103210 # privatesector matters for development OPPORTUNITY CAPITAL GROWTH IMPACT Adjective: essential IFC Annual Report 2015 Absolutely necessary; extremely important. “Jobs are essential for lasting prosperity.” 2-3 LEADERSHIP PERSPECTIVE 4-19 ESSENTIAL Why the Private Sector Matters for Development 4 We believe that private sector 20-27 investment is essential if IFC GLOBAL RESULTS the world is to end extreme poverty by 2030 and boost Our Management Team 20 IFC Financial Highlights 23 IFC Operational Highlights 23 IFC’s Global Impact 24 shared prosperity. 28-55 PRIVATE SECTOR IMPACT Spurring Growth 30 Building Resilience 40 Improving Lives 48 56-104 ABOUT US World Bank Group 2015 Summary Results Message from the President of the World Bank Group and Chairman of the Board of Executive Directors LETTER FROM WORLD BANK GROUP PRESIDENT JIM YONG KIM This has been a pivotal year for global development. The international community’s decisions in 2015 will have long-term impacts on the world’s ability to reach our goal of ending extreme poverty by 2030. T oday, nearly 1 billion people still live on less than $1.25 a day. This is a staggering number, but it is important to remember that over the past 25 years, the world has reduced the rate of extreme poverty by two-thirds. Over that time, many countries have succeeded in making the seemingly impossible possible. natural disasters and pandemics to prevent people focused on private sector development, are from plunging into extreme poverty. strengthening their efforts in this regard. This year, “Working together, we can We also know that, as an institution, the World Bank IFC provided about $17.7 billion in financing for private sector development, about $7.1 billion of promote inclusive and sustainable Group needs to better meet the evolving needs of which was mobilized from investment partners. low- and middle-income countries. In a world where MIGA issued $2.8 billion in political risk and credit growth, as well as opportunity capital is more easily available, we must emphasize enhancement guarantees underpinning various our greatest strengths — ​ the marriage of our for the poor and the vulnerable. vast knowledge with innovative financing to deliver investments, including in much-needed infrastructure projects. programs that have the greatest impact on the We can be the generation that poorest. Our aim is to help countries translate Nearly 1 billion people living in extreme poverty ended extreme poverty.” global experience into practical know-how to solve their most difficult problems. want an equal opportunity for a better life. They are counting on policies and programs that give them a chance. Governments must seize this This year, the World Bank Group committed nearly E moment. Our private sector partners must explore nding extreme poverty by 2030 will be $60 billion in loans, grants, equity investments, and new investments. The World Bank Group, our difficult but entirely possible. For decades, guarantees to its members and private businesses. multilateral development bank partners, and our the World Bank Group’s principal institutions — ​ IBRD delivered record amounts of financing for any new partners on the horizon must all work together the International Bank for Reconstruction and year except at the height of the global financial to not let this opportunity slip away and collaborate Development (IBRD), the International Development crisis, with commitments totaling $23.5 billion. And with real conviction. Working together, we can Association (IDA), the International Finance IDA, the World Bank’s fund for the poorest, has promote inclusive and sustainable growth, as well Corporation (IFC), and the Multilateral Investment just had the strongest first year of a replenishment as opportunity for the poor and the vulnerable. We Guarantee Agency (MIGA) — ​ have distilled and cycle ever, committing $19 billion. Thanks to our can be the generation that ended extreme poverty. analyzed our global experience in fighting poverty. determined and dedicated staff, we have been able We have learned from our experience what to strengthen our performance and ensure that has worked for development and what has not in the development knowledge and expertise within specific contexts, and some clear patterns our institution moves more easily around have emerged. the globe. Evidence shows that great gains can be made As the world seeks to go from billions to trillions of through the strategy of “grow, invest, and insure.” dollars in development finance — ​ w ith sources We must promote strong, sustainable, and inclusive of financing from high-, middle-, and low-income DR. JIM YONG KIM economic growth; we must invest in people — ​ countries — ​t he work of our entire World Bank especially in health and education; and we must Group will be critical to driving private sector President of the World Bank Group build social safety nets and protections against investment to emerging markets and fragile and Chairman of the Board of countries. IFC and MIGA, two of our institutions Executive Directors GLOBAL COMMITMENTS LATIN AMERICA & THE CARIBBEAN The World Bank Group maintained strong support for $ 10 developing countries over the BILLION past year as the organization focused on delivering results more quickly, increasing its relevance for its clients and partners, and bringing global solutions to local challenges. EUROPE & CENTRAL ASIA $ 10 EAST ASIA & THE PACIFIC BILLION $ 9 BILLION $ 5 BILLION MIDDLE EAST & NORTH AFRICA $ 11 BILLION 60 $ BILLION SOUTH ASIA $ 15 in loans, grants, equity investments, and guarantees BILLION to partner countries and private businesses SUB-SAHARAN AFRICA Total includes multiregional and global projects. Regional breakdowns reflect World Bank country classifications. OUR IMPACT DRIVING ECONOMIC GROWTH PROMOTING INCLUSIVENESS ENSURING SUSTAINABILITY The World Bank Group leveraged IBRD/IDA IBRD/IDA IBRD/IDA its strengths, expertise, and resources to help countries and other partners make a real impact 49 million people and micro, small, 123 million people received health, 41 million tons of CO2 equivalent and medium enterprises reached nutrition, and population services emissions expected to be reduced with on development — ​by driving with financial services support of special climate instruments economic growth, promoting inclusiveness, and ensuring sustainability. 27,700 kilometers of roads 14.5 million beneficiaries covered by 34 countries with strengthened public constructed or rehabilitated social safety net programs financial management systems IFC IFC IFC 237 million customers supplied 3.5 million students received $19.5 billion in government revenues with phone connections educational benefits generated by IFC clients 2.5 million jobs provided 3.4 million farmers assisted 9.7 million metric tons of greenhouse emissions expected to be reduced as a result of IFC investments in FY15 MIGA MIGA MIGA $14.7 billion in new loans issued 21.8 million people provided 4 million people provided by MIGA clients access to power access to clean water 100,325 jobs provided 142 million people provided $3 billion in government revenues access to transport generated by MIGA clients THE INSTITUTIONS OF THE WORLD BANK GROUP FINANCING WORLD BANK GROUP FOR PARTNER COUNTRIES The World Bank Group is one of the world’s largest sources By fiscal year, in millions of dollars of funding and knowledge for developing countries, WORLD BANK GROUP 2015 2014 2013 2012 2011 Commitments a 59,776 58,190 50,232 51,221 56,424 consisting of five institutions with a common commitment Disbursements b 44,582 44,398 40,570 42,390 42,028 to reducing poverty, increasing shared prosperity, and IBRD Commitments 23,528 18,604 15,249 20,582 26,737 promoting sustainable development. Disbursements 19,012 18,761 16,030 19,777 21,879 IDA International Bank for Reconstruction and Development (IBRD) Commitments 18,966 22,239 16,298 14,753 16,269 Disbursements 12,905 13,432 11,228 11,061 10,282 lends to governments of middle-income and creditworthy low-income countries IFC International Development Association (IDA) Commitments c 10,539 9,967 11,008 9,241 7,491 Disbursements 9,264 8,904 9,971 7,981 6,715 provides interest-free loans, or credits, and grants to governments of the MIGA poorest countries Gross issuance 2,828 3,155 2,781 2,657 2,099 International Finance Corporation (IFC) RECIPIENT-EXECUTED TRUST FUNDS Commitments 3,914 4,225 4,897 3,988 3,828 provides loans, equity, and advisory services to stimulate private sector Disbursements 3,401 3,301 3,341 3,571 3,152 investment in developing countries a. Includes IBRD, IDA, IFC, and Recipient-Executed Trust Fund (RETF) commitments, and MIGA gross issuance. RETF commitments include all recipient-executed grants, and therefore total WBG commitments differ from the amounts reported in the WBG Multilateral Investment Guarantee Agency ( MIGA) Corporate Scorecard, which includes only a subset of trust-funded activities. b. Includes IBRD, IDA, IFC, and RETF disbursements. NOTE: The disbursement total for 2015 has been corrected since publication of provides political risk insurance and credit enhancement to investors and lenders the print edition. It includes previously omitted IDA data. to facilitate foreign direct investment in emerging economies c. Long-term commitments for IFC’s own account. Does not include short-term finance or funds mobilized from other investors. International Centre for Settlement of Investment Disputes (ICSID) provides international facilities for conciliation and arbitration of investment disputes IFC ANNUAL REPORT 2015 1 ABOUT IFC Throughout our history, IFC has made a practice of taking on difficult tasks — ​k nowing that the lessons we learn will help us steer the private sector to make a greater contribution to growth and poverty reduction. I FC, a member of the World Bank Group, is the largest global development institution focused on the private sector in developing countries. Established in 1956, IFC is owned by 184 member countries, a group that collectively determines our policies. With a global presence in 100 countries, a network consisting of hundreds of financial institutions, and more than 2,000 private sector clients, IFC is uniquely positioned to create opportunity where it’s needed most. We use our capital, expertise, and influence to help end extreme poverty and boost shared prosperity. 2 IFC ANNUAL REPORT 2015 LEADERSHIP PERSPECTIVE A Letter from IFC Executive Vice President and Chief Executive Officer, Jin-­Yong Cai T he needs of developing countries are immense. But our experience over the past two decades has shown that strong partnership between the public and private sectors can achieve dramatic results. Since 1990, the number of people living in extreme poverty has been reduced by more than half, It’s imperative for the and the size of the working middle class in developing countries has nearly tripled. public and private sectors to Now the global community has embarked on an ambitious play their respective roles. the Sustainable Development Goals — ​ initiative — ​ to address the full spectrum of challenges that inhibit progress and prosperity in developing countries. Meeting these goals over the next 15 years will require trillions of dollars a year. It will require the world to unleash the power of market economies — ​ which are most effective when they are fair, transparent, and inclusive. It’s imperative for the public and private sectors to play their respective roles in this effort. At IFC, we believe the private sector is essential for sustainable development — ​ and we know how to forge the ­ public-­private IFC ANNUAL REPORT 2015 3 partnerships necessary to address the most We did all of this despite turbulent market countries. Much more can be done to tackle urgent challenges of development. In fiscal conditions, declining commodity prices, the challenges of development — ​ especially year 2015, our long-term investments in and political instability in several regions. in mobilizing the financing that will be needed developing countries totaled $17.7 billion, a During the year, IFC unveiled several projects to achieve the Sustainable Development 17 percent increase over the previous year. with substantial development potential. Goals. I am confident IFC’s performance has More than a third of that amount — ​ over We helped Colombia on an ambitious positioned us well to take on those challenges was mobilized from other investors $7 billion — ​ $24 billion road-­modernization project. We in the coming years. who joined us in our projects because of played a catalytic role in deepening India’s our 60-year track record of achieving strong capital markets, introducing an offshore development results along with sound rupee-­ denominated bond program whose financial returns. success prompted the Indian central bank Our work helped spark opportunity in to consider permitting local companies to JIN-YONG CAI more than 100 developing countries, issue similar bonds in offshore markets. We agreed to provide a $300 million financing IFC Executive Vice President particularly in the most challenging markets. package to help set up the largest wind farm and Chief Executive Officer Our long-term investments in the poorest countries — ​ those eligible to borrow from in Central America. the World Bank’s International Development IFC continued to deliver strong results Association — ​totaled nearly $4.7 billion, for our clients through our advisory work. accounting for over a third of our projects. More than 90 percent of our advisory clients About 10 percent of our projects, totaling expressed satisfaction with our work. Nearly more than $600 million, were in fragile and two-­thirds of our advisory work was in the ­ affected areas of the world. conflict-­ poorest countries — ​ including 20 percent in In doing so, we helped our clients improve conflict-­ fragile and ­ affected areas. lives and drive sustainable growth. Our clients IFC Asset Management Company maintained provided 2.5 million jobs, helped educate its growth trajectory, increasing its assets 3.5 million students, and treated more than under management to $8.5 billion across nine 17 million patients. They generated power investment funds, and mobilizing $761 million for nearly 56 million customers, distributed for IFC projects. water to more than 23 million, and provided I am proud of IFC staff’s efforts in improving gas to 35 million. the lives of millions of people in developing 4 IFC ANNUAL REPORT 2015 ESSENTIAL: WHY THE PRIVATE SECTOR MATTERS FOR DEVELOPMENT Over the past two decades, the world has made extraordinary progress in economic development, lifting more than 700 million people out of extreme poverty while creating millions of jobs. The 2008 — global financial crisis, however, slowed that progress   ​and the world economy is still struggling to regain momentum. IFC ANNUAL REPORT 2015 5 M ore than a billion people still scrape by on less than $1.25 a day. If the world is to end extreme poverty by 2030 and create the conditions necessary for sustained This is challenging work, and it can involve difficult judgments and tradeoffs. But throughout our history, IFC has made a practice of taking on difficult tasks — ​ prosperity, economic growth must accelerate. Growth must knowing that the lessons we learn from our experience be resilient in the face of a growing array of challenges — ​ will help us steer the private sector to make an even such as climate change, conflict and instability, and fast- greater contribution to growth and poverty reduction. moving epidemics. These challenges can’t be tackled without a robust and engaged private sector. Developing countries need up to $2 trillion a year just for investments in the power, It takes a special kind of focus to transportation, and health sectors. As the largest global development institution focused on ensure that the benefits of private the private sector, we know how to mobilize significant sector growth reach the people who private capital to create opportunity in the most challenging need them most. places. Over the past six decades, we have leveraged about $2.6 billion in capital from our member governments to deliver a significant amount of financing for private sector development — ​ about $224 billion in all. It takes a special kind of focus, however, to ensure that the benefits of private sector growth reach the people who need them most. IFC plays an important role here — ​ by making investments that expand opportunities for the poor; by helping businesses improve environmental, social, and governance standards; and by helping establish investment- climate systems that promote prosperity for all. 6 IFC ANNUAL REPORT 2015 Developing countries need up to $2 trillion a year just for investments in the power, transportation, and health sectors. A challenge of this magnitude requires the public and private sectors to work together. IFC ANNUAL REPORT 2015 7 Open here to see how far we have to go O ver the past six decades, we have leveraged about $2.6 billion in capital from our member governments to deliver a significant amount of financing for private sector development — about $224 billion in all. But much more is needed. $2 T TRI LLI ION $2.6B I FC capital from shareholders since 1956 $224B* F inancing generated by IFC for private sector development since 1956 *Not adjusted for inflation. 