International Finance Corporation: Objectives and Working

Chapter 1: International Finance Corporation

1.1 Introduction

The International Finance Corporation (IFC) is an international financial institution that offers investment, advisory, and asset management services to encourage private sector development in developing countries. The IFC is a member of the World Bank Group and is headquartered in Washington, D.C., United States. It was established in 1956 as the private sector arm of the World Bank Group to advance economic development by investing in strictly for-profit and commercial projects that purport to reduce poverty and promote development. The IFC's stated aim is to create opportunities for people to escape poverty and achieve better living standards by mobilizing financial resources for private enterprise, promoting accessible and competitive markets, supporting businesses and other private sector entities, and creating jobs and delivering necessary services to those who are poverty-stricken or otherwise vulnerable. Since 2009, the IFC has focused on a set of development goals that its projects are expected to target. Its goals are to increase sustainable agriculture opportunities, improve health and education, increase access to financing for microfinance and business clients, advance infrastructure, help small businesses grow revenues, and invest in climate health.

The IFC is owned and governed by its member countries, but has its own executive leadership and staff that conduct its normal business operations. It is a corporation whose shareholders are member governments that provide paid-in capital and which have the right to vote on its matters. Originally more financially integrated with the World Bank Group, the IFC was established separately and eventually became authorized to operate as a financially autonomous entity and make independent investment decisions. It offers an array of debt and equity financing services and helps companies face their risk exposures, while refraining from participating in a management capacity. The corporation also offers advice to companies on making decisions, evaluating their impact on the environment and society, and being responsible. It advises governments on building infrastructure and partnerships to further support private sector development.

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The corporation is assessed by an independent evaluator each year. In 2011, its evaluation report recognized that its investments performed well and reduced poverty, but recommended that the corporation define poverty and expected outcomes more explicitly to better-understand its effectiveness and approach poverty reduction more strategically. The corporation's total investments in 2011 amounted to $18.66 billion. It committed $820 million to advisory services for 642 projects in 2011, and held $24.5 billion worth of liquid assets. The IFC is in good financial standing and received the highest ratings from two independent credit rating agencies in 2010 and 2011.

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1.2 History of international finance corporation

Seeking to strengthen the global economy in the coming post-World War II era, delegations from 44 countries created the World Bank and IMF. The new entities were called the "Bretton Woods Institutions," named for the resort community in the U.S. state of New Hampshire hosting the negotiations. In creating the World Bank, a new multilateral bank to finance reconstruction and development, the delegates emphasize loans to governments, not the private sector.

But soon the agenda grew.

When forming his senior management team three years later, new Bank chief John McCloy recruited his top deputy Robert L. Garner, chief financial officer of General Foods, one of the largest U.S. corporations of its time, and before that a leading banker with a forerunner of today's JP Morgan Chase and Co. After two years inside the Bank, Garner saw that lending to governments is not enough. By 1949, he was called for a new body to finance private investment in developing countries-the future IFC.

Garner was held in high regard by all who knew him. To McCloy's successor, Eugene Black, he was a "pioneer" showing "indomitable spirit." To others, he was "the toughest man in the international financial field," one whose razor-sharp mind combined "vision with wisdom."

1.3 Following are the tiers of history of IFC:

1944

Bretton Woods Conference

Delegates from 44 countries meet at Bretton Woods Conference, creating the World Bank and International Monetary Fund to transfer financial resources to member governments--but no separate entity for private sector development.

1946

World Bank Opens

The World Bank begins operations with 32 shareholding countries, $7.7 billion in capital, and headquarters in Washington, D.C. IFC has not yet been created.

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1947

Garner Arrives

The driving force behind the future IFC, New York financier Robert L. Garner, joins the World Bank as one of its first senior executives. He brings a keen sense of the role private business can play in international development, a topic few others considered at the time.

1950

The Idea of IFC

Garner and colleagues suggest creating a new institution to stimulate private investment in the Bank's borrowing countries. "It was my firm conviction that the most promising future for the less developed countries was the establishing of good private industry," Garner said.

1951

Growing Support

The U.S. government calls for "an International Finance Corporation" tied to the World Bank. It would finance private enterprises in developing countries but:

Take no government guarantees Always work alongside other private investors Never manage its investees

1956

IFC Created

IFC opens under Garner's leadership with 12 full-time staff but just $100 million in authorized capital, a low amount that prevents it from making major investments. Shareholders only allow it to make loans, not the equity investments that Garner desired, and that in time would become the key to its profitability.

1957

First Investment

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IFC's first investment: a $2 million loan to help the Siemens affiliate in Brazil manufactures electrical equipment. Following the mandate, the project is a private sector solution to a development challenge - at the time, Brazil's per capita power consumption is just half of neighboring Argentina's.

1958

First Mission to India

Garner leads IFC's first mission to India, becoming an early champion of its nascent private sector that will later transform the country in the 1990s and 2000s.

1960

IDA Created

World Bank shareholding governments create the International Development Association (IDA), a new concessional funding arm for the world's poorest countries. In time, IDA countries will become IFC's main focus.

1961

New Powers

Upon retirement, Robert L. Garner sees a key part of his historic vision become reality: IFC is authorized to make equity investments. The first one follows the next year (a stake in Spanish auto parts manufacturer FEMSA).

1965

First Syndication

IFC mobilizes $600,000 from Deutsche Bank and others for Brazilian pulp and paper company Champion Cellulose. The transaction provides early support for Champion, a rising player that in 2001 is sold for $9.1 billion to the world's largest paper company, International Paper of the U.S. The project also launches IFC's syndications program.

It will eventually attract more than $32 billion from commercial financial institutions for projects in more than 100 countries.

1969

A Call for Growth

Accepting an independent commission's report, World Bank President Robert S. McNamara agrees that a larger, more development-oriented IFC could play a

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powerful role. To guide the thinking behind IFC's growth, he recruits IMF official Moeen Qureshi, a future prime minister of Pakistan.

1971

Financial Markets

At a time when few development thinkers are focused on the role of financial institutions, IFC breaks the mold, creating a Capital Markets Department to strengthen local banks, stock markets, and other intermediaries. In time this function will become IFC's largest area of emphasis.

