the board of directors or other multilateral development banks. A specific 2. the Statements have been presented meetings, loan agreements, internal and effort is made by IFC to assess the develop- in accordance with “IFC’s Access to external presentations and reports, or ment results of its Investment and Advisory Information Policy,” which is available survey results. Services, notably through its Development on IFC’s website2 and the principles » We went to the Hong Kong office in order Outcome Tracking System (DOTS), the of relevance, completeness, neutrality, to meet with result measurement special- implementation of its evaluation strategy clarity and reliability as defined by ists, investment officers, portfolio manag- and the testing of IFC Development Goals. international standards.3 ers and others in charge of gathering data However, we note that IFC would It is the responsibility of IFC to prepare from clients, consolidating it and review- benefit from further improving the rele- the Indicators and Statements, to provide ing it locally. vance and number of indicators (beyond information on the Reporting Criteria and » We reviewed the presentation of the the Environmental and Social (E&S) to compile the Annual Report. Statements and the Indicators in the management system) in the E&S DOTS It is our responsibility to express a Annual Report and the associated notes performance area, in order to better mea- conclusion on the Indicators and the on methodology. sure how clients are improving their own Statements based on our review. Our E&S performance. This is of particular review was conducted in accordance with LIMITATIONS OF OUR REVIEW importance with financial institutions the ISAE 3000, International Standard on Our review was limited to the Statements where E&S impacts are indirect. Assurance Engagements from IFAC.4 Our and Indicators identified in the table independence is defined by IFAC profes- above and did not cover other disclosures Completeness sional code of ethics. in the Annual Report. The Indicators’ reporting perimeter covers Our tests were limited to document the most relevant IFC activities. The scope NATURE AND SCOPE OF OUR REVIEW reviews and interviews at IFC’s headquar- covered by each indicator has been indi- We performed the following review to be ters in Washington, DC and Hong Kong. cated in the comments next to the data in able to express a conclusion: Within the scope of work covered by this the Annual Report. » We assessed the Reporting Criteria, statement, we did not participate in any With the growing importance of Trade policies and principles, with respect to activities with external stakeholders or Finance activities in IFC’s portfolio, in their relevance, their completeness, their clients, nor did we conduct testing or inter- 2012, IFC launched a pilot DOTS client neutrality and their reliability. views aimed at verifying the validity of data collection survey for its Global Trade information related to individual projects. Finance Program which provided a report 1. A higher level of assurance would have required more extensive work. 2. http://www.ifc.org/ifcext/disclosure.nsf/content/disclosure_policy 3. ISAE 3000 from IFAC, Global Reporting Initiative (GRI), or AA1000 Accountability Standard. 4. ISAE 3000: “Assurance Engagement other than reviews of historical data,” International Federation of Accountants, International Audit and Assurance Board, December 2003. THE POWER OF PARTNERSHIPS _ 103 of baseline data findings and which should consistent with IFC’s own definitions and LETTER TO THE BOARD OF GOVERNORS enable IFC to start reporting ratings soon. calculation methodologies. The Board of Directors of IFC has had Neutrality and clarity CONCLUSION this annual report prepared in accordance IFC provides information on the methodol- with the Corporation’s by-laws. Jim Yong Based on our review, nothing has come to ogies used to establish the Indicators in the Kim, President of IFC and Chairman of our attention that causes us to believe that: comments next to the published data or in the Board of Directors, has submitted this » the Indicators were not established, in all the related sections. Further information is report with the audited financial state- material aspects, in accordance with the available on the IFC website. ments to the Board of Governors. The Reporting Criteria; We have noted the efforts made, together Directors are pleased to report that, for » the Statements were not presented, with the other principal International the fiscal year ended June 30, 2013, IFC in all material aspects, in accordance Finance Institutions, to harmonize the expanded its sustainable development with “IFC’s Policy on Disclosure of definitions of the Reach