The Independent Evaluation Group Releases Report on IFC's Development Results for...

The Independent Evaluation Group Releases Report on IFC's Development Results
for 2008

JOHANNESBURG, South Africa, July 31 /PRNewswire-USNewswire/ -- Performance of
IFC-supported private sector operations in developing countries has improved
in the last three years, says a new study released today by the Independent
Evaluation Group (IEG) of the International Finance Corporation (IFC) - a
member of the World Bank Group. This overall outcome is driven by better
results in two regions with a large share of IFC operations -- Latin America
and Europe and Central Asia. However, project performance lagged in Asia, and
the Middle East, and in Africa, where IFC has scaled up its operations in
recent years while facing ongoing challenges with respect to business climate
and sponsor quality. Projects showed strong results in financial markets and
infrastructure sectors but weak results in information technologies and
general manufacturing.

According to IEG's Independent Evaluation of IFC's Development Results 2008,
71 percent of projects met or exceeded IFC's development and market benchmarks
in 2007 (compared to about a half in 2005). The study also found that the
development effectiveness of projects did not come at the expense of IFC
profitability -- nearly 60 percent of all projects (74 percent by volume)
combined high development outcomes with satisfactory financial returns, while
26 percent (17 percent by volume) combined low development outcomes with low
financial returns.

The study noted continued shortcomings in adherence to IFC's environment and
social performance standards by IFC-supported project companies in Africa. In
this report, IEG took a first detailed look at IFC's "additionality" - its
unique role and contribution in providing and catalyzing financing otherwise
not available, due to market imperfections; helping to improve corporate
operations, governance, and environmental and social standards -- compared to
that of other financiers. The findings indicate that in most cases, IFC
delivered at least one form of financial additionality in terms of longer
tenor, grace period, local-currency finance, pioneering or innovative
structures, and countercyclical finance; or operational additionality --
support for business strategy, operations management, and new business
development; or institutional additionality in terms of standards of corporate
governance, environmental and social sustainability and better public-private
risk allocation.

While IFC's additionality has been mostly financial to date (85 percent of all
projects evaluated), IFC's operational and institutional additionality was not
insignificant (30 percent and 35 percent of projects evaluated, respectively).
The quality of IFC's additionality also varied substantially by region and
across sectors, being evident in Latin America and Europe and Central Asia,
but much less in Africa and the rest of Asia. For example, in a project that
aimed at supporting a West African bank to attract more
foreign currency financing, IFC was not successful in catalyzing other sources
of finance, and the bank continued relying on subsidized loans. In another
project in Africa, however, the quality of IFC additionality was strong --
IFC's loan to a coffee production company in a southern African country
provided the much-needed working capital in a country and sector where
long-term financing is extremely scarce, and IFC supplemented this
contribution with specialist advice on farming practices and business
restructuring.

Noting the strong observed connection between IFC additionality and projects'
development impact, IEG suggests that IFC will need to focus much more on its
additionality in all lagging regions and sectors. "IFC's sector, country and
regional strategies have not sufficiently addressed the institution's
additionality. Going forward, to help regions and sectors with lagging
performance, IFC needs to map out its unique role and contribution in sector
and regional strategies and develop guidelines and incentives for operational
staff to better identify and ensure its delivery in projects," said Marvin
Taylor-Dormond, Director of IEG.

Vinod Thomas, Director-General of Evaluation for the World Bank Group,
emphasized, "Close attention to work quality and portfolio risk management
continues to be crucial as IFC invests heavily in newer and riskier markets,
especially in conditions of a downturn in global economic growth. This holds
especially true for Africa -- a region where IFC has to revamp efforts to
ensure that the overall results, and environmental and social shortcomings of
projects, are addressed."

To view IFC Management's response and download the report, please visit:
http://www.ifc.org/ieg/iedr2008

CONTACT: Sid Edelmann
202-458-4738
sedelmann@ifc.org

SOURCE The Independent Evaluation Group of the International Finance
Corporation

Sid Edelmann of IFC, +1-202-458-4738, sedelmann@ifc.org