IDA Works Closely with IFC and MIGA

IDA plays a crucial role, supporting and assisting governments in their efforts to strengthen their investment climates and paving the way for the country to attract and retain private investment

The World Bank Group is a vital source of financial and technical assistance to developing countries around the world.  Its member institutions, including IBRD, IDA , MIGA, and IFC, work together and complement each other’s activities to achieve their shared goals of reducing poverty and improving lives.  IBRD primarily serves middle-income countries with capital investment and advisory services, while IDA focuses on the poorest countries, providing low-interest credit and grants for basic services, including education, health and infrastructure.  IBRD and IDA generally work with country governments and public sector institutions, while IFC’s and MIGA’s activities help promote private sector investment, which is increasingly seen as critical to sustainable growth, as well as to improving employment opportunities and reducing poverty. 

This comprehensive approach, formalized through joint country assistance and country partnership strategies, recognizes the important roles of all actors—governments, donors, and the private sector—in effectively meeting the needs of the developing world, as well as the interdependence of the quality of economic development and social, environmental, and governance-related performance.

Typically, IDA concentrates first on helping governments establish the institutional framework that will ensure sustainable development. This often begins with analytic and advisory services tailored to a country’s specific needs. That foundational economic and sector work may include providing information for policy discussions, supporting the development and implementation of country strategies, formulating effective lending programs, building institutional capacity, and communicating knowledge to the international community.

That basic groundwork is critical not only to the success of the Bank Group’s public sector lending programs but also to that of private sector investment.  Private firms—from farmers and microentrepreneurs to local manufacturing companies and multinational enterprises—are at the heart of the development process - investing in new ideas and new facilities, bringing management and technical skills, creating jobs and providing the goods and services needed to raise living standards. Even in sectors such as health, education and infrastructure where traditionally state provision has been dominant, the private sector is often the first line provider to many in the poorest groups. In addition, private businesses are a major source of tax revenues, contributing to funding for publicly provided services.

The investment climate significantly determines the presence or absence of private firms and the contributions that they can make to society. Government policies and behaviors play a key role in defining that environment through such factors as the security of property rights, approaches to regulation and taxation, , the functioning of finance and labor markets, and broader governance features such as corruption. Improving those policies and behaviors drives growth and reduces poverty. 

IDA plays a crucial role in this regard, supporting and assisting governments in their efforts to strengthen their investment climates and paving the way for the country to attract and retain private investment.  Building on these foundations, IDA’s work is then complemented and its impact multiplied through the private sector investment activity of IFC and MIGA. Through direct investment and lending to the private sector, and by providing investment guarantees to third-party foreign investors, IFC and MIGA catalyze projects that turn the promise of development into the reality of growth and opportunity.

MIGA promotes foreign direct investment primarily through political risk insurance for foreign investments in developing countries, while IFC supports investment primarily through loans, equity investments, and risk management products to private companies.