250 $ BILLION Additional funding needed for education per year IFC ANNUAL REPORT 2015 13 ESSENTIAL: OPPORTUNITY Our priority is to create opportunity where it’s needed most — in the poorest and most fragile countries, and for the most vulnerable segments of the population. U nsteady, low-wage jobs are the norm for 1.5 billion people in developing countries. It’s imperative to accelerate job creation, expand opportunities for women, and modernize health and education services. Noun: opportunity A set of circumstances that makes it possible to do something. “We’ve identified a good business opportunity.” 14 IFC ANNUAL REPORT 2015 ESSENTIAL: CAPITAL IFC helps unlock private capital for development in ways that promote prosperity for all. We do so by helping businesses mitigate risks and raise environmental, social, and governance standards. M obilizing private capital means creating the right mix of incentives — one that balances the private sector’s need for returns with society’s need for affordable services. Noun: capital Wealth in the form of money or other assets owned by a person or organization or available or contributed for a particular purpose such as starting a company or investing. “Rates of return on invested capital were high.” Up to 690 $ . ILLION B Additional funding needed for power per year Up to 470 $ . ILLION B Additional funding needed for the transportation sector per year IFC ANNUAL REPORT 2015 17 ESSENTIAL: GROWTH IFC helps companies overcome obstacles to sustainable growth. We focus on strengthening infrastructure, boosting small and medium enterprises, and making it easier for people to get the financing they need to succeed. N early a billion people struggle on less than $1.25 a day. If the world is to end extreme poverty by 2030 and boost shared prosperity, economic growth and job creation must accelerate. Noun: growth Increase in economic value or activity. “The government aims to revive economic growth.” 18 IFC ANNUAL REPORT 2015 ESSENTIAL: IMPACT IFC looks for creative ways to maximize the private sector’s capacity to create opportunity and promote inclusive growth, driving impact. T he private sector sparks the innovation necessary for economies to thrive, delivering 90 percent of the jobs and most of the goods and services that people need to improve their lives. Noun: impact The effect or influence of one person, thing, or action, on another. “Our regional initiatives have had a significant impact on employment.” Up to 240 $ . ILLION B Additional funding needed for telecom per year 20 IFC ANNUAL REPORT 2015 OUR MANAGEMENT TEAM Our seasoned team of executives ensures that IFC’s resources are deployed effectively, with a focus on maximizing development impact and meeting the needs of our clients. James Scriven, Vice President, Corporate Risk and Sustainability I FC’s Management Team benefits from years of development experience, a diversity of knowledge, qualities that enhance and distinct cultural perspectives — ​ IFC’s uniqueness. The team shapes our strategies and policies, positioning IFC to help improve the lives of poor people in the developing world. Jean Philippe Prosper, Vice President, Global Client Services IFC ANNUAL REPORT 2015 21 Gavin Wilson, CEO, IFC Asset Management Company Ethiopis Tafara, General Counsel and Vice President, Corporate Risk and Sustainability Nena Stoiljkovic, Vice President, Global Partnerships, and World Bank Group Vice President—Global Practices Anshul Krishan, Chief of Staff Dimitris Tsitsiragos, Vice President, Global Client Services Jingdong Hua, Vice President and Treasurer Karin Finkelston, Vice President, Global Partnerships Jin-Yong Cai, IFC Executive Vice President and CEO 22 IFC ANNUAL REPORT 2015 IFC YEAR IN REVIEW In FY15, IFC invested nearly $18 billion, including more than $7 billion mobilized from other investors. Our comprehensive approach helped businesses innovate, build internationally competitive industrial sectors, and create good jobs. IFC ANNUAL REPORT 2015 23 IFC FINANCIAL HIGHLIGHTS 2015 2014 2013 2012 2011 Dollars in millions, for the year ended June 30* Net income (loss) attributable to IFC $ 445 $ 1,483 $ 1,018 $ 1,328 $ 1,579 Grants to IDA $ 340 $ 251 $ 340 $ 330 $ 600 Income before grants to IDA $ 749 $ 1,739 $ 1,350 $ 1,658 $ 2,179 Total assets $ 87,548 $ 84,130 $ 77,525 $ 75,761 $ 68,490 Loans, equity investments, and debt securities, net $ 37,578 $ 38,176 $ 34,677 $ 31,438 $ 29,934 Estimated fair value of equity investments $ 14,834 $ 14,890 $ 13,309 $ 11,977 $ 13,126 KEY RATIOS Return on average assets (GAAP basis) 0.5% 1.8% 1.3% 1.8% 2.4% Return on average capital (GAAP basis) 1.8% 6.4% 4.8% 6.5% 8.2% Cash and liquid investments as a percentage of next three years’ estimated net cash requirements 81% 78% 77% 77% 83% Debt-to-equity ratio 2.6:1 2.7:1 2.6:1 2.7:1 2.6:1 Total resources required ($ billions) $ 19.2 $ 18.0 $ 16.8 $ 15.5 $ 14.4 Total resources available ($ billions) $ 22.6 $ 21.6 $ 20.5 $ 19.2 $ 17.9 Total reserve against losses on loans to total disbursed loan portfolio 7.5% 6.9% 7.2% 6.6% 6.6% See page 4 of Management’s Discussion and Analysis and Consolidated Financial Statements for details on the calculation of these numbers:   *  http://www.ifc.org/FinancialReporting IFC OPERATIONAL HIGHLIGHTS 2014 2015 2012 2013 2011 Dollars in millions, for the year ended June 30 LONG-TERM INVESTMENT COMMITMENTS Number of projects 406 364 388 365 324 Number of countries 83 73 77 78 82 For IFC’s account $ 10,539 $ 9,967 $ 11,008 $ 9,241 $ 7,491 CORE MOBILIZATION* Syndicated loans1 $ 4,194 $ 3,093 $ 3,098 $ 2,691 $ 4,680 Structured finance – – – – – IFC initiatives & other $ 1,631 $ 1,106 $ 1,696 $ 1,727 $ 1,340 Asset Management Company (AMC) funds $ 761 $ 831 $ 768 $ 437 $ 454 Public-Private Partnership (PPP)2 $ 548 $ 113 $ 942 $ 41 – Total core mobilization $ 7,133 $ 5,142 $ 6,504 $ 4,896 $ 6,474 INVESTMENT DISBURSEMENTS For IFC’s account $ 9,264 $ 8,904 $ 9,971 $ 7,981 $ 6,715 Syndicated loans 3 $ 2,811 $ 2,190 $ 2,142 $ 2,587 $ 2,029 COMMITTED PORTFOLIO Number of firms 2,033 2,011 1,948 1,825 1,737 For IFC’s account $ 50,402 $ 51,735 $ 49,617 $ 45,279 $ 42,828 Syndicated loans 4 $ 15,330 $ 15,258 $ 13,633 $ 11,166 $ 12,387 SHORT-TERM FINANCE Average Outstanding Balance $ 2,837 $ 3,019 $ 2,739 $ 2,529 $ 1,881 ADVISORY SERVICES Advisory Services program expenditures $ 202.1 $ 234.0 $ 231.9 $ 197.0 $ 181.7 Share of program in IDA countries 5 65% 66% 65% 65% 64% Note: IFC changed its reporting practice regarding investment amounts, beginning in the current fiscal year. To align our approach with that of commercial banks, we now report short-term finance investments separately from long-term investments. Short-term investments are reported as the average outstanding balance for the year. This chart reflects five years’ worth of data, calculated under the new reporting policy.   * Financing from entities other than IFC that becomes available to client due to IFC’s direct involvement in raising resources. 1. Includes B-Loans, Parallel Loans, MCPP Loans, and A-Loan Participation Sales (ALPS). 2. Third-party financing made available for public-private partnership projects due to IFC’s mandated lead advisor role to national, local, or other government entity. 3. Includes B-Loans, Agented Parallel Loans & MCPP Loans. 4. Includes B-Loans, A-Loan Participation Sales (ALPS), Agented Parallel Loans, Unfunded Risk Participations (URPs) & MCPP Loans. 5. All references in this report to percentages of advisory program expenditures in IDA countries and fragile and conflict-affected areas exclude global projects. 24 IFC ANNUAL REPORT 2015 IFC’S GLOBAL IMPACT Our work helped spark LATIN AMERICA & THE CARIBBEAN opportunity in 100 $ 5.1 BILLION developing countries, particularly in the most challenging markets. M ore than a third of our long-term investments — ​ $4.7 billion in all — went to the world’s poorest countries. About 10 percent of our projects, totaling more than $600 million, were in fragile and conflict-affected areas of the world. IFC ANNUAL REPORT 2015 25 EUROPE & CENTRAL ASIA $ 2.2 EAST ASIA & THE PACIFIC BILLION $3.3 BILLION $ 1.3 BILLION $1.9 17.7 $ * MIDDLE EAST & NORTH AFRICA BILLION SOUTH ASIA $ 3.7 BILLION BILLION SUB-SAHARAN AFRICA in long-term investment commitments, including more than $7 billion in funds mobilized from other investors *Including global projects 26 IFC ANNUAL REPORT 2015 IFC’S GLOBAL IMPACT FY15 LONG-TERM COMMITMENTS FY15 LONG-TERM COMMITMENTS FY15 COMMITTED PORTFOLIO BY ENVIRONMENTAL AND Dollar amounts in millions, for IFC’s own account as of June 30, 2015 Dollar amounts in millions, for IFC’s own account as of June 30, 2015 SOCIAL CATEGORY Total $10,539 (100.0%) Total $50,402 (100%) Category Commitments Number of ($ millions) projects BY INDUSTRY BY INDUSTRY A $ 1,508 25 Financial Markets $4,697 (44.6%) Financial Markets $16,046 (32%) B $ 3,244 157 Infrastructure $2,056 (19.5%) Infrastructure $9,919 (20%) C $ 215 57 Agribusiness & Forestry $1,375 (13.1%) Manufacturing $5,429 (11%) FI* $ 256 15 Consumer & Social Services $748 (7.1%) Consumer & Social Services $4,289 (8%) FI-1 $ 1,311 17 Oil, Gas & Mining $515 (4.9%) Funds $4,163 (8%) FI-2 $ 2,937 100 Funds $507 (4.8%) Agribusiness & Forestry $3,401 (7%) FI-3 $ 1,067 35 Manufacturing $365 (3.5%) Oil, Gas & Mining $2,640 (5%) Telecommunications & Information $275 (2.6%) Trade Finance $2,665 (5%) TOTAL $ 10,539 406 Technology Telecommunications & Information $1,849 (4%) FI category applies to new commitments * Technology on previously existing projects. Visit BY REGION www.ifc.org/escategories for information Latin America and the Caribbean $2,379 (22.57%) BY REGION on category definitions. East Asia and the Pacific $2,288 (21.71%) Latin America and the Caribbean $11,198 (22%) Sub-Saharan Africa $1,831 (17.38%) Europe and Central Asia $8,947 (18%) Europe and Central Asia $1,534 (14.55%) Sub-Saharan Africa $8,681 (17%) IFC’S LARGEST COUNTRY South Asia $1,402 (13.30%) East Asia and the Pacific $8,398 (17%) EXPOSURES1 Middle East and North Africa $893 (8.47%) South Asia $6,053 (12%) June 30, 2015 (Based on IFC’s Account) Global $212 (2.01%) Middle East and North Africa $5,923 (12%) Committed % of Some amounts include regional shares of investments that are officially classified as Global $1,203 (2%) Country Portfolio Global global projects. (Global Rank) ($ millions) Portfolio Amounts include regional shares of investments that are officially classified as global projects. BY PRODUCT India (1) $ 4,809 9.54% Loans1 $7,019 (66.60%) China (2) $ 3,608 7.16% Equity2 $3,187 (30.24%) Turkey (3) $ 3,174 6.30% Guarantees $273 (2.59%) Brazil (4) $ 2,519 5.00% Risk-management products $60 (0.57%) Nigeria (5) $ 1,621 3.22% 1. Includes loan-type, quasi-loan products. Indonesia (6) $ 1,437 2.85% 2. Includes equity-type, quasi-equity products. Mexico (7) $ 1,383 2.74% Russian Federation (8) $ 1,188 2.36% Pakistan (9) $ 1,176 2.33% Colombia (10) $ 1,026 2.03% 1. Excludes individual country shares of regional and global projects. IFC ANNUAL REPORT 2015 27 FY15 INVESTMENT SERVICES DOTS SCORE BY INDUSTRY FY15 ADVISORY SERVICES PROGRAM EXPENDITURES Dollar amounts in millions IFC Total 820 ($30,973) 63% Funds 100 ($1,591) 74% Total $202.1 (100%) Financial Markets 243 ($11,481) 74% BY REGION Agribusiness & Forestry 94 ($2,354) 62% Sub-Saharan Africa $53.6 (26.5%) Infrastructure 135 ($6,432) 61% East Asia and the Pacific $38.5 (19.0%) Oil, Gas & Mining 33 ($2,067) 55% Europe and Central Asia $33.7 (16.7%) Manufacturing 89 ($3,921) 53% South Asia $22.9 (11.3%) Consumer & Social Services 89 ($2,032) 52% Latin America and the Caribbean $21.8 (10.8%) Telecommunications & Information 37 ($1,094) 41% Middle East and North Africa $20.5 (10.1%) Technology Global $11.1 (5.5%) Numbers at the left end of each bar are the total number of companies rated and the total IFC investment (US$ millions) in those projects at the end of FY15. BY BUSINESS AREA Financial Sector $64.0 (31.7%) Investment Climate $50.5 (25.0%) FY15 INVESTMENT SERVICES DOTS SCORE BY REGION Public-Private Partnerships $30.9 (15.3%) Cross-Industry Areas $27.8 (13.8%) IFC Total 820 ($30,973) 63% Energy & Resource Efficiency $16.9 (8.4%) East Asia and the Pacific 110 ($4,341) 65% Agribusiness $11.9 (5.9%) Latin America and the Caribbean 179 ($6,479) 65% Middle East and North Africa 91 ($3,924) 64% Sub-Saharan Africa 149 ($3,962) 63% WEIGHTED AND UNWEIGHTED INVESTMENT South Asia 116 ($4,374) 61% SERVICES DOTS SCORES Europe and Central Asia 160 ($7,400) 61% Numbers at the left end of each bar are the total number of companies rated and the total FY15 820 63% IFC investment (US$ millions) in those projects at the end of FY15. $30,973 72% FY14 833 64% $30,042 73% FY13 716 66% $29,674 73% Unweighted Weighted Numbers at the left end of each bar for unweighted DOTS score are the total number of companies rated. Numbers at the left end of each bar for weighted DOTS score represent total IFC investment (US$ millions) in those projects. 28 IFC ANNUAL REPORT 2015 LEVERAGING THE POWER OF THE PRIVATE SECTOR — The private sector is an indispensable force for sustainable development   ​ it sparks the innovation, improves the productivity and economic efficiency, and creates the jobs and growth needed to end extreme poverty and boost shared prosperity. IFC is ideally positioned to tap the power of the private sector to address the most urgent challenges of our time. IFC ANNUAL REPORT 2015 29 30 SPURRING GROWTH W e work with private sector clients and partners to drive sustainable growth and with a focus on building infrastructure, create jobs — ​ mobilizing private capital, promoting investments in technology, and expanding opportunities for small and medium enterprises. 40 BUILDING RESILIENCE S ustainable development depends on much more than economic growth. Developing countries are vulnerable to a growing array of challenges — ​from food security and climate change to urban migration. IFC works with businesses and governments to help stave off the biggest threats to sustained prosperity. 