indicators, which impact through private sector investments, Information” and the principles of rele- should significantly enhance the consis- Advisory Services, and fund management. vance, completeness, neutrality, clarity tency of IFIs’ communication on the reach and reliability as defined by interna- of their activities. tional standards. Reliability Paris-La Défense, France, August 5, 2013 IFC has made progress in strengthen- ing internal controls on “Climate related The Independent Auditors investments”, “micro loans” and “small & ERNST & YOUNG et Associés medium loans” (MSME reach indicators). In addition to the numerous controls performed at the corporate and project level, IFC should implement further checks at the source information used to track Reach indicators. As these data often come Eric Duvaud directly from external sources, and can Partner, Cleantech and Sustainability sometimes be based on estimates rather than clients’ audited financial statements, it is essential to ensure that data reported are 104 _ IFC ANNUAL REPORT 2013 FINANCIAL SUMMARY FINANCIAL PERFORMANCE SUMMARY The overall market environment has a significant influence on IFC’s financial performance. The main elements of IFC’s net income and comprehensive income and influences on the level and variability of net income and comprehensive income from year to year are: Elements Significant Influences Net income: Yield on interest-earning assets Market conditions including spread levels and degree of competition. Nonaccruals and recoveries of interest on loans formerly in nonaccrual status and income from participation notes on individual loans are also included in income from loans. Liquid asset income Realized and unrealized gains and losses on the liquid asset portfolios, which are driven by external factors such as: the interest rate environment; and liquidity of certain asset classes within the liquid asset portfolio. Income from the equity investment Global climate for emerging markets equities, fl uctuations in currency and commodity markets and portfolio company-specific performance for equity investments. Performance of the equity portfolio (principally realized capital gains, dividends, equity impairments, gains on non-monetary exchanges and unrealized gains and losses on equity investments). Provisions for losses on loans and Risk assessment of borrowers and probability of default and loss given default. guarantees Other income and expenses Level of advisory services provided by IFC to its clients, the level of expense from the staff retirement and other benefits plans, and the approved administrative and other budgets. Gains and losses on other non- Principally, differences between changes in fair values of borrowings, including IFC’s credit spread, and trading financial instruments associated derivative instruments and unrealized gains associated with the investment portfolio including accounted for at fair value puts, warrants and stock options which in part are dependent on the global climate for emerging markets. These securities are valued using internally developed models or methodologies utilizing inputs that may be observable or non-observable. Grants to IDA Level of the Board of Governors–approved grants to IDA. Other comprehensive income: Unrealized gains and losses on Global climate for emerging markets equities, fl uctuations in currency and commodity markets and listed equity investments and company-specific performance. Such equity investments are valued using unadjusted quoted market prices debt securities accounted for as and debt securities are valued using internally developed models or methodologies utilizing inputs that available-for-sale may be observable or non-observable. Unrecognized net actuarial gains Returns on pension plan assets and the key assumptions that underlay projected benefit obligations, and losses and unrecognized prior including financial market interest rates, staff expenses, past experience, and management’s best estimate service costs on benefit plans of future benefit cost changes and economic conditions. THE POWER OF PARTNERSHIPS _ 105 NET INCOME Net gains on other non-trading financial instruments accounted for at fair value totaled $422 million in FY13, $641 million higher IFC reported income before net gains and losses on other than net losses of $219 million in FY12. Accordingly, IFC has non-trading financial instruments accounted for at fair value and reported income before grants to IDA of $1,350 million, $308 mil- grants to IDA of $928 million in FY13, as compared to $1,877 mil- lion lower than income before grants to IDA of $1,658 million lion in FY12. in FY12. The decrease in income before net gains and losses on other Grants to IDA totaled $340 million in FY13, as