Data released by the International Finance Corporation (IFC), the private sector arm of the World Bank Group, shows that three Dutch banks were among the largest co-investors of the IFC in Fiscal Year 2015. 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. The IFC’s share of the investment is typically no more than 25-35%. The remainder has to come from other investors. In comparison to our post concerning fiscal year 2014, it seems that Dutch investment banks are increasingly active at the World Bank. This year, three (instead of two) Dutch banks are among the largest co-financer of the IFC. When it comes to the overall portfolio of the IFC, Dutch development bank FMO has risen to become second (instead of fourth) largest co-financier.
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 third-largest co-financer of the IFC was Dutch private-sector development bank FMO, with a total of $117 million in co-investments. With a total of $52,380, the Rabobank is number 13 on this list. ING Group comes 17th, with its co-investment set at $40,772.
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 ($449 million), FMO is the second largest co-financier with $435 million, while the top five is completed by ING with $326 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.