48 IMPROVING LIVES W e focus on lifting people out of poverty — ​ by helping businesses create jobs, by expanding education and health care, and by promoting women’s economic empowerment. We concentrate our efforts wherever poverty is most entrenched and wherever our support can do the most good. 30 IFC ANNUAL REPORT 2015 SPURRING GROWTH: INFRASTRUCTURE We take a comprehensive approach to infrastructure development. In Colombia, for example, our PPP team is advising the government Creating a Strong on an ambitious $24 billion road-­modernization project. In addition, we agreed to invest $70 million in Financiera de Desarrollo Nacional — ​Colombia’s development agency — ​to help mobilize Foundation for funding for the country’s infrastructure projects. Development In Pakistan, where millions remain cut off from the national grid, we invested $125 million in China Three Gorges South Asia to support a series of privately owned hydro, solar, and wind projects. Once operational, they are expected to provide electricity to more than 11 million people and boost the country’s generation D eveloping countries spend about $1 trillion a year on capacity by 15 percent. but that’s barely half of what’s needed. infrastructure — ​ In Myanmar — ​ where only one-third of households enjoy access to As a result, more than a billion people still lack access to electricity. IFC and the World Bank’s International Development electricity — ​ More than 750 million are forced to endure the hazards of unclean Association are jointly supporting private sector development water. More than a billion are deprived of the benefits of modern of about 750 megawatts of new gas-fired power generation. We means of transportation. Such challenges diminish productivity, are also working with power utilities in Yangon and Mandalay to slow economic growth, and constrict crucial avenues out raise efficiency in power distribution. of poverty. We’re also working to expand electricity in Nepal, which uses Governments alone cannot close the infrastructure funding gap. less than 1 percent of its 83,000 MW in hydropower potential. We That’s why IFC has taken a leading role in financing infrastructure partnered with India’s GMR Group to develop the 900 MW Upper projects and advising client governments on p ­ ublic-­ private Karnali hydropower plant and two transmission line projects. partnerships, or PPPs. In FY15, we provided $3.9 billion in long- Twelve percent of the power generated will be provided free of term financing for infrastructure projects, including funds cost to Nepal. mobilized from other investors. Our advice facilitated $5.7 billion In Kenya, just 25 percent of the people have access to power. in private investment in public infrastructure and is expected To help expand the country’s electricity grid, we invested to help 16 million people gain access to basic services such as $50 million in Kenya Power & Lighting Company, the national transportation, electricity, and water. power distributor. We also advised the company on how to improve its operational efficiency. IFC ANNUAL REPORT 2015 31 Governments alone cannot close the infrastructure funding gap. That’s why IFC has taken a leading role in financing infrastructure projects and advising client governments on public-private partnerships. WHY MORE NEEDS TO BE DONE 1 BILLION people still lack access to electricity 32 IFC ANNUAL REPORT 2015 SPURRING GROWTH: ACCESS TO FINANCE Opening Up New Pathways to Prosperity B ishaka Bairagi dreamed of owning her own handmade sari business in Kolkata, India. But her earnings were less than $7 a month. And she was wary of money lenders. “They treat us very badly,” she said. An IFC client, Bandhan Financial Services, offered her a $66 loan to launch her business. Today she employs 25 people and earns $400 a month. With her new income, she is able to afford a comfortable house and university education for her son. Across the world, 2.5 billion adults do not have access to basic financial services. Nearly 200 million micro, small, and medium enterprises, or MSMEs, in emerging countries have limited access to financial services and credit. debit cards, e-money accounts, and Basic financial services — ​ simple bank accounts — ​ are standard tools for lifting people out of poverty and spurring economic growth. Such accounts can provide a quick entry point for people to banking services, helping them boost their earnings, plan for household expenses, save for the future, and better manage economic risks. IFC is playing a vital role in achieving a key goal of the World Bank Group — ​ universal access to finance for adults by 2020. Working IFC’s advisory work in Africa enabled Nimna Diayte to lease equipment for her small business in Senegal. IFC ANNUAL REPORT 2015 33 WHY MORE NEEDS with a network of about 800 financial institutions in more than TO BE DONE 100 developing countries, we and other Bank Group institutions intend to help establish 600 million bank accounts by 2020 for 2.5 people who currently lack one. Recently, we joined forces with ­ the credit-card company MasterCard to set up a $250 million facility to boost access to electronic payments for millions of people in emerging markets. Our collaboration BILLION will allow banks in developing countries to increase their offerings of debit, credit, prepaid, and electronic cards — ​ which are safer and more efficient than cash transactions — ​ to more people and small businesses. adults still lack basic financial services We’re also working to remove obstacles to effective and sustainable by improving access to credit information, promoting credit flows — ​ best practices in risk management, and helping financial institutions improve environmental and social standards. In Latin America, we are helping modernize the region’s collateral Bishaka Bairagi launched her handmade sari business with a registry system to enable borrowers to pledge movable assets $66 loan from an IFC client. to guarantee loans — ​instead of using purely traditional collateral assets such as land. As a result, more businesses are able to get loans and expand. We are working to set up such systems in Belize, St. Lucia, the Dominican Republic, and Trinidad and Tobago. Basic financial services such as bank accounts are essential for lifting people out of poverty and spurring economic growth. 34 IFC ANNUAL REPORT 2015 SPURRING GROWTH: SME s Accelerating Local Entrepreneurship W hen Sonia Arias launched her small textile business seven years ago in Medellin, Colombia, she had a loan and a high interest rate that left her short of cash to reinvest. Repaying the loan felt like “being hit with a stick,” she remembers. Now, a l­ittle-known financial tool is having a big impact on Arias and other small-business entrepreneurs who lack the right kind of collateral to secure traditional loans. Smaller businesses make up the majority of businesses in Latin America. A new collateral registry in Colombia allows them to leverage assets as small as a sewing machine to receive loans. The results have been striking. Since the registry went live in 2014, thousands of business owners have registered more than a million items worth more than $93 billion. Some of the country’s largest banks are among the lenders. Local entrepreneurship drives emerging economies. Micro, small, and medium enterprises, or MSMEs, account for about 90 percent of businesses and more than 50 percent of employment worldwide. Yet access to capital — ​especially for women-owned is often limited to loans with crippling interest rates. enterprises — ​ A loan from an IFC client helped Sayeda Bayoumi expand her souvenir shop near the Egyptian Pyramids. IFC ANNUAL REPORT 2015 35 IFC believes strengthening such businesses is key to ending extreme poverty and boosting shared prosperity. We provide investment and advice to smaller enterprises in IFC believes strengthening more than 80 countries, focused on every phase of business such businesses is key to development  — ​­investment-­climate reform, strengthening management skills, and access to finance and markets. ending extreme poverty and We also play a key role in mobilizing SME finance globally, boosting shared prosperity. serving as the technical advisor in this area to the Group of 20 leading economies. In 2014, we worked across the world with financial institutions that focus on lending to MSMEs. These institutions had an outstanding loan portfolio of nearly $270 billion in micro, small, and medium loans. Our Global SME Banking program advised clients on more than 70 projects in more than 40 countries. Nearly two-­thirds of these projects were in the poorest countries, and 15 percent were in ­ conflict-­ affected areas. WHY MORE NEEDS In Jordan, we helped Bank Al Etihad launch a new banking TO BE DONE model that supports women, particularly those who own 90 small businesses. The program is part of a larger initiative that has facilitated more than $1.7 billion in lending for such businesses, supporting nearly 120,000 jobs. % In Peru, small businesses face challenges in obtaining financing. To help address the problem, IFC agreed to invest $15 million in HMC Capital High Yield Peru Fund — ​ the first fund in the country to invest solely in bonds issued of businesses worldwide by SMEs. are micro, small, or medium enterprises 36 IFC ANNUAL REPORT 2015 SPURRING GROWTH: CROSS-­ BORDER INVESTMENT The first, IFC Asset Management Company, offers an innovative way to expand financing for development and help investors Mobilizing Capital for benefit from IFC’s extensive investment experience in developing countries. Since it was established in 2009, AMC has set up nine investment funds, with assets totaling about $8.5 billion. Development The second is our loan-­syndications program, the oldest and largest of its kind among multilateral development banks. Under invest with the program, more than 175 financial institutions co-­ us in projects in developing countries. At the end of FY15, our T he needs of developing countries are vast. By 2030, they will need up to $950 billion a year in power-­ up to $770 billion a year in ­ transportation-­ related investments, related investments, syndications portfolio totaled more than $15.3 billion. To broaden the base of co-­ investors, we developed a Master Cooperation Agreement in 2009 to set guidelines for development and about $210 billion a year to build or modernize h related ­ ealth-­ institutions that join us in our projects. By FY15, 28 institutions infrastructure such as hospitals. had signed up. These institutions have provided $3.4 billion to In an era of scarce public resources, those sums far exceed the IFC clients since 2009. capacity of governments. It’s imperative to create partnerships Encouraging the flow of capital from one developing country to that bring together all of the potential resources available for another — ​South-South investment — ​ is an important part of our development — ​ particularly from the private sector. IFC plays a work. In FY15, we facilitated nearly $2 billion in such investments. critical role in forging such partnerships. For instance, we invested $5 million in Nafith International, Mobilizing capital from other investors — ​banks, international a Jordanian logistics company that is helping streamline the finance institutions, sovereign funds, pension funds, and other movement of freight trucks in four Iraqi ports. partners — ​is a key element of our strategy. It allows us to enlarge We continue to identify new projects under our Managed Co-­ the pool of resources we bring to bear. For our co-­ investors, our Lending Portfolio Program, for which China has pledged $3 billion. involvement provides a more attractive balance of risk and return. Under the program, IFC retains the authority for loan origination, For businesses in developing countries, it helps ensure a healthy structuring, and portfolio management. By the end of FY15, nearly transfer of knowledge. all of the MCPP funds had been allocated to development projects. In FY15, we mobilized a total of $7.1 billion for investment in developing countries — ​40 percent of our long-term investments in all. We did that through two significant channels that underscore our history of innovation in this area. IFC ANNUAL REPORT 2015 37 In FY15, we mobilized $7.1 billion in third-party investments in developing countries — ​40 percent of our long-term investments. WHY MORE NEEDS TO BE DONE 770 $ BILLION per year needed for transportation-related investments 38 IFC ANNUAL REPORT 2015 SPURRING GROWTH: TECHNOLOGY Using Digital Technology to Empower the Poor A braham Pierre lives in one of the biggest slums in the poorest country in the Western Hemisphere. In the Jalousie district of Port-au-­Prince, Haiti, residents have neither running water nor reliable electricity. But, increasingly, they do have mobile phones. And those phones are indispensable. “The phone is money nowadays,” says Pierre, an English teacher and tutor who books appointments and receives payments by phone. That wasn’t always possible. Before the 2010 earthquake, only one in three Haitians had a mobile phone. Fewer than one in 100 had Internet access. The country’s ­ government-owned phone company was losing nearly $1.5 million a month. When the government put together a plan to privatize Teleco and improve and expand service to Haitians, it looked to IFC to make that plan a reality. IFC brought the Haitian government together with the Vietnamese company Viettel, which bought a controlling stake in Teleco and promised nearly $100 million to upgrade service. The newly formed Natcom Haiti grew to 1.8 million customers from 75,000 and is no longer in the red. IFC helped our client FINCA expand mobile banking in the Democratic Republic of Congo. IFC ANNUAL REPORT 2015 39 Now, the mobile phone is ubiquitous in Haiti, with many using it to access the Web and maintain connections with friends, family, and colleagues through social networking. Putting digital technology in the hands of more of the world’s least- advantaged people is an IFC goal. Increasing digital technology use could add more than $1 trillion to the world economy by 2020, with the biggest impact in emerging economies, according to a recent study. Countries such as China could see a GDP boost of up to $418 billion as technology helps upgrade and streamline business practices. In 2014, IFC invested $5 million in China’s largest online platform for the recycling and resale of used electronic devices such as smartphones and tablets. The investment will allow Aihuishou International to expand its business in ways that are good for the environment. Chinese citizens bought 300 million smartphones in Abraham Pierre, an English teacher in 2013. Aihuishou provides a means of recycling some of the phones Haiti, gets paid via his mobile phone. being replaced. one of India’s poorest states — ​ In Bihar — ​ IFC worked closely with the state government to develop a Web-based payments system that automates all health payments made by the government to WHY MORE NEEDS ­ health-care workers and their beneficiaries. The program, funded TO BE DONE by the Bill & Melinda Gates Foundation, eliminates the need for paper billing. It also frees up to 33 percent of medical practitioners’ 1/100 time that can now be used to provide needed health services. Before 2010, fewer than one in 100 people in Haiti had Internet access 40 IFC ANNUAL REPORT 2015 IFC helped create a public- private partnership to ease traffic congestion in Thimphu, Bhutan. BUILDING RESILIENCE: URBANIZATION boosting investments in smaller enterprises, building medical centers, and creating education opportunities. Reinforcing Cities and In China, we are helping expand the distribution of natural gas — ​ a cheaper and cleaner energy source — ​ to millions of people Urban Centers g rowing cities throughout the country. A $300 million in fast-­ financing package for China Gas Holdings and a $150 million equity investment in China Tian Lun Gas Holdings by IFC and the IFC Infrastructure Fund will help replace coal and other fuels for household, industrial, and transportation needs. C ities have long been considered the future, and current projections show that to be truer than ever. In 2014, about half the world’s population lived in urban areas. By 2050, that In Latin America, where 80 percent of the population lives in urban areas, our newly launched Cities Initiative harnesses all the resources at IFC’s disposal to foster sustainable urban growth. number is expected to jump to 66 percent. Urban populations Some of the first actions under this initiative are taking place in in Asia and Africa alone will double between 2000 and 2030. Colombia, where we are working in Cali and Medellín to improve Cities of the future will soon account for 90 percent of the world’s the operations of municipal utility firms so they can provide population growth, 80 percent of its carbon emissions, and services for a larger part of the population. 