1972

First Advisory Services

With donor support from the U.S. and U.K., IFC sends two staff and 12 Canadian banking consultants to Jakarta for four years to build Indonesia's securities markets. Little noticed at the time, it is the start of a core business function: provision of business and financial expertise through advisory services.

1972 - 1977

First Field Offices

Decentralization begins with small one-man offices in Jakarta and Nairobi, followed by establishment of the first regional mission for East Asia, based in Manila. By 2008, more than 50 percent of IFC staff will be based outside of Washington, DC.

1981

Emerging Markets

IFC coins the phrase "emerging markets." Investment Officer Antoine van Agtmael devises the term as a way to change the financial world's perception of developing countries. It sticks, defining a new asset class. Worth almost nothing at first, the total capitalization of emerging market stock markets will reach $5 trillion within 25 years of IFC's origination of the phrase.

1982

First Advisory Facility

IFC creates its first multi donor advisory services initiative, the Caribbean Project Development Facility. The first of many such initiatives within IFC, the initiative was credited with creating 17,500 jobs before closing in the 1990s.

1984

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Financial Autonomy

Long reliant on World Bank support, IFC becomes financially independent, gaining approval to issue its own bonds in international capital markets.

1989

AAA Credit Rating

IFC receives the highest possible endorsement of financial health from private rating agencies. It becomes the key to a large-scale, multicurrency borrowing program that by 2009 will exceed $9 billion a year.

1991

Capital Increase

Shareholders give IFC a record $1.2 billion capital increase, leading to increased work in privatization, infrastructure finance, capital market development, support of small and medium enterprises, and renewed collaboration with the World Bank.

1992

Global Industry Departments

Sensing that global knowledge is one of its most important assets, IFC creates new global industry departments in Infrastructure, Agribusiness, Oil/Gas/Mining, and Chemicals/Petrochemicals/Fertilizers to complement the existing one for Capital Markets.

1994

Information Disclosure

IFC enacts its first policy on public disclosure of information, greatly increasing its openness and transparency by increasing the amount of project information it releases on projects before board approval. As part of the policy, IFC "recognizes and endorses the fundamental importance of accountability and transparency in the development process."

1998

Environmental and Social Standards

IFC's launches new environmental and social review procedures and safeguard policies. They will become a fundamental part of IFC's work, mainstreaming high standards of sustainability in all investment transactions.

1999

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Increased Accountability

As part of an increasing commitment to openness and accountability, Meg Taylor is appointed Compliance Advisor/Ombudsman for IFC and MIGA. The post is the first of its kind in a multilateral development institution.

2001

Sustainability Initiatives

Under Executive Vice President Peter Woicke's leadership, IFC begins mainstreaming sustainability concerns into all its investment operations.

2003

Equator Principles

Meeting at IFC,10 top international banks adopt the Equator Principles, applying new environmental and social development standards to their project finance lending based on IFC's own standards. By 2009, 68 participating banks had adopted the Equator Principles, representing 90 percent of all global project financing.

2007

IDA Focus

IFC's investment in IDA countries grows by 75 percent in one year, part of a new focus on the world's poorest countries and other frontier regions left out of the emerging market investment boom. Soon, more than half of IFC investment projects will be in IDA countries.

2007

Decentralization

With most clients now coming from emerging markets, IFC plans moves to increase client service and responsiveness by streamlining business procedures and decentralizing staff and decision making. By 2009, IFC will be present in more than 80 countries and have more than half of its staff in the field-a dramatic turnaround from previous years.

2008

Climate Change

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IFC adds climate change to its main areas of business focus, leading to a vast increase in investment and advisory services in renewable energy, energy efficiency, cleaner production, and other earth-friendly business opportunities.

2008

Expanded Reach

For the year, IFC clients provide 2.1 million jobs, serve 5.5 million patients, and help educate 1.2 million students. This comes as IFC's new financing reaches $16.2 billion, a 34 percent increase over the previous year. This includes $11.4 billion for IFC's own account and $4.8 billion mobilized for clients.

2009

Crisis Response

Amid a severe global economic downturn, IFC and its many partners launch crisis response initiatives in trade finance, microfinance, infrastructure, advisory services, and distressed assets. The moves show IFC's growing leadership, helping clients weather the storm and preserve jobs during the crisis.

2009

IFC Asset Management Company

IFC Asset Management Company is launched, adding a third business line to complement IFC's existing investment and advisory services work. IFC Asset Management Company invests third-party capital in a private equity fund format. It offers outside investors the opportunity to benefit from IFC's expertise in emerging markets and track record of achieving strong equity returns as well as distinct development impact.

2010

Emphasis on Jobs

IFC investment clients provide 2.2 million jobs. More than 711,000 come from businesses supported indirectly though IFC--backed investment funds. Commitments reached $18 billion--$12.7 billion for IFC's own account and $5.3 billion in mobilizations. Annual spending on advisory services hits $268 million.

2010

Inclusive Business

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IFC makes a new commitment to reaching the many millions of people at the base of the pyramid, launching a new initiative to create jobs, raise incomes, and bring more low-income producers' goods and services to global markets.

2010

G-20 Recognition

Recognizing IFC's leadership in the field, the G-20 makes us its global partner in SME development. At its Seoul summit, the G-20 receives our knowledge-sharing report on access to finance, and ask IFC to lead implementation of the SME Finance Challenge, a new campaign to scale up successful models of support to SMEs, a key driver of job creation and growth.

2011

The Future is Here

Financially strong, with a talented, diverse staff and respected global brand, IFC is increasingly moving into a leadership position in addressing some of the most challenging issues in private sector development. Our proud 55-year history leaves us well-prepared to the challenging new beginnings we face today.

1.3 Governance of IFC

The IFC is governed by its Board of Governors which meets annually and consists of one governor per member country (most often the country's finance minister or treasury secretary). Each member typically appoints one governor and also one alternate. Although corporate authority rests with the Board of Governors, the governors delegate most of their corporate powers and their authority over daily matters such as lending and business operations to the Board of Directors.