compared to non-trading financial instruments accounted for at fair value and $330 million in FY12. Net loss attributable to noncontrolling grants to IDA in FY13 when compared to FY12 was principally as a interest totaled $8 million in FY13 as compared to $0 in FY12. result of the following (US$ millions): Accordingly, net income attributable to IFC totaled $1,018 million in FY13, as compared with a net income of $1,328 million in FY12. Increase IFC’s net income (loss) for each of the past five fiscal years (decrease) FY13 vs FY12 ended June 30, 2013 is presented below (US$ millions): Realized capital gains on equity investments $(1,079) Provisions for losses on loans, guarantees and other receivables (126) NET INCOME (LOSS) Foreign currency transaction gains and losses on non-trading For fiscal years ended June 30 (US$ millions) activities (110) Advisory services expenses, net (91) 2013 $1,018 Expenses from pension and other postretirement benefit plans (77) 2012 $1,328 Unrealized gains on equity investments 154 2011 $1,579 Income from liquid asset trading activities 187 2010 $1,746 Other-than-temporary impairments on equity investments 251 2009 $(151) Other, net (58) Overall change $(949) 106 _ IFC ANNUAL REPORT 2013 The table below presents selected financial data for the last five fiscal years (in millions of US dollars, except where otherwise stated): Selected Financial Data 2013 2012 2011 2010 2009 as of and for the years ended June 30 NET INCOME HIGHLIGHTS: Income from loans and guarantees $ 1,059 $ 938 $ 877 $ 801 $ 871 (Provision) release of provision for losses on loans & guarantees (243) (117) 40 (155) (438) Income (loss) from equity investments 752 1,457 1,464 1,638 (42) Of which: Realized gains on equity investments 921 2,000 737 1,290 990 Gains on non-monetary exchanges 6 3 217 28 14 Unrealized gains (losses) on equity investments 26 (128) 454 240 (299) Dividends and profit participations 248 274 280 285 311 Other-than-temporary impairments (441) (692) (218) (203) (1,058) Fees and other (8) – (6) (2) – Income from debt securities 5 81 46 108 71 Income from liquid asset trading activities 500 313 529 815 474 Charges on borrowings (220) (181) (140) (163) (488) Other income Service fees 101 60 88 70 39 Advisory services income 239 269 – – – Other 101 119 134 106 114 Other expenses Administrative expenses (845) (798) (700) (664) (582) Advisory services expenses (351) (290) (153) (108) (134) Expense from pension and other postretirement benefit plans (173) (96) (109) (69) (34) Other (32) (23) (19) (12) (14) Foreign currency transaction gains (losses) on non-trading activities 35 145 (33) (82) 10 Income (loss) before net gains and losses on other non-trading financial instruments accounted for at fair value and grants to IDA 928 1,877 2,024 2,285 (153) Net gains (losses) on other non-trading financial instruments 422 (219) 155 (339) 452 Of which: Realized gains 35 11 63 5 – Gains on non-monetary exchanges 2 10 22 6 45 Unrealized gains (losses) 385 (240) 70 (350) 407 Income before grants to IDA 1,350 1,658 2,179 1,946 299 Grants to IDA (340) (330) (600) (200) (450) Net income (loss) 1,010 1,328 1,579 1,746 (151) Less: Net loss attributable to noncontrolling interests 8 – – – – Net income (loss) attributable to IFC $ 1,018 $ 1,328 $ 1,579 $ 1,746 $ (151) THE POWER OF PARTNERSHIPS _ 107 2013 2012 2011 2010 2009 as of and for the years ended June 30 CONSOLIDATED BALANCE SHEET HIGHLIGHTS: Total assets $ 77,525 $ 75,761 $ 68,490 $ 61,075 $ 51,483 Liquid assets, net of associated derivatives 31,237 29,721 24,517 21,001 17,864 Investments 34,677 31,438 29,934 25,944 22,214 Borrowings outstanding, including fair value adjustments 44,869 44,665 38,211 31,106 25,711 Total capital $ 22,275 $ 20,580 $ 20,279 $ 18,359 $ 16,122 Of which: Undesignated retained earnings $ 18,435 $ 17,373 $ 16,032 $ 14,307 $ 12,251 Designated retained earnings 278 322 335 481 791 Capital stock 2,403 2,372 2,369 2,369 2,369 Accumulated other comprehensive income (AOCI) 1,121 513 1,543 1,202 711 Noncontrolling interests 38 – – – – FINANCIAL RATIOS:1 Return on average assets (GAAP basis)2 1.3% 1.8% 2.4% 3.1% (0.3%) Return on average assets (non-GAAP basis)3 0.9% 2.8% 1.8% 3.8% (1.1%) Return on average capital (GAAP basis) 4 4.8% 6.5% 8.2% 10.1% (0.9%) Return on average capital (non-GAAP basis)5 3.1% 9.9% 6.0% 11.8% (3.0%) Cash and liquid investments as a percentage of next three years’ estimated net cash requirements 77% 77% 83% 71% 75% External funding liquidity level 6 309% 327% 266% 190% 163% Debt to equity ratio7 2.6:1 2.7:1 2.6:1 2.2:1 2.1:1 Total reserves against losses on loans to total disbursed portfolio 8 7.2% 6.6% 6.6% 7.4% 7.4% Capital measures: Capital to risk-weighted assets ratio9 n/a n/a n/a n/a 44% Total Resources Required ($ billions)10 16.8 15.5 14.4 12.8 10.9 Total Resources Available ($ billions)11 20.5 19.2 17.9 16.8 14.8 Strategic Capital12 3.8 3.7 3.6 4.0 3.9 Deployable Strategic Capital13 1.7 1.8 1.8 2.3 2.3 Deployable Strategic Capital as a percentage of Total Resources Available 8% 9% 10% 14% 16% 1. Certain fi nancial ratios, as described below, are calculated excluding the effects of unrealized gains and losses on investments, other non-trading fi nancial instruments, AOCI, and impacts from consolidated Variable Interest Entities (VIEs). 