75 percent of its energy consumption. Yet people increasingly want Projects in the works include $176 million in financing for Intelligent to live in urban areas. Cities mean businesses, jobs, communities, Mass Transit, which will expand and improve Bogota’s bus system and opportunities — ​ especially for women in the developing world. and benefit 6 million passengers daily. But explosive growth comes at a price. To accommodate the In Bhutan, where one in every seven citizens lives in the capital city 300 million people expected to move to its cities in the next of Thimphu, IFC mobilized $8 million in private sector funds and two decades, China will need to build what amounts to all of the ­ ublic-­ created a p private partnership to address traffic congestion. infrastructure currently in place in the United States. India and Among the planned projects is the city’s first multilevel, off-­ Africa face similar burdens, as 250 million and 380 million people, street parking garage, which will open up vital road space while respectively, move to urban centers. also generating hundreds of thousands of dollars in revenue for IFC is playing an important role in helping countries and the city. businesses face the challenge. We are engaging partners to address a long list of needs that includes roads, bridges, power, sanitation, and access to clean water. We’re committed to IFC ANNUAL REPORT 2015 41 Cities mean businesses, jobs, communities, and opportunities — ​ especially for women in the developing world. WHY MORE NEEDS TO BE DONE 2/3 of the global population will live in cities by 2050 42 IFC ANNUAL REPORT 2015 BUILDING RESILIENCE: LOCAL CAPITAL MARKETS Building Efficient Capital Markets L asting prosperity depends on efficient capital markets. Such markets propel growth, helping companies to expand and create more jobs. They help people buy homes and invest in their future. They help governments raise money to build hospitals and power stations. They insulate local economies against financial hazards that can emerge from abroad. In developing countries, many firms face hurdles in raising funds in local currency, forcing them to borrow in foreign currencies. That exposes them to greater risk — ​ as many companies in emerging markets are finding with the rise of the U.S. dollar. IFC plays a vital role in strengthening local capital markets. We do so by issuing local-­ currency bonds, thereby protecting companies from the vagaries of f currency swings. We encourage a ­ oreign-­ variety of global investors to participate in the bond offerings. We help developing countries draft policies and regulations for stronger capital markets. Over the years, IFC has emerged as the first foreign issuer of local-­ currency bonds in many developing countries. In doing so, we have spurred many countries to take additional steps to deepen their capital markets. Many firms face hurdles in IFC ANNUAL REPORT 2015 43 raising local-currency funds, forcing them to borrow in foreign currencies. In India, over the past two years, we have rolled out what has grown into a $5.5 billion rupee-­denominated bond program that will boost funding for much-­ needed roads, power, and airports in that country. Under the program, we launched our maiden offshore bond offering — ​ Masala Bonds — raising the equivalent of $1.6 billion from international investors for investment in India. Separately, we raised the equivalent of nearly $100 million through onshore Maharaja Bonds. The success of our program highlighted IFC’s catalytic role in WHY MORE NEEDS capital-markets development: we issued bonds in a sufficient TO BE DONE range of maturities to establish a sound benchmark for rupee bond $ 3.1 prices. The resulting investor demand for rupee bonds prompted the Indian central bank to consider permitting local companies to issue rupee-­denominated bonds in offshore markets. We have also helped China expand its role in international ­ foreign-­ in r exchange markets. In FY15, IFC issued over $400 million ­ enminbi-­ denominated bonds on the London Stock Exchange, TRILLION making us one of the largest issuers of such bonds on that exchange. The proceeds will support private sector development in China. Dollar-denominated debt owed by emerging emerging-­ In all, IFC has issued bonds in 17 ­ market currencies. In economies totals addition, we have provided local-­ c urrency financing in more than $3.1 trillion 60 currencies — ​ through loans, swaps, guarantees, risk-­sharing facilities, and other structured and securitized products. 44 IFC ANNUAL REPORT 2015 BUILDING RESILIENCE: CLIMATE CHANGE Penonomé Wind Project. The planned 337.5-­ megawatt power plant will cut energy prices and reduce Panama’s dependence on fossil Helping Contain a fuels. The project will make an important contribution to reducing carbon emissions. Global Threat In Jordan, we arranged $207.5 million for a solar-power project — ​ the largest private s­ ector–led solar initiative in the Middle East and North Africa. Of that amount, $116 million was mobilized from other lenders. Under the project, seven solar photovoltaic plants will be built, cutting carbon emissions and providing C limate change will hit developing countries hardest — ​ food-supply needs. posing significant threats to their efforts to tackle water, energy, and 102 megawatts of power. We are one of the largest issuers of green bonds — ​ those that support ­ climate-smart investments, including renewable energy Developing countries will need large sums of money to cope with and e­ nergy-­efficiency projects. In September 2014, we launched climate change: up to $1 trillion a year. The private sector has an a program that for the first time allowed U.S. individual investors indispensable role to play, and IFC is at the forefront in mobilizing to buy ­triple-A-rated IFC bonds that support such projects in private capital to address climate change. developing countries. In all, we have issued a total of $3.75 billion We provide finance and advice for e ­ nergy-­efficient and ­ renewable-­ in green bonds. energy solutions — ​ such as green buildings and solar power. Since We also raised $418 million for the IFC Catalyst Fund — ​ managed 2005, we have made long-term investments totaling more than by IFC Asset Management Company — ​ which invests in funds that ­ limate-­ $13 billion in c related projects. This includes $2.3 billion in support companies developing innovative ways to address climate 103 projects in 31 countries in FY15. We also mobilized $2.2 billion change. In FY15, the fund invested $25 million in a private equity from other investors. energy projects in fund that aims to raise $125 million for clean-­ We are working with governments, companies, and investors to Chile, Colombia, and Peru. prepare for likely changes in the way the world manages carbon We partnered with the Shell Foundation to invest in a fund — ​ with emissions. This year, 190 governments will come together to try to finance companies offering off- initial capital of $30 million — ​ to reach a global agreement to cut greenhouse emissions. We’re grid solar-power systems, mainly in Asia and Africa. The fund aims advising our clients on how to navigate carbon pricing and carbon to improve the livelihoods of nearly 20 million people over the trading and leverage carbon funds. next three years. This complements the joint IFC and World Bank In Panama, we agreed to provide a $300 million financing package efforts to build a new market for off-grid solar lighting and services to help set up the largest wind farm in Central America — ​ the through our Lighting Global program. IFC ANNUAL REPORT 2015 45 In Panama, we agreed to provide a $300 million financing package to help set up the largest wind farm in Central America — the Penonomé Wind Project. WHY MORE NEEDS TO BE DONE 1 $ TRILLION a year needed to cope with climate change in developing countries 46 IFC ANNUAL REPORT 2015 BUILDING RESILIENCE: AGRIBUSINESS Feeding the World Sustainably B y 2050, the worldwide demand for food and crops will double. That poses a formidable challenge for the global community: how to feed the world’s expanding population without depleting its already scarce resources. IFC is partnering with the private sector to address the challenge. Through our agribusiness investments, we aim to increase the supply of affordable and nutritious food, and ensure it is available to those who need it most. agribusiness-­ In FY15, our ­ related investments across the food supply chain totaled $3.2 billion, including funds mobilized from other investors. These investments in production, food processing, logistics, and distribution helped benefit 3.4 million farmers worldwide. Our work gives farmers better access to finance and opens up new markets for them. It takes us from Nepal to Nicaragua, where our clients train farmers to raise productivity, reduce waste, and adopt environmentally sustainable practices. We promote inclusive development by focusing on opportunities for women and small farmers — ​ and helping them manage risks. In Nepal, we and our partners invested nearly $4 million in Our work gives farmers better IFC ANNUAL REPORT 2015 47 access to finance and opens up new markets for them. ­ nimal-feed maker Probiotech Industries to enhance a productivity in poultry farms and boost incomes among smallholder farmers. Probiotech makes almost all of its purchases from small and medium enterprises, which, in turn, obtain their supplies from small farmers. IFC’s investment is WHY MORE NEEDS an example of how we create opportunities for farmers TO BE DONE and others — ​throughout the supply chain — ​ to raise 805 their income. In developing countries, demand for meats like poultry and pork is rising swiftly as the middle class expands. This year, we invested $60 million in Romania’s MILLION largest pork producer — ​Smithfield Romania — ​to help expand production, create jobs, and promote best practices in food safety, animal husbandry, and environmental management. people remain chronically In Iraq, we invested $18 million in the Saudi company undernourished Al Safi Danone’s Iraq unit to help build a dairy plant in the city of Erbil to meet the rising demand for dairy products. The plant is expected to produce about 59,000 tons of dairy products every year. When the Ebola epidemic buffeted the Liberian economy, we and our partners helped provide $5 million in financing to Wienco Liberia, which supplies fertilizers to cocoa farmers. By 2019, the funding is expected to make it easier for up to 7,500 farmers to buy fertilizer and potentially doubling cocoa yields. use it effectively — ​ 48 IFC ANNUAL REPORT 2015 In Bangladesh’s garment industry, IFC is helping improve construction, fire safety, labor, and environmental standards. IMPROVING LIVES: EMPLOYMENT In 2014, our investment clients supported 2.5 million jobs. In Africa, we recognized that financing individual developers was less Taking a Comprehensive effective than working with a single partner capable of carrying out large-scale regional projects. So we set up an innovative partnership with China’s CITIC Construction Company. Together, Approach to Job Creation we aim to establish up to 30 housing development projects across Africa, generating an estimated 150,000 direct and indirect jobs over five years. In Kenya, we arranged $70 million in financing for National Cement K elbesa Debelo didn’t want to spend the rest of his life picking flowers in his village in Ziway, Ethiopia. He wanted to learn English, acquire new skills, and build a career. Company to expand its operations in Nairobi — ​ and create 6,000 jobs. We provided $55 million in loans for the project. In addition, IFC and IFC Asset Management Company invested That was six years ago. Today, Debelo is an E ­ nglish-­ speaking $15 million to take a stake in the company. Small businesses that manager at Afriflora — ​ Ethiopia’s largest rose exporter — ​ where transport the company’s raw materials and provide general he once worked as a flower picker. “When my children grow up, services will also benefit economically. maybe they can also make their living here,” he says. Creating safe and productive workplaces is central to our work. In Jobs are indispensable for development: they lift people out of Bangladesh, where the garment industry provides jobs for 4 million poverty and help create the conditions for sustained prosperity. people, we take a comprehensive approach to helping the sector Yet 1.5 billion people in developing countries — ​half the working grow — ​ by facilitating investments, and by improving construction, population — ​ s truggle with unsteady, low-wage jobs. These fire safety, and labor and environmental standards. countries will need to generate 200 million jobs by 2019 just to those IFC is also a leading investor in inclusive businesses — ​ keep up with population growth. that offer goods, services, and job opportunities to low-­ income Job creation is a priority for IFC — ​ an objective that shapes every communities. Since 2005, IFC has invested over $12.5 billion aspect of our activities. We work with businesses to help them and worked with over 450 inclusive businesses in 90 countries grow and create b­ etter-­ quality jobs. We do so by expanding access to integrate more than 200 million people, including farmers, to finance, supporting investments in infrastructure, improving students, patients, utility customers, and micro borrowers in core the investment climate, and boosting education and training in business operations. developing countries. IFC ANNUAL REPORT 2015 49 Job creation is a priority for IFC — an objective that shapes every aspect of our activities. WHY MORE NEEDS TO BE DONE 1.5 BILLION people in developing countries lack steady jobs 50 IFC ANNUAL REPORT 2015 IMPROVING LIVES: GENDER Expanding Economic Opportunities for Women C hen Yuanyuan struggled to find ways to finance her textile business, which takes orders on Alibaba.com. Banks rejected her loan applications, saying she had no collateral to offer. Her fortunes changed after she came to know of Ant Credit, an IFC client. After an interview over the Internet, Ant approved a $67,000 loan. The business has since taken off, generating more than $8 million a year in revenue. “It was so easy to borrow online,” she recalled. IFC has long recognized the importance of greater participation of women in economic activities. Their role as leaders, employees, consumers, and entrepreneurs is crucial in spurring growth and building prosperity. Research shows women reinvest up to 90 percent of their wages in their households. Through our partnership with Ant Credit, a unit of China’s Ant Financial, we launched a program to provide about $80 million in loans for women entrepreneurs. The program, a joint effort of IFC and Goldman Sachs’ 10,000 Women initiative, marks the first time ­ Internet-based gender finance has been provided in China. Franco-Lao in the Lao In another first, we partnered with Banque ­ People’s Democratic Republic to unveil a financing facility for Backed by an IFC client, Jacqueline Mavinga opened a clothing shop in Kinshasa, Democratic Republic of Congo. IFC ANNUAL REPORT 2015 51 women-owned small and medium enterprises. With IFC’s WHY MORE NEEDS support, the bank aims to nearly triple its loan portfolio TO BE DONE for such businesses by 2017. 