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The International Finance Corporation’s and Multilateral Investment Guarantee Agency’s support for private investment in fragile and conflict-affected situations, fiscal years 2010–21 - an independent evaluation

Overview

The private sector can play a critical role in providing jobs and income in fragile and conflict-affected situations (FCS). The World Bank Group Strategy for Fragility, Conflict, and Violence 2020–2025 emphasizes the private sector’s importance in contributing to sustainable development in countries affected by fragility, conflict, and violence (FCV).

The International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) are both seeking to scale up their business volumes in FCS. Supporting investments in FCS has been a strategic priority for both IFC and MIGA for more than a decade. More recently, both institutions have adopted corporate targets for their business volume in the most challenging country groupings that include FCS. IFC has committed to delivering 40 percent of its overall long-term finance in International Development Association (IDA) and FCS countries and 15–20 percent in low-income IDA and IDA FCS countries by 2030. MIGA aims to reach a volume of 30–33 percent in IDA and FCS countries by 2023. Achieving these targets implies an ambitious increase in investment volumes in FCS compared with the level achieved before 2020. However, IFC and MIGA have not differentiated targets for business in FCS countries from the targets combining IDA and FCS countries, making it impossible to assess the extent to which future targets will be achieved within FCS.

FCS countries receive lower levels of private foreign direct investment (FDI). Net FDI flows to FCS have declined since 2012 and currently remain far below official development aid and remittances. Although FCS economies represent 5.8 percent of the developing world’s gross domestic product, they receive only 3.6 percent of FDI flows. This is due to heightened risks and constraints of investing in FCS compared with other developing countries.

This evaluation seeks to inform the implementation of the FCV strategy and MIGA’s and IFC’s commitments to scale up investments in FCS. It builds and expands on recent Independent Evaluation Group (IEG) evaluative work on the role of the private sector in FCS and assesses the effectiveness of IFC’s and MIGA’s support to the private sector in FCS during the fiscal years (FY)10–21. It draws out findings and lessons to help both institutions achieve their strategic objectives and assesses factors that could influence the scaling up of business volumes and development impacts in FCS.

The evaluation covers all relevant IFC and MIGA activities that directly support private investment in FCS, such as IFC investment and advisory services to private firms and MIGA guarantees. Through its seven country case studies, the evaluation also covers World Bank and IFC interventions with governments that are directly relevant to generating private investments. Finally, the report reflects background research in areas critical to the implementation of the FCV strategy, including staffing and human resources, financial and risk implications of scaling up in FCS, and a qualitative analysis of comparator institutions.

The evaluation covers all IFC and MIGA investments, advisory services, and guarantees committed or approved in an FCS country. However, the concepts used by World Bank Group institutions to define FCS are not fully consistent. IEG identified and analyzed the portfolio using the World Bank Harmonized List of Fragile and Conflict-Affected Situations due to its methodological rigor and to ensure consistency and comparability of data when assessing the three World Bank Group institutions. IFC and MIGA have separately adopted a practice of extending the World Bank (harmonized) FCS list by three fiscal years. Finally, both IFC and MIGA track their corporate commitments combining FCS countries and those that are IDA17 (17th Replenishment of IDA) eligible.

Read the full report here.