1. Critical voices on the World Bank and IMF Financial intermediaries: What’s the issue? Peter Chowla 4 June 2013

2. Critical voices on the World Bank and IMF @brettonwoodspr, @brettonwoods_ES http://www.brettonwoodsproject.org Overview Financial Intermediaries what are they? FI lending – how it works Concerns Justifications for FI use CAO report on FIs Options for challenging FIs

3. Critical voices on the World Bank and IMF @brettonwoodspr, @brettonwoods_ES What are they? Financial intermediaries are third-party financial entities such as banks, insurance companies, leasing companies, microfinance institutions, and private equity funds. http://www.brettonwoodsproject.org

4. Critical voices on the World Bank and IMF FI lending: how it works equity investments guarantees loans trade finance risk management products syndications IFC Financial Intermediary private equity fund investment bank commercial and retail bank non-banking microfinance institution other (e.g. credit guarantee company, real estate fund) Sub-project Micro- enterprises Small, medium and large companies Specific projects Individual household equity investments lending to businesses, including microfinance project finance (e.g. infrastructure projects) trade finance housing finance leasing consumer finance

5. Critical voices on the World Bank and IMF @brettonwoodspr, @brettonwoods_ES http://www.brettonwoodsproject.org Financial Intermediary Stats - IFC 47% IFC operations are through financial intermediaries in FY2011 Almost $4 billion committed in FY2012 categorised as FI risk category, 25% of FY2012 commitments (but excludes trade finance) But $10 billion in funds, trade finance & financial markets categories – more than 64% of FY2012 commitments Overall 45% of the portfolio in funds, trade finance and financial markets

6. Critical voices on the World Bank and IMF @brettonwoodspr, @brettonwoods_ES IFC FI stats – by destination http://www.brettonwoodsproject.org

7. Critical voices on the World Bank and IMF @brettonwoodspr, @brettonwoods_ES IFC FI stats – by sector Sectors (Consolidated) Number of Projects Total IFC Investment ($m) Grand Total41616,811 Commercial Banking - General1005,621 Private Equity / Venture Fund / Foreign Portfolio782,219 Commercial Banking - SME Finance471,867 Trade Finance121800 Insurance (Life and Non-life, General, Reinsurance)17740 Consumer Banking - Microfinance / Microfinance and Small Business35730 Commercial Banking - Short Term Finance6580 Capital Markets / Exchanges6507 Mortgage and Leasing Services25478 Finance Companies (Consumer Finance, Commercial Banking - Consumer Finance)16475 Microfinance and Small Business - Non Commercial Banking47426 http://www.brettonwoodsproject.org

8. Critical voices on the World Bank and IMF @brettonwoodspr, @brettonwoods_ES IFC FI stats – by country Country FY 2010-12 Total ($) Russian Federation1220.0 India874.8 China859.0 Turkey631.0 Vietnam493.3 Philippines456.6 Indonesia450.0 Nigeria447.7 Brazil417.6 Kenya378.0 http://www.brettonwoodsproject.org

9. Critical voices on the World Bank and IMF @brettonwoodspr, @brettonwoods_ES Concerns FIs allow bypassing of strict performance standards (social, environmental) as compliance is self-certified by IFC clients Who is leveraging whom? Problems with transparency and accountability No clear measurement or prioritisation of development impacts Impact of these interventions on the financial sector of developing countries Being used as a way to http://www.brettonwoodsproject.org

10. Critical voices on the World Bank and IMF @brettonwoodspr, @brettonwoods_ES Justifications for FI use Small-scale projects/loans are too time intensive for IFC staff to get involved in More efficient to use the private sector FIs know the market/clients better Want to build the capacity of local financial institutions – financial inclusion, market development, financial deepening http://www.brettonwoodsproject.org

11. Critical voices on the World Bank and IMF @brettonwoodspr, @brettonwoods_ES CAO report on FIs Compliance Advisor/Ombudsman (CAO) finished an evaluation of IFC FI projects last year Evaluation report was critical – saying that the IFC “doesn’t know” impact or risks IFC likely to use this as opportunity to reach out to NGOs in the next months http://www.brettonwoodsproject.org

12. Critical voices on the World Bank and IMF @brettonwoodspr, @brettonwoods_ES Options for challenging FIs General strategy – point to corporate welfare and lack of development impact Find bad projects (old strategy) that are funded by FI and make the link back to IFC (harder than before) Contest the financial sector model promoted by the IFC – involves challenging financialisation Work within the system to promote better development impact assessment and ESG monitoring http://www.brettonwoodsproject.org

13. Critical voices on the World Bank and IMF Bretton Woods Project http://www.brettonwoodsproject.org Twitter: @brettonwoodspr Peter Chowla pchowla@brettonwoodsproject.org