2x Under our Banking on Women program, we provide investment and advice to help advance business opportunities for women. In all, IFC has initiated 29 investment projects in about 20 countries, pledging over $800 million in investments in financial institutions, supported by 19 advisory services projects in 17 countries. Men are twice as likely to have jobs as women In September 2014, we launched the SheWorks partnership to boost job opportunities for more than 300,000 women worldwide by 2016. Under the initiative, 12 companies such as Coca-Cola and Intel, as well as many IFC clients, agreed to boost women’s employment through leadership training and flexible opportunities — ​ working arrangements. In Nigeria, we provided a naira-­ denominated loan of $4.1 million to Grooming People for Better Livelihood Research shows Centre, which provides micro loans to low-­income women reinvest women in rural areas. The organization, which also helps deliver health and education services, expects to reach most of their wages nearly 780,000 women by the end of 2018, up from about in their households. 277,500 at December 2012. Our loan is expected to benefit 2 million people. In Turkey, we partnered with Boyner Group, a retail conglomerate, to help train Boyner’s women-owned strengthening their ability to obtain financing suppliers — ​ and improve business performance. 52 IFC ANNUAL REPORT 2015 CONFLICT-­ IMPROVING LIVES: IDA & ­ AFFECTED AREAS Creating Opportunity in ­Strife-Torn Environments M ore than 2.5 billion people live in the poorest countries of the world. Nearly a quarter of the people on the planet live in areas torn by conflict and violence. Nowhere is poverty more entrenched than in these parts of the world. IFC is ramping up our activities in these areas. Our aim is to improve the lives of the poor wherever they are located — ​ and wherever the incidence of poverty is greatest. In FY15, we invested nearly $4.7 billion in the 78 poorest countries — ​ those eligible to borrow from the World Bank’s International Development Association, or IDA. Our long-term investments in those countries have more than tripled over the past decade. Nearly two-­ thirds of our advisory program was in these countries. We have also made direct contributions of $3.2 billion since 2007 to support the work of IDA. conflict-­ In fragile and ­ affected regions, our FY15 investments totaled more than $600 million, including funds we mobilized from other investors. Twenty percent of our advisory program was in these areas. Poverty and strife make many countries acutely vulnerable to disasters. The Ebola outbreak in West Africa in 2014 caused severe IFC ANNUAL REPORT 2015 53 economic damage in the region. The cost — ​ in lost economic growth — ​ for Guinea, Liberia, and Sierra Leone is expected to total $1.6 billion in 2015 alone. Our aim is to improve the IFC responded swiftly. Over the next three years, we intend to lives of the poor wherever provide $450 million in financing to help Ebola-­affected countries they are located — ​and revive their economies. This includes the $75 million Ebola Emergency Liquidity Facility that we unveiled in 2014 to fund wherever the incidence of affected countries. We also provided critical imports for Ebola-­ training to hundreds of businesses to impart skills to maintain poverty is greatest. continuity during the crisis. Governments across the world have said our efforts, along with those of IDA, were critical in containing and mitigating the Ebola outbreak. In Liberia, we invested about 5.3 million British pounds in Aureus Mining to help the company offset Ebola-­ related costs. Our assistance enabled Aureus to continue with its New Liberty project — ​Liberia’s first commercial gold mine — ​ which is expected WHY MORE NEEDS to create 300 jobs. TO BE DONE 1.2 In the Democratic Republic of Congo, which is recovering from years of conflict, we provided an $18 million loan to two related companies, Terra and African Milling Company Congo, to help them expand their maize farm and mill in Katanga. The initiative is expected to create 300 jobs. We also worked with Lafarge and Proparco, the French development agency, to invest €6 million to convert household BILLION waste to fuel for Lafarge’s cement plant in northern Iraq. The ­ ossil-fuel use and benefit local project will help Lafarge cut f violence- people still live in ­ communities by reducing air and water pollution. conflict-prone areas and ­ In Sri Lanka, IFC client NDB Capital Holdings launched a $50 million private equity fund, Emerald Sri Lanka Fund, to provide financing growing small and medium enterprises. to fast-­ 54 IFC ANNUAL REPORT 2015 Children at an evening reading session in an Indian village. IFC’s Lighting Asia program brought solar lamps to the village. IMPROVING LIVES: HEALTH & EDUCATION sectors, including funds mobilized from other investors. Our clients helped educate 3.5 million students and treated more than Strengthening Human 17 million patients. In Peru, we invested $25 million in a start-up private education Capital company, Proyectos Educativos Integrales del Peru, to help set up a university and a network of institutes for technical and vocational income students — ​ training. The initiative will target low-­ improving their employment opportunities while addressing a rising demand for such jobs. A cross the world, more than a billion people lack access to worldwide deaths from chronic illnesses — ​ quality health services. Nearly three-­ fourths of the 38 million such as cancer — ​occur In Kenya, IFC is bringing world-class standards through our work with our client AAR Healthcare. AAR runs 28 clinics in Kenya, Uganda, and Tanzania, offering a range of medical services, from in developing countries. Globally, more than 57 million children do gynecology to pharmacy, under one roof. not attend school, with 30 million of them in Africa alone. In Brazil, the private sector provides health care for one in four These statistics highlight a major obstacle to ending extreme Brazilians. IFC’s $255 million investment in Rede D’Or, Brazil’s poverty and boosting shared prosperity: high-­ quality education largest network of private hospitals, will help the group expand to and h­ ealth-care services still aren’t as widely available and serve 525,000 more patients a year, easing pressure on the public affordable as they need to be. This is a challenge that’s best hospital system. addressed when the public and private sectors act in concert to advance the interests of society. In Turkey, we arranged €433 million in loans — ​including €35 million from our own account — ​to develop a 1,550-bed health campus in Governments play a critical role in ensuring the quality and ­ ublic-­ Adana. The project is part of a p private partnership program affordability of health and education. But the private sector can launched by the Turkish government. make a significant contribution — ​ by finding innovative ways to deliver high-­ quality services in places where they are most needed. Our investments in specialty hospitals support innovations that bring down the cost of procedures like heart and eye surgery. Expanding access to health care and education is a central IFC’s $5.5 million equity investment in Eye-Q Vision, for example, element of our strategy. As the largest multilateral investor in will help the chain expand access to high-­ quality and affordable private health care and education, we have invested more than eye-care services to several Indian cities. $4 billion in health and education companies in emerging markets. In FY15, we invested nearly $1 billion in the health and education IFC ANNUAL REPORT 2015 55 WHY MORE NEEDS TO BE DONE 57 MILLION children do not attend schools Expanding access to health care and education is a central element of our strategy. 56 IFC ANNUAL REPORT 2015 57 MEASURING UP How We Help End Poverty and Boost Shared Prosperity 58 Performance in Key Areas 59 Creating Opportunity Where It’s Needed Most 60 62 OUR EXPERTISE Where We Work 63 What We Do 64 Our Industry Expertise 68 71 OUR PEOPLE & PRACTICES A Refocused IFC 72 Understanding Our Development Impact 73 Our Staff 80 Our Governance 82 Accountability 84 Partnerships 86 Managing Risks 88 Promoting Sustainability 89 Independent Assurance Report on a Selection of Sustainable Development Information 92 Financial Summary 97 IFC ANNUAL REPORT 2015 57 MEASURING UP IFC strives to deliver what cannot be obtained elsewhere. We offer clients a unique combination of investment and advice designed to promote sustainable private sector development in emerging markets. We call that special edge our “additionality.” Using it to maximize our development impact is a cornerstone of our strategy. 58 IFC ANNUAL REPORT 2015 STRENGTHEN FRONTIER MARKETS Promote development in IDA countries, fragile and conflict situations, and frontier regions of other developing countries ADDRESS CONSTRAINTS TO PRIVATE SECTOR GROWTH IN INFRASTRUCTURE, HEALTH, EDUCATION, AND THE FOOD-­S UPPLY CHAIN HOW WE HELP END Increase access to basic services and strengthen POVERTY AND BOOST the agribusiness value chain SHARED PROSPERITY DEVELOP LOCAL FINANCIAL MARKETS Build institutions, mobilize resources, and introduce O innovative financial products ur activities are guided by our determination to assist wherever we are needed most — ​ and wherever ADDRESS CLIMATE CHANGE AND ENSURE ENVIRONMENTAL AND SOCIAL SUSTAINABILITY our assistance can do the most good. Develop new business models and financing instruments, setting and raising standards BUILD LONG-TERM CLIENT RELATIONSHIPS IN EMERGING MARKETS Use the full range of our products and services to guide clients’ development and assist cross-­ border growth IFC ANNUAL REPORT 2015 59 IFC’S PERFORMANCE IN KEY AREAS PERFORMANCE DEVELOPMENT RESULTS FY15 FY14 Investment Companies Rated High (DOTS Score)1 63% 64% Advisory Projects Rated High2 73% 76% KEY AREAS FRONTIER MARKETS IDA: Number of Investment Projects 145 153 IDA: Long-Term Investment Total Commitments (millions) $4,666 $4,852 IDA: Share of Advisory Services Program in IDA Countries, % 3 65% 66% Fragile and Conflict Situations: Number of Investment Projects 4 43 19 Fragile and Conflict Situations: Long-Term Investment Total Commitments (millions) 4 614 638 Fragile and Conflict Situations: Share of Advisory Services Program, % 20% 20% Frontier Regions: Number of Investment Projects 26 40 INFRASTRUCTURE, HEALTH, EDUCATION, FOOD-SUPPLY CHAIN Long-Term Investment Total Commitments (millions)5 $9,623 $9,142 LOCAL FINANCIAL MARKETS Long-Term Investment Total Commitments in Financial Markets (millions)6 $6,392 $5,981 Long-Term Investment Total Commitments focused on Micro, Small, and Medium Enterprises (millions)7 $3,592 $3,536 CLIMATE CHANGE, ENVIRONMENTAL AND SOCIAL SUSTAINABILITY Related Investment Commitments (millions) 8 Climate-­ $2,349 $2,479 LONG-TERM CLIENT RELATIONSHIPS Number of South-South Investment Projects 39 38 Long-Term Investment Total Commitments in South-South Projects (millions) $1,964 $2,565 Notes: 1. DOTS scores: percentage of client companies with high development outcome ratings as of June 30 of the respective year, based on projects approved over a rolling six-year period (FY15 ratings are based on approvals from 2006–2011). 2. For Advisory Services, development effectiveness ratings are for calendar years 2014 and 2013. 3. FY14 and FY15 figures reflect improved methodology for measuring Advisory Services expenditures in IDA countries, incorporating regional projects. 4. Starting with FY15, IFC’s data on FCS investments include projects in countries that have been on the World Bank’s Harmonized list of FCS at any time during the previous three fiscal years. This is designed to reflect the long gestation period for investment projects as well as to encourage a longer-­term organizational focus on these countries. 5. Commitments in Infrastructure (excluding Oil, Gas, and Mining), Communications & Information Technologies, Subnational Finance, Health & Education, and Agribusiness & Food Supply Chain. 6. Commitments of IFC’s Financial Markets excluding Investment Funds and Private Equity. 7. Includes direct MSME borrowers, financial institutions with more than 50% of their business clients being MSMEs, and any other investments that specifically target MSMEs as primary beneficiaries. 8. Climate-­related is an attribute of a project involving Climate Mitigation, Climate Adaptation and/or Special Climate activities. For more details on these terms and activities, please visit http://www.ifc.org/climatemetrics. Includes IFC’s own account LTF commitments. 60 IFC ANNUAL REPORT 2015 EAST ASIA & THE PACIFIC 59 MILLION EAST ASIA & THE PACIFIC non-cash retail transactions facilitated, totaling $160 billion 12.9 $ BILLION CREATING OPPORTUNITY in goods and services purchased WHERE IT’S NEEDED MOST from domestic suppliers 31.8 I FC and our clients make a wide MILLION range of contributions in developing customers supplied with gas countries. Our clients’ success can have ripple effects across an economy, giving many people — ​including the poor — ​a chance to better their lives. MIDDLE EAST & NORTH AFRICA $ 36 MILLION in new financing for firms MIDDLE EAST & NORTH AFRICA with improved corporate governance practices 4.7 MILLION patients cared for 3.7 MILLION micro, small, and medium loans made to enterprises IFC ANNUAL REPORT 2015 61 EUROPE & CENTRAL ASIA LATIN AMERICA & THE CARIBBEAN 9.2 1.6 MILLION MILLION EUROPE & LATIN AMERICA & CENTRAL ASIA customers supplied with power THE CARIBBEAN students educated (generation + distribution) $ 81 7 MILLION BILLION people expected to receive in micro, small, and medium improved access to infrastructure loans made to enterprises services through public-private partnerships $ 232 $ 743 MILLION MILLION in new financing for firms to invest in clean energy and in new investments attributable ­resource-­efficient technologies to industry reform and investment promotion work with governments SOUTH ASIA SUB-SAHARAN AFRICA 8.8 1.2 MILLION MILLION people received access to farmers reached SOUTH ASIA SUB-SAHARAN improved services from off- AFRICA grid lighting appliances 6.1 196.8 MILLION MILLION customers supplied with water phone connections provided 72 $ 35 POLICY REFORMS BILLION in 29 countries to support growth and promote investment in micro, small, and medium loans made to enterprises 62 IFC ANNUAL REPORT 2015 OUR EXPERTISE IFC blends investment with advice and resource mobilization to help the private sector advance development. IFC ANNUAL REPORT 2015 63 WHERE WE WORK A s the largest global development institution focused on the private sector, IFC operates in 100 countries. We apply lessons learned in one region to solve problems in another. We help local companies make better use of their own knowledge — by matching it to opportunities in other developing countries. 