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IFC's Operations in MICs 1996-2006

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IFC's Operations in MICs




 

MICs are a key group of countries for IFC, accounting for some 80 percent of IFC's investment volumes Through its loan and equity products, IFC invested some $4 billion in MICs in 2006. In absolute terms, IFC has doubled its commitments in MICs since 1996, when they were $2 billion. IFC commitments have also increased by the same factor in LICs, meaning that MICs continue to account for around 80 percent of IFC's total commitment volumes. By number of projects, the share of operations in MICs drops a little (to 69 percent) due to IFC being involved with, on average, larger investments in these countries than in LICs ($16.7 million per investment in MICs, compared to $8.6 million in LICs). In general, IFC's investments in MICs are reflective of MICs' share of developing country GDP (81 percent).


IFC's Investment Operations in MICs, 1996-2006

ifc committments
Most IFC investment operations since 1996 have been in MICs. The balance of commitments between MICs and LICs has been relatively consistent over time (approximately 4:1), except in 2000, when the balance was closer to 2:1. The drop in investments in MICs in 2000, in relative and absolute terms, was reflective of a more general decline in investor confidence in many of these countries in the wake of various financial crises, in Asia and elsewhere.
Source: IFC
 
A smaller share, but still a majority, of IFC's advisory operations have been in MICs IFCmanaged approximately $233 million worth of advisory services operations in 76 MICs between 1996-2006. This compares to approximately $150 million worth of advisory services operations in LICs over the same period.

IFC has achieved better development results in MICs than in LICs, though at times of abundant private capital flows IFC additionality has been weaker

IFC has achieved much higher development ratings in its projects in MICs (62 percent) than those in LICs (53 percent). IFC has also provided greater additionality (role and contribution) in its projects in MICs (83 percent) than those in LICs (75 percent). IFC's project development ratings have been especially positive in MICs considered high risk at approval (67 percent), partly reflective of greater additionality in these countries overall (see Table 1), but also due to better appraisal and supervision quality, as well as more positive improvements in business climate risk post-approval than in LICs (where the business climate risk has tended to remain high, especially in Africa). IFC's development results are not directly comparable to those of the World Bank.

 IFC Development Ratings in MICs and LICs, 1996-2006

Income Classifcation

Development Success Rate (%)

IFC role and contribution
(% high rating)

MIC, all

62%

83%

MIC, high risk3

67%

87%

MIC, non-high risk

59%

81%

LIC

53%

75%

All

59%

81%

Notes: 1) Ratings are for 627 investment operations evaluated between 1996 and 2006; 2) The development rating is a synthesis rating of four ratings: project business success; economic sustainability; environmental and social effects, and private sector development impacts beyond the project (e.g. demonstration effects); 3) IFC role and contribution is defined as the extent to which IFC played a catalytic role in an investment, and made a special contribution. For example, did IFC adhere to its corporate, country and sector strategies and business principle, and was IFC timely and efficient in its dealings with the client?
Source: Independent Evaluation Group - IFC
 

When private capital flows were more abundant in the mid 1990s, however, IFC has struggled to make a unique, pioneering contribution in MICs, and to deliver high development results. During previous buoyant periods in the emerging markets, IFC achieved noticeably worse investment ratings in MICs when it supported projects in these countries without a high role and contribution. Generally, where IFC's role and contribution has been low in MICs, only 31 percent of IFC-supported projects have achieved high development ratings, compared to 70 percent when IFC's role and contribution was high - a bigger differential than for IFC projects in LICS.

The higher development ratings that IFC has achieved in its projects in MICs (relative to LICs) applies across almost all of IFC's sector departments. The only exception is the infrastructure sector, where IFC has been extremely successful in LICs, with its investment operations realizing a 95% success rate (Table E.2).

IEG-IFC's forthcoming Evaluation Brief, IFC's Experience in Middle Income Countries 1996-2006, covers IFC's performance in MICS in greater detail.
 

IFC development ratings by sector, 1996-2006

Sector

Development Success Rate - MICs

Development Success Rate - LICs

Infrastructure

79%

95%

Extractive

78%

67%

Finance

64%

50%

Food and Agribusiness

62%

43%

General manufacturing and services

50%

53%

Funds

50%

0%

Health and education

33%

*

All

61%

49%

Notes: 1) Ratings are for 627 investment operations evaluated between 1996 and 2006; 2) The development rating is a synthesis rating of four ratings: project business success; economic sustainability; environmental and social effects, and private sector development impacts beyond the project (e.g. demonstration effects); 3) *Only three evaluated operations, of which one was rated as having high development success.
Source: Independent Evaluation Group - IFC
 

Also See: IFCIndependent Evaluation Group-IFC
 




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