Data released by the International Finance Corporation (IFC), the private sector arm of the World Bank Group, shows that Dutch investment bank FMO was the largest co-investor of the IFC in Fiscal Year 2014. Additionally, of the entire IFC portfolio, two of the five largest co-financiers were Dutch.
The IFC invests in private sector entities that are active in developing countries. However, as described in a previous blog post, the IFC’s share of the investment is typically no more than 25-35%. The remainder has to come from other investors.
Before the IFC will invest in a company, a serious and thorough analysis of the proposed project and the characteristics of the company needs to take place. This is done through various assessments, including an environmental, social and financial assessment, a required process regardless of the size of an investment. Because of these assessments, the IFC typically prefers larger investments, as the transaction costs are roughly the same for each deal. The thorough assessment process makes the IFC an interesting partner to work with for other financial institutions. The IFC’s involvement is widely seen as the World Bank Group’s seal of approval.
Dutch banks are strong partners of the IFC. In Fiscal Year 2014, the largest co-financer of the IFC was Dutch private-sector development bank FMO, with a total of $167 million in co-investments. The ING is number 15 on this list, with a total of $52.5 million.
The overall portfolio of the IFC shows a similarly large interest in partnering with Dutch banks. Although the list of co-financiers of the IFCs entire portfolio is topped by Unicredit ($574 million), DNB ASA ($479 million) and Mitsubishi UFJ Financial Group ($427 million), FMO is the fourth largest co-financier with $405 million, while the top five is completed by ING with $391 million co-invested with the IFC. With two of the five largest co-investors of the total portfolio, the Netherlands is an important partner for the IFC in strengthening and growing the private sector in developing countries.
Investing for development
As part of the World Bank Group, the IFC also has the Twin Goals of ending poverty and boosting shared prosperity as the leading principles for its investments. At the same time, as the private sector arm, the IFC must at least break-even, and preferably make a small profit on its investments. As a result, the IFC has transferred significant amounts of money each year to IDA, the fund for the poorest countries. Co-investing with the IFC thus makes financial, and developmental, sense: a true case of doing well, by doing good.
The full overview of IFC co-financiers can be found here.
UPDATE on August 24: The IFCs overview states DNB as the second largest co-investor in its portfolio. This article originally stated this was the Dutch national bank (De Nederlandsche Bank). Upon further investigation this turned out to be the DNB ASA – Norway’s largest financial services group. This has been corrected in this article.