64 IFC ANNUAL REPORT 2015 INVESTMENT Our financial products enable companies to manage risk and broaden their access to foreign and domestic capital markets. IFC operates on a commercial basis. We invest exclusively in profit projects in developing countries, and we charge for-­ market rates for our products and services. WHAT WE DO Our offerings are designed to meet the specific needs of — ​ IFC clients in different industries  with a special focus on infrastructure, manufacturing, agribusiness, services, and IN FY15, financial markets. I WE MADE NEARLY FC provides investment, advice, In FY15, we made $10.5  billion in long-term investments in and asset management. These are mutually reinforcing services, delivering $18 406 projects. In addition, we mobilized more than $7 billion to support the private sector in developing countries. BILLION financing and global expertise to clients in developing countries. in long-term PRODUCT LINES investments, including funds mobilized from LOANS Together, they give us a special other investors advantage in helping the private sector IFC finances projects and companies through loans for our own account, typically for seven to 12 years. We also make create opportunity — ​our investment loans to intermediary banks, leasing companies, and other IFC MADE and advice can be tailored to a client’s COMMITMENTS FOR lending. financial institutions for on-­ specific needs, and in ways that add value. While IFC loans traditionally have been denominated in the Our ability to attract other investors brings additional benefits, introducing $7 currencies of major industrial nations, we have made it a pri- currency products. IFC has provided ority to structure local-­ BILLION currency loan financing in more than 60 local currencies. local-­ our clients to new sources of capital and in new loans in FY15 In FY15, we made commitments for $7 billion in new loans. better ways of doing business. EQUITY Equity investments provide developmental support and long- term growth capital that private enterprises need. We invest directly in companies’ equity, and also through ­private-­equity funds. In FY15, equity investments accounted for about $3.2 billion of commitments we made for our own account. IFC ANNUAL REPORT 2015 65 IFC generally invests between 5  percent and 20  percent of a company’s equity. We encourage the companies we DERIVATIVES AND STRUCTURED FINANCE invest in to broaden share ownership through public listings, IFC makes derivatives products available to our clients, solely thereby deepening local capital markets. We also invest for hedging purposes. By allowing these companies to access through p participating loans, convertible loans, and ­ rofit-­ international derivatives markets in order to hedge currency, preferred shares. interest-rate or ­ ­ commodity-price risks, we enable them to enhance their creditworthiness and improve their profitability. management products, IFC acts generally as In offering risk-­ TRADE AND ­S UPPLY-CHAIN FINANCE an intermediary between the market and private companies The IFC Global Trade Finance Program guarantees trade-­ in emerging markets. IFC also provides credit guarantees and related payment obligations of approved financial institutions. structuring advice for clients. IFC’S SYNDICATED- The program extends and complements the capacity of banks LOAN PORTFOLIO to deliver trade finance by providing risk mitigation on a per-­ STOOD AT transaction basis for more than 250 banks across more than BLENDED FINANCE 80 countries. In FY15, IFC had an average outstanding balance of $2.8 bil- In addition to financing on commercial terms, IFC uses a number of complementary tools to bring about develop- $15.3 BILLION lion in trade finance. ment impact that otherwise would be unattainable. One such approach is to blend concessional funds  — ​typically from at the end of FY15 donor partners  — ​alongside IFC’s own resources. Blended SYNDICATIONS finance can also help mitigate early-­ entrant costs or project risks. IFC applies this approach in three areas: climate change, IFC’s Syndicated Loan Program is the oldest and largest agribusiness and food security, and finance for small and IN FY15, IFC among multilateral development banks. In FY15, it accounted HAD AN AVERAGE medium enterprises. Other areas of strategic priority could OUTSTANDING for 59 percent of the funds mobilized by IFC. benefit from this tool in the future. In FY15, we committed BALANCE OF In FY15, IFC syndicated about $4.6 billion in B-loans, paral- more than $148 million of donor funds, catalyzing more than lel loans, and MCPP loans, structured A-loan participations, and unfunded risk participations provided by 84 financial $1.25 billion of IFC and private sector financing. $ 2.8 institutions. These included commercial banks, institu- BILLION tional investors, development finance institutions, and an ­ emerging-­ markets central bank. A record $2.1 billion was pro- ADVICE in trade finance vided by cofinanciers in emerging markets. The syndicated loan portfolio stood at $15.3 billion. It takes more than finance to achieve sustainable private sec- tor development. IFC’s experience shows the powerful role Borrowers in the infrastructure sector received 49  percent advice can play in unlocking investment by the private sector of the total volume. More than a quarter of the financing we and helping businesses expand and create jobs  — ​thereby provided through syndications  $1.3 billion in all  — ​ went to — ​ strengthening the World Bank Group’s efforts to end poverty borrowers in IDA countries. and boost shared prosperity. That is why we continue to strengthen our advisory work. This year, we took steps to more closely align our advisory services with other areas of IFC and the World Bank, so that our clients 66 IFC ANNUAL REPORT 2015 can benefit from the full range of capabilities available across Energy & Resource Efficiency  We help clients develop com- the Bank Group. Advice is increasingly integrated into the quality and affordable energy solutions petitive, clean, high-­ wide suite of solutions IFC provides to our clients. across the value chain. We accelerate the development of commercial markets to increase the production of renew- At the end of FY15, IFC had an active portfolio of more than able energy and improve people’s access to modern energy 600 advisory projects in 101 countries, valued at $1.2  bil- services. In FY15, we had 177 active client engagements in lion. Most of the program was in IDA countries and around 51 countries. conflict-­ 20 percent was in fragile and ­ affected areas. During FY15, IFC provided advice in a number of areas critical to We also provide advisory solutions that can be deployed development: across several industries. This includes helping businesses improve corporate governance and building the capacity Financial  Sector   We help increase the availability and of smaller businesses operating within the supply chains of affordability of financial services for individuals and for micro, AT THE END OF FY15, larger companies, thereby increasing local opportunities small, and medium enterprises. We work with financial institu- IFC HAD 600 ADVISORY while helping our clients make better use of local suppli- PROJECTS VALUED AT tions to strengthen their risk management and diversify their ers and resources. Central to IFC’s advisory work is helping product offering in areas such as small and medium enter- clients build robust and inclusive business performance by $ 1.2 prises, housing finance, and sustainable energy. As part of an integrated World Bank Group team in the Finance & Markets Global Practice, we also support the development of financial making them aware of — ​ and invest in — ​ the value that women can bring either as consumers, as employees, as business BILLION leaders, or as entrepreneurs and suppliers. In FY15, in these markets — ​ by promoting universal access to finance, strength- cross-­industry areas, we had 301 active client engagements ening capital markets, and establishing credit bureaus and in 85 countries. collateral registries that open up new avenues for companies to create jobs and grow sustainably. In FY15, we had 425 active IFC ASSET MANAGEMENT client engagements in 96 countries. COMPANY HAD ABOUT Investment Climate As part of an integrated World Bank IFC ASSET MANAGEMENT $ 8.5 Group team in the Trade & Competitiveness Global Practice, we help national and local governments implement reforms that improve the business environment and encourage and COMPANY BILLION retain investment, thereby fostering competitive markets, IFC Asset Management Company, LLC, a wholly owned sub- in assets under growth, and job creation. In FY15, we had 151 active client sidiary of IFC, mobilizes and manages capital for investment management in FY15 engagements in 61 countries. in developing and frontier markets. It was created in 2009 to provide investors with access to IFC’s ­ emerging-­markets ­ ublic-­Private  Partnerships   We help governments in de- P investment pipeline and to expand the supply of long-term signing and implementing ­ private partnerships in public-­ capital to these markets, enhancing IFC’s development goals infrastructure and basic public services. Our advice helps and generating profits for investors by leveraging IFC’s global the private sector increase public access to electricity, water, reach, standards, investment approach, and track record. health, and education. It also helps strengthen the quality and efficiency of these services. In FY15, we had 102 active client As of June 30, 2015, AMC had approximately $8.5 billion in engagements in 53 countries. total assets under management. It manages nine investment funds on behalf of a wide variety of institutional investors, Agribusiness  We help clients improve productivity and stan- including sovereign wealth funds, pension funds, and devel- dards  among other things, by focusing on efficient food — ​ opment finance institutions. value chains and food security, with strong economic, social and environmental benefits, for smaller farming enterprises, communities, and IFC clients. In FY15, we had 111 active client engagements in 34 countries. IFC ANNUAL REPORT 2015 67 AMC FUNDS emerging markets. It also may invest directly in those com- panies. As of June 30, 2015, the fund had made seven fund IFC CAPITALIZATION FUND commitments totaling $175 million. The $3 billion IFC Capitalization Fund consists of an equity fund of $1.3 billion and a subordinated debt fund of $1.7 bil- IFC GLOBAL INFRASTRUCTURE FUND lion. Launched in 2009, the fund helps strengthen systemically important banks in emerging markets, bolstering their ability The $1.2 billion IFC Global Infrastructure Fund was launched to cope with financial and economic downturns. As of June 30, in 2013 and co-­ equity-­ invests with IFC in equity and ­ related 2015, the fund was fully invested with 41 investment commit- investments in the infrastructure sector in emerging markets. ments totaling $2.8 billion. As of June 30, 2015, the fund had made 10 investment com- mitments totaling $443 million. THE IFC CAPITALIZATION FUND WAS FULLY IFC AFRICAN, LATIN AMERICAN, INVESTED IN FY15, WITH AND CARIBBEAN FUND CHINA-­M EXICO FUND INVESTMENTS TOTALING The China-­Mexico Fund is a ­country-­specific fund that reached 2.8 The $1  billion IFC African, Latin American, and Caribbean Fund was launched in 2010. The fund invests in equity and a close of $1.2 billion in December 2014. The fund will make $ ­ equity-­ related investments across a range of sectors in Sub-­ ­ quity-like and mezzanine investments along with equity, e Saharan Africa and in Latin America and the Caribbean. As IFC in Mexico. It will focus mainly on infrastructure, oil & gas, BILLION of June 30, 2015, the fund had made 29 investment commit- and other sectors, including manufacturing, agribusiness, ments totaling $790 million. services, and banking. AFRICA CAPITALIZATION FUND IFC FINANCIAL INSTITUTIONS GROWTH FUND The $182 million Africa Capitalization Fund was launched in The IFC Financial Institutions Growth Fund is a ­ follow-on 2010 to invest in systemically important c ­ ommercial-­banking fund to the IFC Capitalization Fund and will make equity institutions in Africa. As of June 30, 2015, the fund had made and ­ related investments in financial institutions in equity-­ six investment commitments totaling $102 million. emerging markets. In March 2015, the fund reached a close of approximately $350 million. IFC RUSSIAN BANK CAPITALIZATION FUND IFC GLOBAL EMERGING MARKETS FUND OF FUNDS The $550 million IFC Russian Bank Capitalization Fund was launched in 2012 to invest in ­ commercial-­ banking institu- In June 2015, the IFC Global Emerging Markets Fund of Funds tions in Russia. As of June 30, 2015, the fund had made three reached a close of approximately $400 million. The fund will investment commitments totaling $82 million. invest mainly in private equity funds that are focused on growth companies in various sectors across emerging and frontier markets. The fund will also invest directly in such IFC CATALYST FUND companies, as well as secondary interests in emerging-market private equity funds. The $418 million IFC Catalyst Fund was launched in 2012 and invests in funds that provide growth capital to companies developing innovative ways to address climate change in 68 IFC ANNUAL REPORT 2015 AGRIBUSINESS AND FORESTRY Agribusiness has an important role to play in poverty reduc- tion. The agricultural sector often accounts for at least half of GDP and employment in many developing countries, making it a priority for IFC. IFC provides support for the private sector to address rising demand in an environmentally sustainable and socially inclu- sive way. To help clients finance inventories, seeds, fertilizers, chemicals, and fuel for farmers, IFC offers w c apital ­ orking-­ OUR INDUSTRY EXPERTISE IFC’S LONG-TERM COMMITMENTS IN facilities. To facilitate trade and lower costs, we pursue investments in infrastructure such as warehouses and cold-­ AGRIBUSINESS AND storage facilities. To bring land into sustainable production, FORESTRY TOTALED we work to improve productivity by transferring technologies I FC’s leadership role in sustainable private sector development reflects a special advantage — ​ the depth and $ 1.4 BILLION and making the best use of resources. In FY15, our new long-term commitments in agribusiness and forestry totaled about $1.4 billion, accounting for about 13 percent of commitments for IFC’s own account. breadth of expertise we have acquired for our own account over nearly 60 years of helping ­ emerging-­ in FY15 market firms succeed and grow. OUR LONG-TERM FINANCIAL INSTITUTIONS COMMITMENTS IN We have moved to leverage our global FINANCIAL MARKETS Sound, inclusive, and sustainable financial markets are vital industry knowledge to tackle the biggest TOTALED ABOUT to development because they ensure efficient resource allo- development challenges of the coming cation. IFC’s work with financial intermediaries has helped years — ​including unemployment, climate $ 4.7 strengthen financial institutions and overall financial systems. It has also allowed us to support far more micro, small, and change, and food and water security. BILLION medium enterprises than we would be able to on our own. for our own account Working through financial intermediaries enables IFC to in FY15 encourage them to become more involved in sectors that are strategic priorities  such as women-owned businesses and — ​ climate change — ​ and in underserved regions such as fragile and ­ affected states as well as in housing, infrastruc- conflict-­ ture, and social services. In FY15, our new long-term commitments in financial markets totaled about $4.7  billion, or about 45  percent of commit- ments for IFC’s own account. IFC ANNUAL REPORT 2015 69 CONSUMER AND MANUFACTURING SOCIAL SERVICES The manufacturing sector plays a vital role in creating opportunity and reducing poverty in developing countries. IFC is the world’s largest multilateral investor in private health IFC’s manufacturing clients tend to create or maintain more care and education. We work to increase access to high-­quality employment than those in any other sector. health and education while also supporting job-­ creating sec- tors such as tourism, retail, and property. We help improve We have increased our activities in the sector, which includes standards of quality and efficiency, facilitate the exchange of chemicals, construction materials, e efficient machin- ­ nergy-­ best practices, and create jobs for skilled professionals. ery, and equipment for solar and wind power. We invest in companies that are developing new products and markets, In addition to making direct investments in socially responsi- and restructuring and modernizing to become internationally IN FY15, IFC’S LONG- ble companies, our role includes sharing industry knowledge competitive. TERM COMMITMENTS and expertise, funding smaller companies, raising medical IN INFRASTRUCTURE and education standards, and helping clients expand services As these industries represent some of the most TOTALED ABOUT income groups. In FY15, our new long-term commit- to lower-­ carbon-­ ­ intensive sectors, we are helping clients develop and ments in consumer and social services totaled $748 million, or about 7 percent of IFC’s commitments for our own account. undertake investments that help reduce carbon emissions and energy consumption. $ 2 BILLION In FY15, our new long-term commitments in the manufac- turing sector totaled $365 million for IFC’s own account. for our own account INFR ASTRUCTURE Modern infrastructure spurs economic growth, improves liv- OIL, GAS, AND MINING ing standards, and can represent an opportunity to address emerging development challenges, including rapid urbaniza- Industries that can harness natural resources are vital for many tion and climate change. of the world’s poorest countries. They are a key source of jobs, It is also an area in which the private sector can make a sig- energy, government revenues, and a wide array of other ben- nificant contribution, providing essential services to large efits for local economies. In Africa, in particular, large-scale numbers of people efficiently, affordably, and profitably. sustainable investments in these industries can create equally This is IFC’s focus: supporting private infrastructure proj- large-scale gains in economic development. ects whose innovative, high-­ impact business models can be IFC’s mission in the oil, gas, and mining sector is to help devel- widely replicated. oping countries realize these benefits, while helping promote We help increase access to power, transportation, and water sustainable-energy sources. We provide financing and advice by financing infrastructure projects and advising client gov- for private sector clients, and also help governments adopt ernments on ­public-­private partnerships. We mitigate risk and effective regulations and strengthen their capacity to manage leverage specialized financial structuring and other capabili- these industries across the value chain. ties. In FY15, our new long-term commitments in this sector totaled about $2 billion, or about 20 percent of commitments for IFC’s own account. 