Opportunity knocks: A capital increase for the World Bank

On 1 November I started my new job as Executive Director at the Board of the World koenBank Group. I am incredibly proud to represent the Netherlands and 12 other countries at this important global institution. I cannot think of a mission more important than ending extreme poverty, boosting shared prosperity and achieving the sustainable development goals. I have seen the World Bank achieve results all over the world, most recently when I worked in Mali.

Despite the tremendous progress in reducing extreme poverty over the last 25 years, with more than a billion people lifted out of extreme poverty, rates remain unacceptably high in low-income countries, in particular those affected by conflict and tensions. To reach the remaining 736 million poor and end extreme poverty by 2030, the World Bank remains indispensable.

I am pleased to take up my duties shortly after the Bank’s shareholding member states gave the Bank an enormous vote of confidence. They adopted a USD 13 billion paid-in capital increase for the World Bank Group in October. This is truly historic, not only given the record amount of resources this helps raise for the Bank’s work, but also since it demonstrates great confidence in global cooperation in turbulent times.

A bigger, better and bolder Bank

So what do shareholders get in return for their capital? Combined with a series of internal reforms, the additional capital is expected to significantly increase the average annual lending volume by about one third to nearly USD 100 billion between FY19 and FY30, benefiting all Bank Group members across the income spectrum as well as creating additional opportunities for the private sector.

Moreover, Governors agreed as part of the financing package on a set of policy commitments supporting the institution’s leadership role on global public goods, including: 1) a stronger focus on the poorest and most fragile counties (IFC aims to deliver 40% of its financing in the poorest and conflict affected countries), 2) increased climate co-benefit targets (30% for IBRD and 35% for IFC), 3) a greater responsiveness to risks to global security and stability, and 4) a stronger focus on improving opportunities for women and girls.

A strong delivery on these policy commitments will certainly be top priority during my tenure at the Board.

Opportunities for the private sector

To achieve these ambitions, the World Bank needs partners. It is critical that the WBG mobilizes the private sector as financier, operator or service provider, bringing solutions that contribute to reducing poverty. The WBG will significantly expand and prioritize the use of private sector solutions, multiplying the impact of its resources and opening opportunities for private investment.

For investors there are significantly more opportunities to do business with the World Bank, as the institution aims at mobilizing US$110 billion of additional private finance over FY19-30. To this end IBRD and IFC aim to increase their respective mobilization ratios to 25 percent and 80 percent on average over FY19-30. For high risk markets, the recently created IDA18 Private Sector Window (PSW) and the Creating Markets Advisory Window will help create markets by providing critical government and project capacity, as well as de-risking tools. This allows pioneering projects to move forward in difficult environments.

The increased focus in the new procurement framework (adopted in 2016) on value for money, innovative solutions and an enhanced complaints mechanism will underpin the effective delivery of the increasing number of projects in client countries. It will not only ensure a maximum development impact of World Bank Group financing, but it will also create more opportunities for innovative initiatives.

I therefore strongly encourage the private sector to engage with World Bank client countries and the World Bank Group (including the country offices – where the aim is to grow our footprint) to explore new opportunities.

I wish you all the best for 2019: may it be a year of opportunity.

By: Koen Davidse, Executive Director of the World Bank Group