1. IFC Mobilization and Trust Funds Haleh Bridi Director, Partnership and Advisory Services Operations March 24, 2011 An overview

2. Context for Greater Partnership Role The financial crisis and tightening aid budgets have forced the development agencies, donor governments and foundations to rethink their business models and to find new and more efficient ways to channel aid with private funding to developing countries. Whereas public and private sources worked through complementary but parallel instruments until a few years ago, funding models now include far greater blending and pooling of private/public funds to achieve bigger leverage, larger reach and greater development impact (e.g. the Global Trade Liquidity Program-GTLP). IFC’s role is to act as a leading and trusted Convening party through its global and regional platforms. IFC has a variety of instruments (traditional Advisory Services trust funds, syndications, structured finance, Asset Management Company-AMC, initiatives, investment trust funds, and concessional financing), which fit donor priorities and can leverage IBRD, IDA and MIGA instruments in innovative ways. 2 Examples: The European Commission's formulation of a new EU Development Policy is centered around Private Sector Development (PSD). DFID just launched a new Private Sector Development department and other traditional bilateral donor agencies (U.K., Denmark, Sweden, Netherlands, etc) are increasingly putting PSD at the heart of their development strategies. Arab aid agencies too are moving into PSD-centered development programs, focused on job creation and growth.

3. IFC Mobilization  Mobilization is a strategic priority for IFC and has become central in IFC’s growth strategy and business model. Mobilization enables IFC to: be a ‘catalyst’ as built into its Articles of Agreement; substantially increase IFC’s development impact and additionality; further grow IFC’s business in IDA and fragile and conflict affected states; use partnerships to continue to grow in countries/sectors/clients where IFC has headroom constraints on its own account; broaden IFC’s reach through programmatic vehicles, in addition to IFC’s traditional project-by-project financing; achieve better efficiency gains through larger multilateral public/private platforms; increase IFC’s revenue base through cost recovery and fees. 3

4. 4 IFC Trust Funds Trust funds have been and remain the main instrument for managing donors’, clients’ and IFC’s contributions to IFC Advisory Services (AS). Donor funding represents 60% of total funding for AS. IFC targets the AS leverage ratio of 1:2 (on spending basis) by 2014, as agreed with the Board. Trust funds are increasingly used as a mobilization mechanism by IFC Investment Operations, especially in response to global challenges such as financial and food crises, climate change, etc. Investment trust funds and donor funded investments (DTFIs) received an impetus with the launch of IFC’s Global Trade Liquidity Program (GTLP) and the Climate Investment Funds (CIF). Trust funded activities are fully aligned with IFC’s overall regional and global strategies.

5. 5 IFC Trust Funds - Overall Trends IFCs trust fund operations are growing in size and complexity. IFC trust funds have significantly grown in FY09-FY10, reaching $1b. In FY10, cash contributions to and disbursements from IFC trust funds increased by 275% and 264% respectively. The spike was mainly due to the expansion of investment trust funds and DTFIs (e.g. GTLP). With a focus on mobilization, the growth of IFC trust funds is expected to continue.

6. 6 IFC Trust Funds Portfolio While IFC’s trust funds portfolio have increased sharply in volume in FY10, it has remained largely stable by the number of trust funds (247), with a small increase in the number of investment trust funds. Due to individual donor preferences and the nature of IFC’s investment operations, single-donor trust funds still represent a bulk of IFC’s trust funds portfolio (59% of total AS trust funds and 70% of Investment trust funds).

7. IFC Donors While IFC’s largest donors such as Netherlands, UK and Canada supported both AS and Investment trust funds, some donors showed preference towards either AS (e.g. Austria, Switzerland, Japan) or Investment (e.g. Saudi Arabia). In FY10, the largest donors for AS were Netherlands, UK, Austria, Switzerland, Canada, and Japan ($103m or 69% of the total). For Investment, the largest contributors were Saudi Arabia, UK and Canada ($832m or 93% of the total). 7 **Excluding WBG contribution

8. Trust Funds: Way Forward 8 Project-by-Project Funding Programmatic Funding Funding via Partnerships Project-by-Project Funding Programmatic Funding Funding via Partnerships A more programmatic approach: encourage donors to pool their funds and delegate more decision making authority to IFC More Partnership/Framework agreements with donors

9. 9 Trust Funds Alignment with IBRD IFC’s trust fund policies are aligned with IBRD trust funds:  Standard administration fees (5% for AS trust funds, 1.5%-2% for investment trust funds)  Minimum size of a trust fund (USD 250,000)  Non acceptance of tied funding and earmarking in multi-donor trust funds  WBG single audit and cash-based financial statements  IBRD accounting system for managing trust funds IFC Donor Portal is hosted on IBRD Client Connections and linked to the IBRD TF Donor Center (Roll out by end FY10). IFC Trust Funds Learning Accreditation Program (TFLAP) is similar to the Bank’s. IFC is exploring possibilities for leveraging IFC instruments with IDA, IBRD and MIGA more systematically. Such leveraging has hitherto been very limited.

10. IAD Review of Fundraising for AS: Recommendations "Management should develop a donor fund-raising strategy for Advisory Services... and clarify how donors should be approached by different levels of AS management in a decentralized structure." "Management should strengthen the oversight role of CPA (Partnership and Advisory Services Department) for fund-raising activities..." "CPA should position itself as the central repository function of donor intelligence and fund-raising information and strengthen its ability to gather key information from donors and staff raising funds." "Management should assess the need for enhancing the information technology support to fund-raising activities…” "CPA should develop key performance indicators (KPIs) to monitor the progress of fund-raising activities…” 10

11. Proposed Approach to AS Fund-Raising 11 MENA “Partnership Practice Group”, facilitated communication and collaboration Oversight (vision, governing principles, accountability structure, Policies and Procedures) Centralized Support Coordinated efforts at Global Level, IT systems, Donor Intelligence, Monitoring and Reporting, Guidelines, Training Centralized Support Coordinated efforts at Global Level, IT systems, Donor Intelligence, Monitoring and Reporting, Guidelines, Training MENA LAC ECA Africa

12. Conclusion IFC’s role in mobilization is increasing. This covers the traditional AS area but also investment and AMC operations. Mobilization captures new demand and creates opportunity for IFC to innovate and offer both its clients and its private and public partners the opportunity to achieve far greater leverage, more additionality than ever before, and far more impact. IFC Trust Funds are growing in size and complexity, especially with regard to Investment trust funds and DTFIs. We are enhancing IFC’s systems to facilitate new innovative funding mechanisms, including DTFIs and to strengthen internal controls and reporting. We are taking steps to better coordinate fundrasing and strengthen donor relationships. While focusing on additionality and greater development impact, we are making efforts on better measuring and demonstrating our results. We see enormous opportunities for leveraging the whole range of WBG instruments, including IBRD, IDA, MIGA with IFC’s advisory and investment instruments to achieve far greater results. 12

13. THANK YOU 13