70 IFC ANNUAL REPORT 2015 We support private investment in these industries, and we work to ensure that local communities enjoy tangible benefits. In FY15, our new long-term commitments for our own account in the sector totaled $515 million. TELECOMMUNICATIONS AND INFORMATION TECHNOLOGY OUR LONG-TERM Modern information and communication technologies make it COMMITMENTS IN easier for the poor to obtain access to services and resources. TELECOMMUNICATIONS They expand opportunity and make markets and institu- AND INFORMATION tions more efficient. IFC works to extend the availability of TECHNOLOGY TOTALED such technologies. We channel investments toward private companies that build modern communications infrastruc- $ 275 ture and ­ information-­technology businesses, and develop ­climate-­friendly technologies. MILLION IFC increasingly helps clients move beyond their own national for our own account borders and into other developing markets. In FY15, our new in FY15 commitments for our own account in this sector totaled $275 million. IFC ANNUAL REPORT 2015 71 OUR PEOPLE & PRACTICES IFC’s commitment to alleviating poverty and creating opportunity for the developing world’s most vulnerable people is reflected in our corporate culture. 72 IFC ANNUAL REPORT 2015 We believe boosting our partnership with other members of the World Bank Group will allow us to streamline processes, share best practices more effectively, and identify new areas for collaboration  generating benefits for our clients, — ​ partners, and staff. We believe these changes will position us better as we prepare to execute the Bank Group’s strategy to end extreme poverty and boost shared prosperity by 2030. Under the revamped IFC leadership structure, we set up a new Global Client Services Vice Presidency, leveraging managers with broad experience across the World Bank Group. The new unit will provide a single platform for investment, advice, and client relationships, with the aim of strengthening our client A REFOCUSED IFC engagement while expanding our client base. We also established a Corporate Risk & Sustainability Vice These improvements Presidency to unify IFC’s t enabling services. This ­ransaction-­ position IFC to maximize T o meet the growing challenges group will help strengthen IFC’s risk judgments and simplify the approval process for transactions; boost our approach to of development, IFC adopted risk management; and address compliance, legal practices, our development impact in 2014 a nimbler and more focused ­ onflict-of-­ and potential c interest matters. organizational structure. Our initiative, These improvements position IFC to maximize our develop- and financial sustainability. A Refocused IFC , was aimed at ment impact and financial sustainability. They also position IFC to work on the most pressing challenges of development strengthening collaboration with other while leveraging the power of the private sector in Bank members of the World Bank Group, Group solutions. We expect these changes to help reduce sharpening our focus on clients, offering administrative burdens on our staff and provide greater scope for professional advancement. comprehensive solutions, and boosting IFC continues to develop new metrics for monitoring and the efficiency of our services. measuring success that reflect client focus and financial sustainability, as well as an improved framework to understand our development impact. The final metrics are expected to comprehensively cover IFC’s results and performance  — ​ including growth, development outcomes, client feedback, and financial sustainability. IFC ANNUAL REPORT 2015 73 At IFC, we measure our results and those of our clients to assess whether we are contributing effectively to the World Bank Group’s twin goals of ending extreme poverty and boosting shared prosperity — ​and whether our work is mak- ing a difference to the people and markets that most need our help. IFC’s results-measurement and evidence systems continue to evolve to better reflect our business needs as we unify our organizational structure and shift operational focus to achieve our goals. We are also seeking to better understand the breadth of our contributions to sustainable private sector development  going beyond the impact of just individual — ​ UNDERSTANDING OUR transactions. DEVELOPMENT IMPACT The improvements we are making to results measurement will Our results- help highlight our efforts in creating jobs and fueling eco- nomic growth through our investment and advisory work. measurement We will also be better positioned to assess the results at the system is evolving T he private sector plays an indispensable role in spurring growth and creating opportunities for country, sector, and program levels and make it easier for cli- ents and operational teams to monitor the results of individual transactions. to better reflect our people to improve their lives. But it’s These changes build on the existing IFC results-measurement business needs. system  retaining what has worked well in the past, lever- — ​ imperative to know precisely what types aging partnerships, and maintaining IFC’s leadership among of private sector activity will have the development finance institutions. greatest impact on development. IFC’S RESULTS- MEASUREMENT SYSTEM Our ­results-­measurement system features three mutually reinforcing components: the IFC Development Goals, a monitoring system to measure development results at the transaction level that could then be aggregated at portfolio levels, and systematic evaluations of the impact of our work. 74 IFC ANNUAL REPORT 2015 THE MONITORING AND TRACKING SYSTEM IFC DEVELOPMENT GOALS IFC uses the Development Outcome Tracking System, or IFC Development Goals are targets for reach, access, or other DOTS, to monitor the development results of our investment tangible development outcomes that projects signed or com- and advisory services. mitted by IFC are expected to deliver during their lifetime. For our investment work, DOTS covers — ​ after certain exclu- The five goals  — ​strengthening infrastructure, improving 1,900 companies under supervision. Reach indicators sions — ​ livelihood of farmers, expanding access to financial services, measure the number of people reached by IFC’s clients or the boosting health and education, and reducing greenhouse dollar benefit to particular stakeholders, regardless of IFC’s emissions — ​ are aligned with the Bank Group Scorecard and investment size. Overall development outcome scores are are also fully integrated into IFC’s corporate scorecard. We are assessed for 820 out of 918 investments approved between currently in the second year of monitoring the progress of our 2006 and 2011, which are mature enough to be rated and commitments to these goals toward their three-year targets. recent enough to be relevant. The overall DOTS score is a More detail is provided in the table on page 77. synthesis of four performance areas (financial; economic; environmental and social; and broader private sector devel- opment impacts). IFC’S EVALUATIONS We streamlined the set of DOTS indicators for investment We conduct self-­ evaluations to assess the achievements of operations and simplified the related monitoring process our projects and identify lessons that can be used to improve to achieve two goals: (i)  enhance relevance of the indica- our operations. Working with the Independent Evaluation tors to operations and clients; and (ii) improve effectiveness Group, we improved how operational teams evaluate their and efficiency. own projects once they are completed or have reached For environmental and social performance, for example, operational maturity. In addition, IFC also conducts in-depth we introduced a set of core indicators based on detailed evaluations to generate greater evidence of development client assessments conducted by environment and social impact of key projects and programs. Under that framework, performance specialists. These indicators measure the prog- we completed 35 evaluations in FY15. We also adopted disclo- ress of our clients in implementing the IFC Performance sure policies that enable us to disseminate these evaluation Standards. In addition to process improvements, we continue findings beyond the Bank Group and have published the eval- to leverage technology solutions to enhance the ease, effi- uation summaries on the IFC external website. ciency, and quality of data collection and reporting on results. For our advisory work, FY15 DOTS scores are based on a review of 106 completion reports filed in 2014, of which 100 could be assessed for development effectiveness. Projects that could not be assessed were those that met certain — ​ exclusion criteria  such as those involving sector or market knowledge-­ studies, ­ sharing conferences, or efforts to create internal knowledge tools for IFC. IFC ANNUAL REPORT 2015 75 ENHANCEMENTS TO FOCUS ON COUNTRY- THE RESULTS- AND ­P ROGRAM-LEVEL RESULTS MEASUREMENT SYSTEM We worked more closely with the World Bank and MIGA to design results frameworks to monitor IFC’s contributions to country-level development objectives under the World Bank ­ IFC’s improved r measurement system provides a better ­ esults-­ Group’s Country Partnership Frameworks. This year we helped picture of the impact of IFC’s interventions at the country, sec- design two such frameworks  for Panama and Myanmar  — ​ — ​ tor, and program levels through evaluation and collaboration which were then discussed by the Board of Directors. We will with the Bank Group on joint frameworks. design such joint frameworks for 15 more countries next year. Our work to improve the results frameworks will help us to better articulate IFC’s development outcomes in the context STRENGTHENING LINKS TO IMPACT of the broader World Bank Group support to the country. results-­ Evaluations are integral to IFC’s ­ measurement frame- We are also designing results frameworks for our strategic work: they help us to learn from our experience, inform engagements that involve a common objective but multiple strategy, and help us assess and report on development investment and advisory activities. These frameworks are built impact more comprehensively. This year we moved to a sys- at the program level by identifying a few indicators that are tematic evaluation strategy that increasingly examines IFC’s then monitored at the project level. We also design and exe- contribution to growth, jobs, and access in key sectors such cute evaluations at the program level. In FY15, we developed as finance, tourism, poultry, power, and small and medium frameworks for our work in the power and agriculture sectors. enterprises, or SMEs. For example, in the power sector, we ramped up the use of evaluation and research as a source of insight for IFC’s oper- LEVERAGING PARTNERSHIPS ational teams. As part of this, we developed an Excel-based, IFC plays a key role in harmonizing indicators to monitor private user-­ friendly tool that uses econometric input-­ output meth- sector operations across institutions. In 2013, IFC worked with odology at the country level to estimate Gross Domestic 25 other development financial institutions, or DFIs, to harmo- Product and employment impact from construction, opera- nize 27 quantitative indicators across sectors. This year, IFC tion and maintenance activities, and increased power supply. has begun implementing these indicators and the DFI group The tool covers 20 developing countries and estimates of established a more formal governance mechanism, including different types of effects  — ​direct, indirect, induced, and member steering committee to manage implementa- a six-­ ­ second-order growth effects  — ​for jobs and GDP. Similarly, tion of the harmonized indicators. The committee will also we developed a methodology to profile SME beneficiaries of explore opportunities for joint work in areas outside these our ­financial-­intermediary clients. indicators. The initiative is now branded as the Harmonized In the coming year, we are taking a systems approach Indicators for Private Sector Operations with its own website, to deepen our understanding of the links between our hipso.net. Building on this experience, IFC partnered with the investment activities and the World Bank Group’s twin goals Donor Committee for Economic Development, a forum of 22 of ending extreme poverty and boosting shared prosperity. donors involved in private sector development, to harmonize indicators to monitor and report on advisory achievements. 