The new report by the British-based group Oxfam and others has identified transparency gaps in the operations of the World Bank’s private sector lending arm.
In particular the report examines lending done through “financial intermediaries” and reports that disclosure has been lacking.
The report concluded:
Another worrying discovery is that of the 49 investments the IFC made to financial intermediaries since 2012 that it did classify as “high risk”, it has only publicly disclosed sub-projects in three of these deals.
“That means there is no public information about where 94 percent of the IFC’s ‘high risk’ intermediary investments have actually ended up. Until the World Bank Group proves that these deals have a legitimate development impact and are doing no harm, the IFC must stop investing in high-risk third parties,” said Natalie Bugalski, legal director of Inclusive Development International, a co-author of the report.
The Bank’s private sector arm, the International Finance Corporation (IFC) invested $36 billion in financial intermediaries, which include commercial banks, private equity and hedge funds, in the four years leading up to June 2013.
Regarding transparency, the report recommends:
Transparency · The IFC should make the disclosure of all subclients and subprojects a condition of receiving IFC investment. This should apply to all FI clients, not just private equity funds. Where national laws prohibit disclosure of certain information, as much information as is legally allowed should be disclosed, with a note explaining why this was withheld.
The report includes many case studies and draws other conclusions, finding that the IFC “is failing to perform due diligence and to identify or effectively manage risk in many of its investments in third-party lenders.”
Filed under: IFTI Watch