IFCWhat is IFC ?• The International Financial Corporation is a

member of the World Bank Group and is headquartered in Washington, DC.

• It shares the primary objective of all World Bank Group institutions i.e. to improve the quality of lives of people in its developing member countries.

• It was established in 1956.• In the developing world, IFC is the largest

multilateral source of loan and equity financing for private sector projects.

Ownership and management:-• IFC has currently 182 members, which determine

its policies and approve investments.• To join IFC, a country must first become a member

of the International Bank for Reconstruction and Development (IBRD).

• The corporate powers of IFC are vested in its Board of Governors, to which member countries appoint their representatives.

• IFC's share capital is provided by member countries, and voting rights are in proportion to the number of shares held.

• The President of World Bank Group Robert Zoellick is currently serving as the IFC's president also.

Functions:-It promotes sustainable private sector development

primarily by:• Providing financial assistance to the private sector

projects and companies located in the developing world;

• Helping private companies based in the developing world mobilize financing in the international financial markets;

• Providing advisory and technical assistance to the businesses and governments.

• While the World Bank finances projects with sovereign guarantees only, the IFC finances projects without sovereign guarantees also. This means IFC is primarily active in private sector projects.

• Like a bank, IFC lends or invests its funds to its customers and expects to make a sufficient risk-adjusted return on its global portfolio of projects.

• IFC supports projects with positive developmental outcomes, and to improve the outcome of such projects by various means.

• IFC provides both investment as well as advisory services.

• IFC's Advisory Services focus basically on five core areas: Access to Finance, Business Enabling Environment, Environmental & Social Sustainability, Infrastructure Advisory, and Corporate Advice.

IDABackground of IDA:-• IBRD was established in 1944 to help Europe recover from

the devastation caused by World War II.• By the 1950s, the issue of poorest developing countries

needing softer terms than those that could be offered by the Bank came up, and a need for special provisions for the developing world was felt so that they could afford to borrow the capital they needed to grow at favorable terms.

• US took the initiative, and a group of the Bank’s member countries decided to set up an agency that could give financial assistance to the poorest countries on the most favorable terms possible. They called the agency as "International Development Association” (IDA).

• Articles of Agreement of IDA came into force in 1960 and the first IDA loans, known as credits, were approved in 1961 to Chile, Honduras, India and Sudan.

• IDA provides interest-free credits and grants for programs that boost eco. growth, and reduce poverty and inequalities.

• IDA complements IBRD–which serves middle-income countries with capital investment and advisory services.

• IBRD and IDA share the same staff and headquarters.• IDA is one of the largest sources of assistance for the

world’s 79 poorest countries, 39 of which are in Africa alone. It is the single largest source of donor funds for basic social services in the world’s poorest countries.

• IDA lends money (also known as credits) on concessional terms i.e. IDA credits have no interest charge and repayments are stretched over 35 to 40 years, including a 10-year grace period. IDA also provides grants to countries at risk of debt distress.

Membership:-• IDA currently has 169 members. • Eligibility for IDA support depends on a country’s relative

poverty also defined as GNI per capita below an established threshold and the same is updated annually.

• IDA also supports several small island economies, which although are above the operational cutoff but lack the creditworthiness needed to borrow from IBRD.

• Some countries, such as India, Indonesia and Pakistan, are IDA-eligible based on their per capita income levels, but at the same time are creditworthy for IBRD borrowing also. These are referred to as ‘blend’ countries.

• 79 countries are currently eligible to receive IDA assistance. Collectively these countries are home to about 2.5 billion people, which amounts to half of the total population of the developing world.

IDA Lending:-• IDA credits have maturities ranging from 20, 35 to

40 years with a further grace period of 10 years before repayments of principal begins. IDA funds are allocated to the borrowing countries in relation to their income levels and record of success in managing their economies and their ongoing IDA projects.

• IDA also provides donor assistance to provide relief to those poor countries that cannot manage their debt-service burden.

• IDA-financed operations address primary education, basic health services, clean water & sanitation, environmental safeguards, business climate improvements, infrastructure & institutional reforms.

IDA Funding:-• IDA is funded largely by funds provided by the

governments of its richer member countries. Additional funds also come from IBRD's income and from the borrowers’ repayments of earlier IDA credits/loans.

IDA & India:-• India is among the top 10 IDA borrowers with $956

million borrowings in the financial year 2009.• IDA has assisted India with US $10.1 billion over

the past decade through 48 projects.• IDA also helped India stabilise its economy in the

early 1990s during the economic reforms and accelerate growth through various policy reforms.

• In education, IDA has supported world’s largest ‘Education For All’ (EFA) program - the ‘Sarva Shiksha Abhiyan’ (SSA).

In 1st phase IDA contributed US $500 million & in 2nd phase over US $9 billion.

• IDA also supported an innovative community forestry project in Andhra Pradesh, recognized as the best practice in India.

• With the help of IDA funding, AP is now considered to have the best-managed power sector, third highest credit rating, one of the best investment climates and fourth lowest corruption level among Indian states.

• The Andhra Pradesh Rural Poverty Reduction Project and its precursors tried to improve the livelihoods of the rural poor and reduce their vulnerability to shocks like illness, a death in the family, crop failure, livestock disease, etc.

• Similar results have been achieved in the state of Orissa also.

Future Perspective:-• IDA & various other institutions have played a vital

role in economic and social upliftment of the Indian poor but a lot more needs to be done.

• In coming years, the emphasis should be on implementation procedures and institutional arrangements that focus on: getting results (including demand-side accountability through- beneficiary, civil society and community involvement); strengthening capacity for publicly provided services; and enhancing private sector participation.

THANK YOU !!

By:- Navneet KaurLLM Batch 2009-11

NALSAR University of Law,Justice City, R.R. Dist.,

Shameerpet,Hyderabad-500078 (A.P) India.