The IFC's Board of Directors consists of 25 executive directors who meet regularly and work at the IFC's headquarters, and is chaired by the President of the World Bank Group. The executive directors collectively represent all 184 member countries. When the IFC's Board of Directors votes on matters brought before it, each executive director's vote is weighted according to the total share capital of the member countries represented by that director. The IFC's Executive Vice President and CEO oversees its overall direction and daily operations.

As of October 2012, Jin-Yong Cai serves as the Executive Vice President and CEO of the IFC. President of the World Bank Group Jim Yong Kim appointed Jin-Yong Cai to serve as the new Executive Vice President and CEO of the IFC. Cai is a Chinese citizen who formerly served as a managing director for Goldman Sachs and has over 20 years of financial sector experience.

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Although the IFC coordinates its activities in many areas with the other World Bank Group institutions, it generally operates independently as it is a separate entity with legal and financial autonomy, established by its own Articles of Agreement. The corporation operates with a staff of over 3,400 employees, of which half are stationed in field offices across its member nations.

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1.4 Goals and values of IFC

As a member of the World Bank Group, IFC has two overarching goals:

End extreme poverty by 2030 Boost shared prosperity—in every developing country

IFCs commitment to alleviating poverty and creating opportunity is reflected in their values:

In everything they do, they seek to achieve the things that few others are able or inclined to. This is their brand value proposition:

Innovation: For more than half a century, IFC has innovated to strengthen private sector development wherever it’s needed most.

Influence: As the world’s largest global development institution focused on the private sector, IFC plays a significant role in influencing the course of private sector development.

Demonstration: IFC have a long history of setting a good example—of demonstrating the rewards of investing in challenging markets.

Impact: IFC go wherever we are needed most, and deploy their resources wherever they will achieve the greatest impact.

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Chapter 2: Objectives of IFC

2.1 Objectives of the IFC

The main objectives of the I.F.C is to accelerate the pace of economic development of the member countries in the under developed areas of the world in these ways.

(i) By investing in private productive enterprises in association with private investors and without any government guarantee of repayment.

(ii) By bringing together investment opportunities, private capital, both foreign and domestic and experienced management.

(iii) By stimulating productive investment of private capital, both foreign and domestic, in the developing countries for productive purposes.

Other objectives are:

1. Investing in productive private enterprises private investors without government guarantee of repayment

2. To serve as a clearing house Investment opportunities, private capital and experienced management

3. Stimulating productive investment

4. Accelerating internal loan of capital

5. Promoting the growth of capital markets in the underdeveloped countries

2.2 AIP Policy

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IFC encourages transparency and allows access to public about information of its clients through Acess to information policy (AIP):

1. AIP sets out the policy (Policy) of the International Finance Corporation (IFC) regarding the scope of information that it makes available to the public either as a routine matter or upon request.

2. IFC is an international financial institution established in 1956 by its member countries. IFC is the private sector arm of the World Bank Group and is headquartered in Washington, D.C., United States of America. The World Bank Group’s mission is: To fight poverty with passion and professionalism for lasting results and to help people help themselves and their environment by providing resources, sharing knowledge, building capacity, and forging partnerships in the public and private sectors.

3. IFC believes that transparency and accountability are fundamental to fulfilling its development mandate. Transparency is essential to building and maintaining public dialogue and increasing public awareness about IFC’s development role and mission. It is also critical for enhancing good governance, accountability, and development effectiveness. Openness promotes engagement with stakeholders, which, in turn, improves the design and implementation of projects and policies, and strengthens development outcomes. This Policy reaffirms and reflects IFC’s commitment to enhance transparency about its activities, improve development effectiveness, and promote good governance.

4. IFC encourages its clients to be more transparent about their businesses to help broaden understanding of their specific projects and of private sector development in general. In addition, IFC believes that when clients are committed to transparency and accountability they help promote the long-term profitability of their investments.

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Chapter 3: Services provided by IFC:

3.1 Investment services

The IFC's investment services consist of loans, equity, trade finance, syndicated loans, structured and securitized finance, client risk management services, treasury services, and liquidity management. In its fiscal year 2010, the IFC invested $12.7 billion in 528 projects across 103 countries. Of that total investment commitment, approximately 39% ($4.9 billion) was invested into 255 projects across 58 member nations of the World Bank's International Development Association (IDA).

The IFC makes loans to businesses and private projects generally with maturities of seven to twelve years. It determines a suitable repayment schedule and grace period for each loan individually to meet borrowers' currency and cash flow requirements. The IFC may provide longer-term loans or extend grace periods if a project is deemed to warrant it. Leasing companies and financial intermediaries may also receive loans from the IFC. Though loans have traditionally been denominated in hard currencies, the IFC has endeavored to structure loan products in local currencies. Its disbursement portfolio included loans denominated in 25 local currencies in 2010, and 45 local currencies in 2011, funded largely through swap markets. Local financial markets development is one of IFC’s strategic focus areas. In line with its AAA rating, it has strict concentration, liquidity, asset-liability and other policies. The IFC committed to approximately $5.7 billion in new loans in 2010, and $5 billion in 2011.

Although the IFC's shareholders initially only allowed it to make loans, the IFC was authorized in 1961 to make equity investments, the first of which was made in 1962 by taking a stake in FEMSA, a former manufacturer of auto parts in Spain that is now part of Bosch Spain. The IFC invests in businesses' equity either directly or via private equity funds, generally from five up to twenty percent of a company's total equity. IFC’s private equity portfolio currently stands at roughly $3.0 billion committed to about 180 funds. The portfolio is widely distributed across all regions including Africa, East Asia, South Asia, Eastern Europe, Latin America and the Middle East, and recently has invested in Small Enterprise Assistance Funds' (SEAF) Caucasus Growth Fund, Aureos Capital's Kula Fund II (Papua New Guinea, Fiji, Pacific Islands) and Leopard Capital’s Haiti Fund. Other equity investments made by the IFC include preferred equity, convertible loans, and participation loans. The IFC prefers to invest for the long-term, usually for a period of eight to fifteen years, before exiting through the sale of shares on a domestic stock exchange, usually as part of an initial public offering. When the IFC invests in a company, it does not assume an active role in management of the company.

