Context: The International Finance Corporation will stop supporting investments in new coal projects as part of its alignment with the Paris Agreement. The decision comes after a 13-year campaign against IFC’s support for a financial intermediary client backing coal in India, which affected communities’ livelihoods.
About International Finance Corporation (IFC)
- IFC was founded in 1956 on an idea that the private sector has the potential to transform developing countries.
- It is the largest global development institution focused on the private sector in developing countries.
- It is a member of World Bank Group.
- It focuses on economic development and improving the lives of people by encouraging the growth of the private sector in developing countries.
It helps private sector in variety of ways:
- Investing in companies through loans, equity investments, debt securities and guarantees.
- Mobilizing capital from other lenders and investors through loan participations, parallel loans and other means.
- Advising businesses and governments to encourage private investment and improve the investment climate.
World Bank
Background: The Bretton Woods Conference of July 1944 established the framework for post – World War II international economic cooperation and reconstruction. It resulted in the formation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank). The World Bank provides loans and grants to low and middle-income countries for capital projects. World Bank comprises of the International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA), two of five organizations in the World Bank Group.
Mission of World Bank
The World Bank has two goals: end extreme poverty and promote shared prosperity in a sustainable way.
World Bank Group
The World Bank Group consists of five organizations:
- The International Bank for Reconstruction and Development (IBRD): is a global development cooperative owned by 189 member countries. It supports the World Bank Group’s mission by providing loans, guarantees, risk management products, and advisory services to middle-income and creditworthy low-income countries.
- The International Development Association (IDA): It was established in 1960 with an aim to reduce poverty by providing zero to low-interest loans (called “credits”) and grants for programs that boost economic growth, reduce inequalities, and improve people’s living conditions. It is the part of the World Bank that helps the world’s poorest countries.
- The International Finance Corporation (IFC): is the largest global development institution focused exclusively on the private sector. It helps the developing countries to achieve sustainable growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments.
- The Multilateral Investment Guarantee Agency (MIGA): it was created in 1988 to promote foreign direct investment into developing countries to support economic growth, reduce poverty, and improve people’s lives. MIGA fulfils this mandate by offering political risk insurance (guarantees) to investors and lenders.
- The International Centre for Settlement of Investment Disputes (ICSID): provides international facilities for conciliation and arbitration of investment disputes.
Note: India is a member of all the organizations of World Bank Group except The International Centre for Settlement of Investment Disputes (ICSID).