2. Net income for the fiscal year as a percentage of the average of total assets at the end of such fiscal year and the previous fiscal year. 3. Net income excluding unrealized gains and losses on certain investments accounted for at fair value, income from consolidated VIEs, and net gains and losses on non-trading fi nancial instruments accounted for at fair value, as a percentage of total disbursed loan and equity investments (net of reserves) at cost, liquid assets net of repos, and other assets averaged for the current period and previous fiscal year. 4. Net income for the fiscal year as a percentage of the average of total capital (excluding payments on account of pending subscriptions) at the end of such fiscal year and the previous fiscal year. 5. Net income excluding unrealized gains and losses on certain investments accounted for at fair value, income from consolidated VIEs, and net gains and losses on non-trading fi nancial instruments accounted for at fair value, as a percentage of paid-in share capital and retained earnings (before certain unrealized gains and losses and excluding cumulative designations not yet expensed) averaged for the current period and previous fi scal year. 6. IFC’s objective is to maintain a minimum level of liquidity, consisting of proceeds from external funding to cover at least 65% of the sum of (i) 100% of committed but undisbursed straight senior loans; (ii) 30% of committed guarantees; and (iii) 30% of committed client risk management products. As of FY13 Q3, IFC’s management decided to modify the External Funding Policy by eliminating the cap on the operational range of 65% to 85%. 7. Leverage (Debt/equity) ratio is defi ned as the number of times outstanding borrowings plus outstanding guarantees cover paid-in capital and accumulated earnings (net of retained earnings designations and certain unrealized gains/losses). 8. Total reserves against losses on loans to total disbursed loan portfolio is defi ned as reserve against losses on loans as a percentage of the total disbursed loan portfolio at the end of the fiscal year. 9. The ratio of capital (including paid-in capital, retained earnings, and portfolio (general) loan loss reserves) to risk-weighted assets, both on- and off-balance sheet. The ratio does not include designated retained earnings reported in total capital on IFC’s consolidated balance sheet. IFC’s Board of Directors has approved the use of a risk-based economic capital framework beginning in the year ended June 30, 2008 (FY08). Parallel use of the capital to risk-weighted assets ratio has now been discontinued. 10. The minimum capital required consistent with the maintenance of IFC’s AAA rating. It is computed as the aggregation of risk-based economic capital requirements for each asset class across the Corporation. 11. Paid-in capital plus retained earnings net of designated retained earnings plus general and specific reserves against losses on loans. This is the level of available resources under IFC’s risk-based economic capital adequacy framework. 12. Total resources available less total resources required. 13. 90% of total resources available less total resources required. 108 _ IFC ANNUAL REPORT 2013 COMMITMENTS In FY13, total commitments were $24,853 million, compared with $20,358 million in FY12, an increase of 22%, of which IFC commit- ments totaled $18,349 million ($15,462 million — FY12) and Core Mobilization totaled $6,504 million ($4,896 million — FY12). FY13 and FY12 commitments and Core Mobilization comprised the following (US$ millions): FY13 FY12 Total commitments1 $24,853 $ 20,358 IFC commitments Loans $ 8,520 $ 6,668 Equity investments 2,732 2,282 Guarantees: Global Trade Finance Program 6,477 6,004 Other 482 398 Client risk management 138 110 Total IFC commitments $ 18,349 $ 15,462 Core Mobilization Loan participations, parallel loans, and other mobilization Loan participations $ 1,829 $ 1,764 Parallel loans 1,269 927 Other mobilization 480 814 Total loan participations, parallel loans and other mobilization $ 3,578 $ 3,505 AMC Equity Capitalization Fund $ 214 $ 24 Sub-debt Capitalization Fund 209 215 ALAC Fund 210 190 Africa Capitalization Fund 92 8 Russian Bank Cap Fund 43 – Total AMC $ 768 $ 437 Other initiatives Global Trade Liquidity Program and Critical Commodities Finance Program $ 1,096 $ 850 Public Private Partnership (PPP) 942 41 Infrastructure Crisis Facility 110 63 Debt & Asset Recovery Program 10 – Total other initiatives $ 2,158 $ 954 Total Core Mobilization $ 6,504 $ 4,896 Core Mobilization Ratio 0.35 0.32 1. Debt security commitments are included in loans and equity investments based on their predominant characteristics. CORE MOBILIZATION RATIO The Core Mobilization ratio is defined as: Loan participations + parallel loans + sales of loans and other mobilization + non-IFC investment part of structured finance which meets core mobilization criteria + non-IFC commitments in Initiatives + non-IFC investments committed in funds managed by AMC + PPP Mobilization Commitments (IFC investments + IFC portion of structured finance + IFC commitments in new Initiatives + IFC investments committed in funds managed by AMC) For each dollar that IFC committed, IFC mobilized (in the form of loan participations, parallel loans, other mobilization, the non-IFC portion of structured finance and the non-IFC commitments in Initiatives, and the non-IFC investments committed in funds managed by AMC) $0.35 in FY13 ($0.32 in FY12). THE POWER OF PARTNERSHIPS _ 109 AMC The activities of the funds managed by AMC at June 30, 2013 and June 30, 2012 can be summarized as follows (US$ millions unless otherwise indicated): Equity Sub-Debt Africa Global Capitalization Capitalization Capitalization Russian Bank Infrastructure Fund Fund ALAC Fund Fund Cap Fund Catalyst Funds Fund Total Assets under management as of June 30, 2013 $ 1,275 $ 1,725 $ 1,000 $ 182 $ 550 $ 282 $ 500 $ 5,514 From IFC 775 225 200 – 250 75 100 1,625 From other investors 500 1,500 800 182 300 207 400 3,889 For the year ended June 30, 2013 Fund Commitments to Investees: From IFC 332 31 52 – 35 – – 450 From other investors 214 209 210 92 43 – – 768 Disbursements from investors to Fund: From IFC 336 33 63 – 38 1 1 472 From other investors 217 223 252 94 46 2 3 837 Disbursements made by Fund 546 249 297 91 78 – – 1,261 Disbursements made by Fund (number) 7 5 12 4 2 – – 30 Equity Sub-Debt Africa Global Capitalization Capitalization Capitalization Russian Bank Infrastructure Fund Fund ALAC Fund Fund Cap Fund Catalyst Funds Fund Total Assets under management as of June 30, 2012 $ 1,275 $ 1,725 $ 1,000 $ 182 $ 275 $ – $ – $ 4,457 From IFC 775 225 200 – 125 – – 1,325 From other investors 500 1,500 800 182 150 – – 3,132 For the year ended June 30, 2013 Fund Commitments to Investees: From IFC 36 32 48 – – – – 116 From other investors 24 215 190 8 – – – 437 Disbursements from investors to Fund: From IFC 62 28 52 – – – – 142 From other investors 40 186 208 14 – – – 448 Disbursements made by Fund 97 208 174 11 – – – 490 Disbursements made by Fund (number) 6 2 8 3 – – – 19 110 _ IFC ANNUAL REPORT 2013 THE POWER OF PARTNERSHIPS _ 111 STAY CONNECTED WEB AND SOCIAL MEDIA RESOURCES IFC’s website, www.ifc.org, provides IFC ONLINE Photography Page 4: Ray Rayburn/WB Photolab comprehensive information on every IFC website ifc.org Page 6: Iwan Bagus Page 8–9: Iwan Bagus aspect of our activities. It includes con- Annual Report Page 18–19: Margie Politzer/Getty Page 20–21: Eightfish/Getty tact information for offices worldwide, ifc.org/AnnualReport Page 22–23: Commerce and Culture Agency/Getty news releases and feature stories, data Social Media Index Page 24–25: Dan Josephson/Getty ifc.org/SocialMediaIndex on results measurement, disclosure Page 34: Vaner Cassaes Facebook Page 35: Sonata Dkhar documents for proposed investments, facebook.com/IFCwbg Page 36: Abengoa Page 37: Gerardo Salazar (top); and key policies and guidelines affect- Twitter Abengoa (bottom) twitter.com/IFC_org Page 38: Tom Cockrem/Getty ing IFC and our client companies. Page 39: Johannes Wiebus-O’Heron LinkedIn The online version of IFC’s Annual on.ifc.org/ifcLinkedIn Page 42: Page 43: Manas Ranjan Ojha Etileno XXI Report 2013 provides downloadable Google+ Page 44: Jamie Marshall–Tribaleye Images/Getty gplus.to/IFCwbg PDFs of all materials in this volume Page 45: Mohamed Essa (left); Scribd Kushang Singh (right) and translations as they become scribd.com/IFCpublications Page 46: Tran Thiet Dung Page 47: Mackenzie Keller available. It is available at www.ifc YouTube Page 50: Rebecca Post .org/annualreport. The website also youtube.com/IFCvideocasts Page 51: Azito Energie (left); Abhay (right) provides more information on sustain- CREDITS Page 52: Lisa Dadlani Page 53: Apollo Tyres ability, including a Global Reporting IFC Annual Report Team Page 54: loveguli/Getty Bruce Moats Page 58: Andrew Testa/Panos Initiative index. 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