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Through its Global Trade Finance Program, the IFC guarantees trade payment obligations of more than 200 approved banks in over 80 countries to mitigate risk for international transactions. The Global Trade Finance Program provides guarantees to cover payment risks for emerging market banks regarding promissory notes, bills of exchange, letters of credit, bid and performance bonds, supplier credit for capital goods imports, and advance payments. The IFC issued $3.46 billion in more than 2,800 guarantees in 2010, of which over 51% targeted IDA member nations. In its fiscal year 2011, the IFC issued $4.6 billion in more than 3,100 guarantees. In 2009, the IFC launched a separate program for crisis response, known as its Global Trade Liquidity Program, which provides liquidity for international trade among developing countries. Since its establishment in 2009, the Global Trade Liquidity Program assisted with over $15 billion in trade in 2011.

The IFC operates a Syndicated Loan Program in an effort to mobilize capital for development goals. The program was created in 1957 and as of 2011 has channeled approximately $38 billion from over 550 financial institutions toward development projects in over 100 different emerging markets. The IFC syndicated a total of $4.7 billion in loans in 2011, twice that of its $2 billion worth of syndications in 2010. Due to banks retrenching from lending across borders in emerging markets, in 2009 the IFC started to syndicate parallel loans to the international financial institutions and other participants.

To service clients without ready access to low-cost financing, the IFC relies on structured or securitized financial products such as partial credit guarantees, portfolio risk transfers, and Islamic finance. The IFC committed $797 million in the form of structured and securitized financing in 2010. For companies that face difficulty in obtaining financing due to a perception of high credit risk, the IFC securitizes assets with predictable cash flows, such as mortgages, credit cards, loans, corporate debt instruments, and revenue streams, in an effort to enhance those companies' credit.

Financial derivative products are made available to the IFC's clients strictly for hedging interest rate risk, exchange rate risk, and commodity risk exposure. It serves as an intermediary between emerging market businesses and international derivatives market makers to increase access to risk management instruments.

The IFC fulfills a treasury role by borrowing international capital to fund lending activities. It is usually one of the first institutions to issue bonds or to do swaps in emerging markets denominated in those markets' local currencies. The IFC's new international borrowings amounted to $8.8 billion in 2010 and $9.8 billion in 2011. The IFC Treasury actively engages in liquidity management in an effort to maximize returns and assure that funding for its investments is readily available while managing risks to the IFC.

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3.2 Advisory services

In addition to its investment activities the IFC provides a range of advisory services to support corporate decision making regarding business, environment, social impact, and sustainability. The IFC's corporate advice targets governance, managerial capacity, scalability, and corporate responsibility. It prioritizes the encouragement of reforms that improve the trade friendliness and ease of doing business in an effort to advise countries on fostering a suitable investment climate.

It also offers advice to governments on infrastructure development and public-private partnerships. The IFC attempts to guide businesses toward more sustainable practices particularly with regards to having good governance, supporting women in business, and proactively combating climate change.

3.3Asset Management Company

The IFC established IFC Asset Management Company LLC (IFC AMC) in 2009 as a wholly owned subsidiary to manage all capital funds to be invested in emerging markets. The AMC manages capital mobilized by the IFC as well as by third parties such as sovereign or pension funds, and other development financing organizations. Despite being owned by the IFC, the AMC has investment decision autonomy and is charged with a fiduciary responsibility to the four individual funds under its management. It also aims to mobilize additional capital for IFC investments as it can make certain types of investments which the IFC cannot. As of 2011, the AMC managed the IFC Capitalization Fund (Equity) Fund, L.P., the IFC Capitalization (Subordinated Debt) Fund, L.P., the IFC African, Latin American, and Caribbean Fund, L.P., and the Africa Capitalization Fund, Ltd. The IFC Capitalization (Equity) Fund holds $1.3 billion in equity, while the IFC Capitalization (Subordinated Debt) Fund is valued at $1.7 billion. The IFC African, Latin American, and Caribbean Fund (referred to as the IFC ALAC Fund) was created in 2010 and is worth $1 billion. As of March 2012, the ALAC Fund has invested a total of $349.1 million into twelve businesses. The Africa Capitalization Fund was set up in 2011 to invest in commercial banks in both Northern and Sub-Saharan Africa and its commitments totaled $181.8 million in March 2012. As of 2012, Gavin E.R. Wilson serves as CEO of the AMC.

3.4 Financing

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In financing private enterprises, the IFC makes loans without government guarantee of repayment. Unlike most other organizations of its kind, the IFC cannot stipulate how the proceeds of its loans will be spent. The IFC seeks to diversify its investments, having funded projects in the fields of tourism development, animal feeds, iron and steel, fertilizers, and textiles. Its primary activities include providing direct project financing and technical advice and assistance, mobilizing resources by acting as a catalyst for private investment, and underwriting investment funds.

The IFC operates on a weighted-voting system based on members’ subscription shares, with the United States exercising about 25 percent of the total votes—quadruple that of Japan, the second largest shareholder. After the end of the Cold War, demand for IFC loans increased among countries in eastern Europe and among the former republics of the Soviet Union. In the late 1990s the IFC began considering institutional and procedural reforms, including public disclosure, and devoted more attention to the environmental and social impact of its aid.

Between 1956 and the beginning of the 21st century, the IFC provided more than $25 billion to fund projects in nearly 125 countries and arranged for nearly $18 billion in additional financing. In 2000 alone the IFC invested more than $4 billion for 250 projects in nearly 80 countries.

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Chapter 4: Working of IFC.

4.1 Introduction:

The IFC considers only such investment proposals whose objective is the establishment, expansion or improvement of productive private enterprises which will contribute to the development of the economy of the country concerned. Industrial, agricultural, financial, commercial, and other private enterprises are eligible for IFC financing, provided their operations are productive in character.

The IFC is authorized to invest its funds in many forms it deems appropriate, with the exception of capital stocks and shares. It does not have a policy of uniform interest rates for its investments. The interest rate is to be negotiated in each case in the light of all relevant factors, including the risks involved and any right to participation in profits, etc.

IFC makes investments only when it is satisfied that the enterprise has or will have experience and competent management and it looks to that management to conduct the business of the enterprise. It does not itself assume responsibility of managing the enterprise.

In India the IFC has so far made six investment commitments totaling over $ 7 million.

However, the actual working of the IFC has been rather slow. That there is great scope for its work is quite evident from its resources and investment portfolios. It is hoped that IFC will in future be more fully able to play a dynamic investor’s role in the economic development of the poor nations.

4.2 Working of IFC

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Working in IFC is explained as:

4.2.1 Client solution:

IFC provides comprehensive solutions to clients in developing countries to address today’s greatest development challenges. Their offerings are designed to meet the specific needs of our clients in different industries, with a special focus on infrastructure, manufacturing, agribusiness, services, and financial markets.

Their financial products enable companies to manage risk and broaden their access to foreign and domestic capital markets. Their advice helps unlock private sector investment, which is essential for expanding businesses, creating jobs, and growing economies.

They work with the private sector to encourage entrepreneurship and build sustainable businesses—advising them on a wide range of issues, including environmental, social and governance standards, energy and efficiency, and supply chains. They help expand access to critical finance for individuals and micro, small, and medium enterprises through our work with financial intermediary clients.

In FY14, IFC invested $17.2 billion for their own account in about 600 projects. In addition, they mobilized more than $5 billion to support the private sector in developing countries.

IFC Investing Solutions Include:

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working

client solution

investing solution

advising solution

asset management

Loans

IFC offers fixed and variable rate loans for its own account to private sector projects in developing countries.

Most IFC loans are issued in leading currencies, but local currency loans can also be provided. The loans typically have maturities of seven to 12 years at origination. Grace periods and repayment schedules are determined on a case-by-case basis in accordance with the borrower's cash-flow needs. If warranted by the project, IFC provides longer-term loans and longer grace periods. Some loans have been extended to as long as 20 years.

IFC operates on a commercial basis. It invests exclusively in for-profit projects in developing countries and charges market rates for its products and services. In FY13, IFC made commitments for nearly $8.5 billion in new loans, bringing the total committed loan portfolio to around $31.5 billion.

Loans from IFC finance both early-stage companies and expansion projects in developing countries. The Corporation also make loans to intermediary banks, leasing companies, and other financial institutions for on-lending. The credit lines are often targeted at small and medium enterprises or at specific sectors.

To ensure the participation of other private investors, A-loans are usually limited to 25 percent of the total estimated project costs for greenfield projects, or, on an exceptional basis, 35 percent in small projects. For expansion projects, IFC may provide up to 50 percent of the project cost, provided its investments do not exceed 25 percent of the total capitalization of the project company. Generally, loans for IFC’s own account range from $1 million to $100 million.

The Corporation is willing to extend loans that are repaid only from the cash flow of the project, without recourse or with only limited recourse to the sponsors.

IFC promotes development by mobilizing financing for the private sector in its developing member countries. In carrying out this role, we operate as both a financial and developmental institution. This developmental mandate is what differentiates IFC from commercial financiers. IFC acts as a catalyst

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in raising capital from foreign and domestic sources, in both private and public markets, for projects in the private sector of its member countries.

Syndicated Loans:

IFC's Syndicated Loans & Management Department ("CSL") mobilizes funds for the Corporation through:

i) Syndicated "B" Loans, ii) Coordinated and/or syndicated parallel loans, and iii) A Loan Participations (ALPs). The Providers of funds under the B

Loan Program are mainly commercial banks, while the providers of funds for parallel loans are mainly development finance institutions (DFIs) and international financial institutions (IFIs).

B Loans - IFC's B Loan allows participants to enjoy the advantages of IFC's status as a multilateral institution. By participating in a B Loan transaction, participants benefit from IFC's Preferred Creditor Status.

Parallel Loans - In response to international banks' retrenchment from cross-border emerging market lending during the recent global financial crisis, IFC began syndicating parallel loans to Development Finance Institutions (DFIs), and other ineligible B Loan participants.

A Loan Participations (ALPs) - An A Loan Participation (“ALP”) is an effective exposure management tool which IFC uses to reduce its risk exposures – dollar for dollar – to a client, country or sector. An ALP is created through the partial sale of an A Loan to commercial banks or other financial institutions and is governed by a Participation Agreement, much like the agreement used for IFC B Loans.

Syndicated Loan Management - The Syndicated Loan Management group ("CSLLM" ) was established as a dedicated resource to provide consistent service to B loan participant banks, and to ensure that IFC's contractual obligations under the loan agreements and participation agreements are fulfilled. The group manages $7.5 billion in B loans held by over 150 financial institutions.

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Equity Finance

IFC takes equity stakes in private sector companies and other entities such as financial institutions, portfolio and investment funds in developing countries. IFC is a long-term investor and usually maintains equity investments for a period of 8 to 15 years. When the time comes to sell, IFC prefers to exit by selling its shares through the domestic stock market in a way that will benefit the enterprise, often in a public offering.

IFC invest directly in companies’ equity, and also through private equity funds. In FY13, equity investments accounted for nearly $2.7 billion of the commitment IFC made for its own account.

To ensure the participation of other private investors, the Corporation generally subscribes between 5 percent and 20 percent of a project's equity. We encourage the companies we invest in to broaden share ownership through public listing, thereby deepening local capital markets. We also invest through profit participating loans, convertible loans, and preferred shares.

IFC's equity investments are based on project needs and anticipated returns. The Corporation does not take an active role in company management.

IFC risks its own capital and does not accept government guarantees. However, to meet national ownership requirements, IFC shareholdings can be treated as domestic capital or local shares.

Structured Finance Products

IFC utilizes structured finance products to provide cost-effective forms of financing that would not otherwise be readily available to clients, with an emphasis on providing long-term local currency solutions and access to local capital markets. They use their expertise in structuring—along with our international triple-A credit rating—to help clients diversify funding, extend maturities, access new investors, and obtain local currency funding. They also work with financial intermediaries to offer new products and access new markets that help further IFC’s mission. IFC has completed structured finance transactions in over 40 different countries.

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Overview of Risk Management Products

Hedging Products through IFC

IFC is one of the few organizations prepared to extend long-maturity risk management products to clients in emerging markets. Our risk management products, or derivatives, are available to our clients solely for hedging purposes. By allowing private sector clients in the emerging markets to access the international derivatives markets in order to hedge currency, interest rate, or commodity price exposure, IFC enables companies to enhance their creditworthiness and improve their profitability.

IFC's role is to bridge the credit gap between its clients and the market, offering clients access to products which they may not have on a direct basis due to credit or country risk. In offering risk management products, IFC acts generally as an intermediary between the market and private companies in the emerging markets. Since the inception of this program in 1990, IFC has transacted risk management products for about 60 clients in 30 countries.

IFC's Comparative Advantage

IFC is in a unique position to offer companies in developing countries a broad range of financial risk management products. Some of the benefits we provide include the following:

Ability to take long term credit risk of emerging market clients. A triple-A rating, allowing access to the global financial markets on

the most favorable terms. Extensive market relationships.

Technical and legal know-how in the area of financial risk management, arising from the extensive use of derivative products in IFC's own financial operations, such as funding, liquid asset management, and asset liability management.

Illustration of Hedging Interest Rate Exposure

IFC offers clients products available in the international financial markets. In this example, a power company in a developing country is going to

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arrange a long-term contract with the local government. Under the terms of the contract the company is to receive a fixed amount of dollar revenue; however, the majority of its long-term financing is on a floating interest rate basis tied to LIBOR.

The company can protect itself against interest rate volatility by executing an interest rate swap with IFC, where the company pays a fixed rate to IFC and receives a LIBOR-based floating rate. The diagram below shows the cash flows associated with such swaps. Since the company's debt service on its floating-rate loan is matched by the floating-rate cash flow received from IFC under the swap, the company is left with a fixed-rate obligation. As a result, the interest rate swap has effectively achieved fixed rate funding for the company, matching its fixed dollar revenues under its long-term contract.

Overview of Local Currency Loans and Hedges

Why Local Currency?

Companies with revenues in local currency should generally borrow in their local currency, instead of borrowing in a foreign currency which leads to currency risk. By matching the currency denomination of assets and liabilities, companies can concentrate on their core businesses rather than worry about exchange rate volatility. The financial crises which have affected emerging markets in recent years demonstrated that even stable exchange rate regimes may not hold in times of crisis, and therefore being hedged against currency risk is a prudent financial strategy.

IFC has also made local currency financing a priority in order to help develop local capital markets. In addition, we are keenly aware that

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companies which receive financing in the same currency as their revenues are more creditworthy clients for IFC.

How IFC Provides Local Currency Loans and Hedges

IFC provides local currency debt financing in three ways:

(1) loans from IFC denominated in local currency;

(2) risk management swaps which allow clients to hedge existing or new foreign currency denominated liabilities back into local currency; and

(3) Structured Finance which enable clients to borrow in local currency from other sources. This note will explore further the first two of these mechanisms.

Collectively, local currency financing through loans or swaps is made possible by the existence of a swap or, more generally speaking, derivatives market. The existence of a long-term swap market between the local currency and dollars permits IFC to hedge its loans in the local currency and provide risk management products tied to the loan currency. Please see the markets in which long-term local currency swaps are currently available.

Local currency loan from IFC:

IFC disburses in local currency and the client repays in local currency. Based on the preference of the client, the loan can carry a fixed rate or a variable rate. Variable rate loans depend on the availability of a liquid local reference rate, usually a short term interbank lending rate or government securities rate. The repayment terms for local currency loans are customized to meet the needs of the client. IFC stands ready to provide long-term local currency loans in over a dozen emerging market currencies.

The diagrams below show the cash flows associated with a Mexican peso loan at disbursement and over time.

Cash Flows at Disbursement

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Cash Flows Over Time

Local currency swap from IFC:

Through an overlay currency swap, IFC allows clients to transform existing or new foreign currency liabilities into local currency. The foreign currency liability can be from any third party source such as a bank loan or bond issue. The currency swap can be tailored so that currency payments from IFC to the client exactly offset currency payments owed by the client under the foreign currency borrowing. By providing clients with hedging instruments which they would otherwise not be able to access, IFC helps clients achieve sythetic local currency financing.

The diagram below shows the cash flows associated with a Thai baht/US dollar currency swap over time:

Private Equity and Investment Funds

IFC has invested in emerging market private equity funds since the 1980s and in 2000 created a group dedicated to investments in funds. IFC has since become a significant player in the emerging market (EM) funds space, having backed around 10% of the funds coming to market since 2000. IFC’s portfolio currently stands at around $3.0 billion committed to about 180 funds. The portfolio is widely distributed across all regions including Africa, East Asia, South Asia, Eastern Europe, Latin America and the Middle East.

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IFC is a significant supporter of emerging managers. Since 2000 around 50% of funds backed by IFC have been run by 1st time managers. Once funds are successful enough to attract a strong following of commercial investors, IFC sees its role completed and moves on to find the next generation of emerging managers. Our returns on first time funds have been particularly strong and many of the managers we supported when they were starting out are now leaders in their markets. Overall, our returns on private equity fund investments since 2000 are in the top quartile of the Cambridge EM Benchmark.

IFC backs private equity funds in the emerging markets because funds, with their unique provision of both equity capital and expertise, have a significant impact on company growth and job creation. The majority of private equity in emerging markets is growth equity, using little leverage and depending on sustained growth of companies to generate returns. The private equity fund helps companies to improve focus and negotiate the transformations and risks of rapid growth. Rapidly growing companies create jobs: the average annual rate of job creation within companies backed by IFC-supported funds since 2000 has been 22%, well in advance of regional rates of job growth of 2-3%.

IFC brings its standards and policy requirements to the funds in which it invests. These include its exclusion list, environmental and social sustainability standards, governance, integrity due diligence and fund terms consistent with best market practice. Due to its presence in the market and its early support of new funds, IFC has been able to establish standards in the private equity industry in emerging markets.

Currently IFC is looking to commit up to $500 million a year in twenty to twenty-five funds globally. Our strategy currently emphasizes growth equity funds, climate change, and SME funds. We will also selectively support small business funds in frontier regions. As we seek to achieve proof of concept to subsequently attract commercial capital, we are very selective. The twenty or so funds we back each year are selected from over 200 funds we see annually.

The annual conference we sponsor in association with the Emerging Markets Private Equity Association (EMPEA) has grown from a friends and family gathering to become the premier global emerging market private equity event, attracting over 875 fund managers and investors from around the world.

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Trade and Supply Chain

Trade is the lifeblood of the world economy and a key driver of global integration, helping small and medium enterprises (SMEs) to grow and create jobs. Trade finance is the engine of an estimated $14 trillion in annual global commerce and is fundamental to the movement of goods at all stages of the supply chain, especially in emerging markets.

Development Impact

Trade finance is a priority for IFC because we have seen the high development impact it can have on developing countries. Through the Global Trade Finance Program (GTFP) launched in 2005, IFC issues credit guarantees where others won't, providing essential liquidity for trade flows through its global network of more than 500 bank partners, helping SMEs in the world's poorest countries join the global trading system.

Since its inception, GTFP has covered over 25,000 trade transactions and supported over $27 billion in emerging market trade, without a single loss. In IDA countries, GTFP has committed over $11 billion, with commitments of $5.4 billion in Sub-Saharan Africa.

GTFP has provided IFC a gateway to engage in otherwise challenging markets; it has supported trade in 27 of the 35 current fragile and conflict-affected situations (FCS), committing investments in 19 of these areas in FY12.

IFC is playing a leadership role in supporting and protecting global trade flows to the world’s poorest countries at a time when many banks are pulling out of trade finance. IFC is delivering a coordinated set of programs that support global trade by helping stabilize and foster trade and commodity finance. In particular, IFC focuses on supporting trade in areas such as agribusiness, SMEs, and energy, because these have the greatest impact on the poor.

Product Offerings

In 2008, the Global Trade Liquidity Program (GTLP) was conceived to channel liquidity quickly to targeted markets by providing trade credit lines and refinancing portfolios of trade assets held by selected banks. These two

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award-winning programs have since facilitated $50 billion in trade to and from emerging markets.

In late 2010, capitalizing on the success of the GTFP and GTLP, IFC formed its Trade and Supply Chain Department, which integrates supply chain financing and other trade facilitation initiatives with its two existing trade finance programs.

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Advising solutions:

Advice to Businesses

IFC offers advice to businesses in:

Agribusiness Oil, Gas & Mining

IFC also offers advice to companies on issues related to:

Energy and Resource Efficiency SMEs and Value Chain Solutions Corporate Governance

IFC and Public-Private Partnerships

Gaps in infrastructure matter. Infrastructure is essential for prosperity, but building, maintaining and operating it is expensive, and few countries have the resources required. So what can be done to help governments provide these essential services to their people?

IFC's advice in public-private partnerships (PPPs) helps national and municipal governments to partner with the private sector to improve basic services such as education, electricity, health, sanitation, and roads, as well as tackle the most pressing issues of our time like climate change and food security.

IFC gives Advisory services in PPP sectors like:

Agriculture Transport Energy Education Health ICT Water Waste

4.2.2 Asset management

Formed in 2009, AMC is IFC’s fund management business, managing third-party capital across seven funds that invest in IFC transactions in

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developing countries. AMC is a new model of development, using a strong governance structure and innovative business model to marry commercial capital with development finance.

AMC presents a unique opportunity for institutional investors to access IFC’s superior investment track record in emerging markets, its unparalleled network of in-country presence and expertise, and its strong investment pipeline. AMC also provides a robust governance framework which capitalizes on IFC’s strengths in identifying and structuring investment opportunities while maintaining requisite decision making independence as a manager of third-party funds with the attendant fiduciary duties.

As of December 2014, AMC had approximately US$7.8 billion of assets under management in seven funds and had committed approximately US$4.5 billion in 58 emerging market companies and 6 private equity funds. AMC’s investors include sovereign wealth funds, pension funds, bilateral and multilateral development finance institutions and other investors.

Following are the Funds offered by the AMC to different countries:

IFC Capitalization Fund Africa capitalization fund IFC Russian Bank Capitalization Fund IFC African, Latin American & Caribbean Fund IFC Catalyst Fund IFC Global Infrastructure Fund

IFC offers portfolio by:

Fund Region Sector

IFC Asset Management Company in numbers

Assets under Management

$7.8 billion

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Number of Funds

7

Investment Commitments

$4.5 billion

Number of Portfolio Companies/Funds

64

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4.3 Recent news on working of IFC:

From the above Writeup the objectives and working of IFC are introduced. Following are some of the recent updates on IFC that tries to fullful their Objectives working with their instruments:

1. IFC Supports Large-Scale Solar Power Facility in South Africa

Johannesburg, South Africa, March 13, 2015 – IFC, a member of the World Bank Group, announced today it is providing a ZAR 455 million ($37 million) loan to support a new solar thermal electricity power facility in South Africa’s Northern Cape region, building on a series of pioneering renewable energy investments in the country.

The 100-megawatt Xina Solar One facility being developed by Abengoa is expected to produce clean energy for more than 95,000 households, create jobs and reduce carbon emissions. It will be located next to Abengoa’s 100-megawatt Kaxu Solar One, the first solar thermal electricity power plant in commercial operation in South Africa, which was also supported by IFC financing. Those projects, along with the 50-megawatt Khi Solar One facility, another Abengoa facility with IFC support, are set to help South Africa meet its growing energy demands and boost access to sustainable, reliable electricity.

IFC Country Manager Saleem Karimjee said, “Solving the power issue is an urgent priority in South Africa, and establishing the country as a leader in renewable energy production is an important long-term goal. This project draws on South Africa’s abundant sunshine to address both these issues.”

IFC’s loan for Xina Solar One is part of a $660 million financing package with support from partners such as the Industrial Development Corporation, the Government Employees Pension Fund represented by the Public Investment Corporation and Kaxu Community Trust. Participation included other development financial institutions, including the African Development Bank and the Development Bank of Southern Africa, and local private banks such as RMB, Nedbank and ABSA.

Xina Solar One is a greenfield solar thermal electricity power plant with a parabolic-trough design and a five-hour thermal energy storage system using molten salts. It will supply clean electricity to the South African power

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utility Eskom under a 20-year power purchase agreement signed in late 2014.

IFC has supported several renewable energy projects developed under South Africa’s Renewable Energy Independent Power Producer Procurement Programme, including the 134-megawatt Amakhala wind farm in the Eastern Cape.

Bertrand de la Borde, IFC Head of Infrastructure in Africa, said: “Inspired by the success of South Africa's Renewable Energy Independent Power Producer Procurement Programme, IFC and its partners in the World Bank Group recently launched the Scaling Solar program which seeks to create a competitive solar power market in the rest of Sub-Saharan Africa.”

The Scaling Solar program offers African governments a “one stop shop” comprehensive solution to launch privately-funded solar projects that can supply electricity to national power grids within two years. As it is implemented across multiple countries, Scaling Solar will allow smaller African countries to enjoy the purchasing power of bigger and more developed economies in this sector.

2. IFC Equity Financing Supports Liberia Gold Mine Through Ebola Crisis

IFC, a member of the World Bank Group, announced today that it has invested approximately £5.3 million in Aureus Mining to support an optimized plan for the New Liberty mine project in Liberia in the wake of the Ebola crisis. Prior to the transaction, IFC owned 12.8% of the issued and outstanding shares of the company on a fully diluted basis. The equity financing will help Aureus Mining cope with additional costs resulting from having continued its operations through the outbreak, and support the company’s ongoing work in Liberia, a country actively seeking to use its natural resources for long term economic growth.

Under the terms of the investment, made by way of private placement, IFC subscribed for 29,239,766 common shares at a price of £0.18 per common share for aggregate consideration of approximately £5.3 million. The investment increases IFC’s holdings in Aureus Mining to 17.42% of the issued and outstanding common shares of the company calculated on a fully diluted basis. The IFC investment was made in connection with a brokered private placement for aggregate proceeds of £4.4 million. IFC’s investment

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follows an US$11.1 million equity investment previously made in July 2014. IFC is also providing environmental and social advice to Aureus as it works to complete the project and continues additional exploration work in Liberia.

The New Liberty gold project is Liberia’s first commercial gold mine with significant development potential for the country. It entails the construction of a greenfield open pit gold mine located in the Grand Cape Mount County of northwest Liberia. In addition to paying revenues to the government, the project is expected to provide 300 jobs in a remote region of the country.

Aureus Mining continued to work to develop New Liberty throughout the Ebola crisis in Liberia. It estimates the outbreak resulted in about US$18 million in additional direct and indirect costs for the project.

"We are delighted to have this additional support from IFC which will allow us to continue the development of the New Liberty Project despite the challenges posed by the Ebola outbreak. It is an endorsement of the tireless work of our construction and operations teams and we look forward to continuing to work to deliver benefits to Liberia and our shareholders,” said David Reading, President and Chief Executive Officer of Aureus Mining.

“IFC anchored this additional investment in Aureus because we feel the company’s updated mine plan makes sound financial sense. Aureus has demonstrated its ability to handle adversity by continuing to build its project throughout the Ebola crisis, and continuing with its innovative community engagement programs. We look forward to successful mine completion later this year,” said Tom Butler, IFC Global Head of Mining.

The World Bank Group is mobilizing nearly $1 billion in financing for the countries hardest hit by the Ebola crisis. This includes $518 million from IDA for the emergency response, and at least $450 million from IFC to enable trade, investment and employment in Guinea, Liberia and Sierra Leone.

Depending on market and other conditions, IFC may from time to time increase or decrease its holdings of common shares or other securities of Aureus Mining.

This news release is issued pursuant to National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issues of the Canadian Securities Administrators, which also requires an

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early warning report to be filed with the applicable securities regulators containing additional information with respect to the foregoing matters.

Similarly many other countries are receiving help from the IFC.

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Conclusion

The sustainability agenda and its Sustainability Framework have become important differentiators for IFC in the marketplace and a pillar of IFC’s corporate strategy. Continued successful implementation of this framework is therefore a corporate priority.

IFC expects continued significant interest in this review from external stakeholders and commits to engage in a constructive and collaborative dialog to fully understand the implications of the proposed changes to the Sustainability Framework. IFC is mindful that the proposed changes may have cost and resource implications for our clients, in particular smaller ones.

IFC is focused both on helping reduce the impact of the crisis on the poor and looking ahead to the post-crisis world. It realizes that while official assistance is clearly vital, public sector money alone is not enough to turn the corner. The recovery strategy needs to encourage the role of private business. As the flow of credit resumes, developing countries can become a key force for a larger global rebound.

Over the longer term, today’s high demand for IFC’s private sector financing will likely grow even faster as developing countries account for a larger share of the global economy, public resources remain constrained, and a young and increasingly urban population in poor countries insists on higher-quality health services, education and infrastructure.

Trade is just one sector in which IFC has rapidly brought to market such targeted new crisis response initiatives. Others include the IFC Capitalization Fund, the Infrastructure Crisis Facility, the Microfinance Enhancement Facility and expanded Advisory Services. They come as part of a coordinated response to the most challenging economic conditions yet seen.

IFC will continue to adapt to meet these challenges and work toward a world where economic development is sustainable and inclusive.

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Bibliography

Websites:

1. http://en.wikipedia.org/wiki/International_Finance_Corporation

2. http://www.ifcamc.org/

3. http://www.yourarticlelibrary.com/organization/international-finance-

corporation-i-f-c-objectives-and-working/26265/

4. http://www.ifc.org/wps/wcm/connect/corp_ext_content/

ifc_external_corporate_site/ifc+news/News

5. http://www.g8.utoronto.ca/newsdesk/pittsburgh/thunell.html

6. http://climatemarkets.org/glossary/international-finance-corporation-

ifc.html

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