76 IFC ANNUAL REPORT 2015 DEVELOPMENT OUTCOMES For our advisory work, 73 percent of IFC projects that closed during the year and could be assessed for development effec- tiveness were rated high. Advisory development outcome Macroeconomic and fi ­ nancial-­markets conditions have deteri- scores have been above our target of 65 percent for the past orated considerably in recent years. Despite that, IFC’s overall five years. In addition, 91  percent of clients said they were development outcome score for our investment operations satisfied with IFC’s advisory work. remained essentially stable, with 63  percent of our clients rated high (slightly below our target of 65 percent). In gen- The Middle East and North Africa region was the strongest eral, larger projects are less risky than smaller projects. When performer, with 90 percent of projects that closed during the weighted for investment volume, 72  percent of our clients year rated high on development effectiveness. The region were rated high. also registered the largest improvement over the three- year average — ​a gain of 14 points in its performance score. At the industry level, our financial sector investment clients These projects focused mainly on the financial sector or on performed the best, with 74 percent rated high. This was an developing ­public-­private partnerships. Europe and Central increase of six percentage points and reflected improved Asia recorded a decline in advisory projects rated high. The performance by new and existing clients in all regions, espe- drop reflected a relatively small pool of rated projects in the cially in East Asia and the Pacific and in the Middle East and several of which were affected by changes in govern- region — ​ North Africa. Microfinance and SME finance projects, which ment priorities during the implementation of p private ­ ublic-­ account for 60  percent of the s ­ector-rated portfolio, reg- partnerships. istered the strongest scores, particularly in private sector development and financial performance. Development outcomes for our advisory work by business area is provided in the table on page 79. Because of IFC’s Amid a slowdown in ­ emerging-­ market growth and a decrease organizational changes (see page 72), p ­ revious-year compar- in commodity prices, our projects in the real sector — ​ partic- ison is available only at the aggregate and regional levels. ularly in infrastructure and oil, gas, and mining  — ​registered lower outcome scores. In infrastructure, ratings of IFC clients declined as weaker financial and economic conditions ham- pered implementation in some cases. In oil, gas, and mining, the outcome score declined  — ​ largely because of new proj- DEVELOPMENT REACH ects in the portfolio, primarily smaller early-stage investments. AND RESULTS When the scores are weighted for project size, 82 percent of the clients were rated high. Across the globe, IFC investment and advisory services clients The regional performance of our investment operations were able to reach many people and record some remarkable remained broadly stable, with the exception of the South Asia achievements (see page 78). Here are a few highlights: and the East Asia and the Pacific regions, which saw down- ward and upward swings of nearly five percentage points, respectively. In East Asia, the improved rating of 65 percent EXPANDING FINANCE came from stronger performance in most sectors, including financial markets; agribusiness and forestry; consumer and › We worked with 331 financial intermediaries focused on lending to micro, small, and medium enterprises. These social services; and telecom, media, and technology. In South institutions provided 44 million micro and 4 million small Asia, 61 percent of clients were rated high on development and medium loans totaling $270  billion. Our clients also outcomes  — ​reflecting weaker performance of new projects, provided over 965,000 housing finance loans, totaling particularly in the Indian infrastructure sector. $22 billion. IFC ANNUAL REPORT 2015 77 › We also helped our partners in digital financial services › We helped governments sign 18 ­public-­private-­partnership to facilitate 70 million noncash retail transactions, totaling contracts that are expected to improve access to infrastruc- over $160 billion. ture and health services for almost 16 million people and mobilize over $5.8 billion in private investment. › We helped strengthen financial markets by working with collateral registries and credit bureaus that facilitated a › We helped firms adopt new practices and technologies total of $1.2 billion in financing. About 294,000 SMEs and nearly that attracted additional financing of $929 million — ​ microenterprises were also able to receive loans secured all of which came from sources other than IFC. Corporate with movable property. In addition, we helped create or governance reforms helped attract $535 million in financ- improve credit bureaus in Jamaica, Samoa, Uzbekistan, resource-­ ing for our clients, and clean energy and ­ efficient and Tajikistan. technologies led to investments of $384 million. PROVIDING SOLUTIONS AND SERVICES IMPROVING THE BUSINESS ENVIRONMENT › Our clients generated and distributed power to 99  mil- › We helped governments in 47 countries adopt 94 invest- lion customers  a 30 percent increase over the previous — ​ ment-climate reforms to foster growth and business year. More than a third of these customers were in Sub-­ creation. ­Seventy-eight of these reforms were in IDA coun- Saharan Africa. conflict-­ tries, including 25 in fragile and ­ affected situations. › Our clients also provided phone connections to 237 million › We helped national and local governments with reform and customers — ​ a 31 percent increase over the previous year, investment-promotion support that contributed to an esti- with most in South Asia. mated $743 million in new investments. › We helped businesses reach 26.4  million people with affordable off-grid lighting solutions. THE IFC DEVELOPMENT GOALS PERCENT OF PERCENT OF FY15 IDG FY15 TARGET FY14–FY16 TARGET GOAL FY15 IDG TARGET FY14–16 TARGETS* COMMITMENTS ACHIEVED ACHIEVED Increase or improve sustainable farming Benefit 1.48 million people Benefit 4.64 million people 1.29 million people 87% 54% opportunities Improve health and education services Benefit 5.74 million people Benefit 14.80 million people 12.92 million people 225% 143% Increase access to financial services for Benefit 27.75 million people Benefit 83.59 million people 52.25 million people 188% 106% microfinance clients Increase access to financial services for Benefit 1.52 million people Benefit 4.61 million people 1.46 million people 96% 55% SME clients Increase or improve infrastructure services Benefit 25.76 million people Benefit 75.36 million people 93.54 million people 363% 154% Reduce greenhouse-gas emissions Reduce by 6.08 million metric Reduce by 18.42 million metric 9.69 million metric tons 159% 83% tons of CO2 equivalent per year tons of CO2 equivalent per year *Cumulative total over three years (FY14–FY16). 78 IFC ANNUAL REPORT 2015 DEVELOPMENT REACH BY IFC’S INVESTMENT CLIENTS PORTFOLIO PORTFOLIO CY13 CY14 INVESTMENTS Employment (millions of jobs)1 2.6 2.5 MICROFINANCE LOANS Number (millions)2 29.0 43.6 Amount ($ billions)2 27.9 35.3 SME LOANS Number (millions)2 5.3 4.3 Amount ($ billions)2 275.7 234.4 TRADE FINANCE Number (millions)3 2.0 1.8 Amount ($ billions)3 310.0 266.0 CUSTOMERS REACHED WITH SERVICES Power generation (millions of customers) 51.3 55.8 Power distribution (millions of customers) 4 25.2 43.6 Water distribution (millions of customers)5 28.4 23.4 Gas distribution (millions of customers)6 39.8 35.0 Phone connections (millions of customers)7 180.9 237.2 Patients served (millions) 27.1 17.3 Students reached (millions) 2.5 3.5 Farmers reached (millions) 2.9 3.4 PAYMENTS TO SUPPLIERS AND GOVERNMENTS Domestic purchases of goods and services ($ billions) 34.3 51.9 Contribution to government revenues or savings ($ billions) 8 19.1 19.5 These figures represent the total reach of IFC clients as of end of CY13 and CY14. CY13 and CY14 portfolio data are not strictly comparable, because they are based on a changed portfolio of IFC clients. For microfinance and SME loans, results also reflect contributions from Advisory Services. While numerous controls are performed on the data provided by clients, they are sometimes based on estimates and the understanding of the indicator definitions may vary slightly between clients. 1. Portfolio figures for employment include jobs provided by Funds. 2. Portfolio reach figures represent the micro, small, and medium outstanding loan portfolio of IFC clients as of end CY13 and CY14, for MSME-oriented financial institutions/projects. 93% of the 331 clients required to report in CY14 did so. The missing data were extrapolated. Data for the number and amount of loans for CY13 revised due to restated values from several clients. 3. Estimate of the number and dollar volume of trade transactions financed by the Global Trade Finance Program’s network of emerging-market banks, based on actual data from over 90% of the network’s active banks and extrapolation for the rest. CY13 and CY14 figures are not strictly comparable due to changes in methodology applied for CY14. Numbers reflect transactions directly guaranteed by IFC as well as those executed by network banks that have been supported by the program. 4. CY13 total power distribution revised due to the restatement of one client value in Latin America and the Caribbean. 5. CY13 water distribution revised due to the restatement of two client values in Latin America and the Caribbean. 6. One client in East Asia and the Pacific contributed 31.8 million of gas distribution customers in CY14. 7. One client in South Asia contributed 135.8 million of phone connection customers in CY14. 8. CY13 total payments to governments revised due to the restatement of two client values in Latin America and the Caribbean. IFC ANNUAL REPORT 2015 79 INVESTMENT SERVICES DOTS SCORE BY PERFORMANCE AREA, FY15 INVESTMENT SERVICES DOTS SCORE BY REGION, FY14 VS. FY15 % Rated High % Rated High Development Outcome 63% IFC Total 64% 72% 63% Financial Performance 47% Latin America and the Caribbean 67% 55% 65% Economic Performance 55% East Asia and the Pacific 61% 63% 65% Environmental & Social Performance 68% Middle East and North Africa 62% 70% 64% Private Sector Development Impact 70% Sub-Saharan Africa 64% 77% 63% Unweighted    Weighted  South Asia 66% 61% Europe and Central Asia 61% INVESTMENT SERVICES DOTS SCORE BY INDUSTRY, FY14 VS. FY15 61% % Rated High FY14    FY15  IFC Total 64% 63% ADVISORY SERVICES DOTS SCORE BY BUSINESS AREA, FY15 Financial Markets 68% % Rated High 74% Funds 72% IFC Total 73% 74% Energy & Resource Efficiency 88% Agribusiness & Forestry 61% Investment Climate 87% 62% Cross-Industry Areas 82% Infrastructure 66% Financial Sector 70% 61% Agribusiness 67% Oil, Gas & Mining 69% Public-Private Partnerships 50% 55% “Financial Sector” also includes projects undertaken by the integrated World Bank Group team in Manufacturing 55% the Finance & Markets Global Practice. 53% Consumer & Social Services 57% 52% ADVISORY SERVICES DOTS SCORE BY REGION Telecommunications & Information 42% % Rated High Technology 41% IFC Total 73% FY14    FY15  75% Middle East and North Africa 90% 76% South Asia 82% 81% Sub-Saharan Africa 74% 72% Latin America and the Caribbean 72% 76% East Asia and the Pacific 60% 66% Europe and Central Asia 50% 76% FY15     FY13 to FY15  80 IFC ANNUAL REPORT 2015 WHERE WE WORK FY10 FY15 LOCATION United States 1,542 (46%) 1,525 (41%) Other Countries 1,816 (54%) 2,162 (59%) Total IFC Staff 3,358 3,687 OUR STAFF OUR STAFF MEMBERS WORK IN NATIONAL ORIGIN — ​ALL FULL-TIME STAFF FY10 FY15 100 NATIONAL ORIGIN IDA Donor Countries1 1,270 (38%) 1,393 (38%) I FC’s employees are diverse. Other Countries 2,088 (62%) 2,294 (62%) Total 3,358 3,687 They are our most important asset. COUNTRIES Representing more than 140 countries, NATIONAL ORIGIN — ​S TAFF GRADED FY10 FY15 our staff brings innovative solutions and AT OFFICER LEVEL AND HIGHER global best practices to local clients. IFC’S EMPLOYEES NATIONAL ORIGIN REPRESENT MORE THAN IDA Donor Countries1 947 (46%) 1,100 (44%) Our staff members work in 100 countries. 140 Other Countries 1,110 (54%) 1,392 (56%) Total 2,057 2,492 More than half of us — ​59 percent — ​are declaration of countries at the time of their IDA membership. 1. Based on self-­ based in offices outside the United States, COUNTRIES an increasing percentage that reflects our GENDER — ​ALL FULL-TIME STAFF FY10 FY15 commitment to decentralization. Most GENDER IFC employees, 62 percent in all, hail Female Staff 1,785 (53%) 1,977 (54%) NEARLY from countries that are not IDA donors — ​ Male Staff 1,573 (47%) 1,710 (46%) 60% Total 3,358 3,687 a diversity that enriches our perspective and underscores our focus on areas GENDER — ​S TAFF AT OFFICER FY10 FY15 where private sector development can of IFC staff members are LEVEL AND HIGHER based in offices outside have the biggest impact. the United States GENDER Female Staff 825 (40%) 1,085 (44%) Male Staff 1,232 (60%) 1,407 (56%) Total 2,057 2,492 IFC ANNUAL REPORT 2015 81 designed to encourage teamwork, reward top performance, COMPENSATION and support IFC’s strategic priorities such as projects in frag- IFC’s compensation guidelines are part of the World Bank ­ onflict-­ ile and c affected states. Group’s framework. The international competitiveness of compensation is essential to our capacity to attract and retain highly qualified, diverse staff. The salary structure BENEFITS PROGRAMS for staff recruited in Washington, D.C., is based on the U.S. IFC provides a competitive package of benefits, includ- market, which historically has been globally competitive. ing medical, life, disability insurance and a retirement plan. Salaries for staff hired outside the United States are based Medical insurance costs are shared  75 percent is paid by — ​ on local competitiveness, determined by independent local IFC and 25 percent by the insured. market surveys. Based on the World Bank Group’s status as a multilateral organization, staff salaries are determined on a IFC’s pension is part of the World Bank Group plan, based on net-of-tax basis. two benefit components: first, a ­ benefit component defined-­ fully funded by IFC based on years of service, salary, and retire- ment age; second, a cash-­ balance component — ​ a mandatory VARIABLE PAY PROGRAMS contribution of 5 percent of salary plus an optional staff con- tribution of 6 percent of salary, to which IFC adds 10 percent IFC’s variable pay programs consist of several components, annually. The Bank Group also sponsors an optional U.S.-style including recognition programs and performance awards 401(k) plan for W­ ashington-based staff and an optional sav- (which include annual and long-term components) that ­ ountry-­ ings plan for c office staff. support IFC’s high-­performance culture. These awards are STAFF SALARY STRUCTURE (WASHINGTON, D.C.) As of June 30, 2015, the salary structure (net of tax) and annual average net salaries/benefits for World Bank Group staff were as follows: MARKET STAFF AT AVERAGE AVERAGE MINIMUM REFERENCE MAXIMUM GRADE LEVEL SALARY/GRADE BENEFITSa GRADES REPRESENTATIVE JOB TITLES ($) ($) ($) (%) ($) ($) GA Office Assistant 23,900 34,100 44,300 0.02% 42,233 24,702 GB Team Assistant, Information Technician 30,100 43,000 55,900 0.5% 44,269 25,893 GC Program Assistant, Information Assistant 37,200 53,100 69,000 9.5% 55,934 32,716 GD Senior Program Assistant, Information Specialist, Budget Assistant 43,900 62,700 81,500 7.6% 69,346 40,560 GE Analyst 58,900 84,200 109,500 10.0% 79,845 46,701 GF Professional 78,300 111,900 145,500 22.4% 103,520 60,549 GG Senior Professional 105,700 151,000 196,300 31.0% 142,515 83,357 GH Manager, Lead Professional 144,000 205,700 267,400 16.1% 200,468 117,254 GI Director, Senior Advisor 220,800 276,000 331,200 2.4% 264,534 154,726 GJ Vice President 272,500 320,600 368,700 0.4% 327,814 191,738 GK Managing Director, Executive Vice President 303,000 356,500 410,000 0.1% 382,207 220,614 Note: Because World Bank Group (WBG) staff, other than U.S. citizens, usually are not required to pay income taxes on their WBG compensation, the salaries are set on a net-of-tax basis, which is generally equivalent to the after-tax take-home pay of the employees of the comparator organizations and firms from which WBG salaries are derived. Only a relatively small minority of staff will reach the upper third of the salary range. a. Includes medical, life and disability insurance; accrued termination benefits; and other nonsalary benefits. Excludes tax allowances. 82 IFC ANNUAL REPORT 2015 OUR GOVERNANCE OUR BOARD Each of our member countries appoints one governor and one alternate. Corporate powers are vested in the Board of Governors, which delegates most powers to a board of 25 directors. Voting power on issues brought before them OUR PLACE IN THE is weighted according to the share capital each direc- WORLD BANK GROUP tor represents. The directors meet regularly at World Bank Group headquar- The World Bank Group is a vital source of financial and tech- ters in Washington, D.C., where they review and decide on nical assistance to developing countries. Its mission is to fight investments and provide overall strategic guidance to IFC poverty with passion and professionalism, for lasting results. management. The President of the World Bank Group is also President of IFC. IFC is one of five members of the Bank Group, though it is a separate legal entity with separate Articles of Agreement, share capital, financial structure, management, and staff. Membership in IFC is open only to member countries of the World Bank. As of June 30, 2015, IFC’s paid-in capital of about EXECUTIVE $2.56 billion was held by 184 member countries. These coun- COMPENSATION tries guide IFC’s programs and activities. IFC works with the private sector to create opportunity where The salary of the President of the World Bank Group is deter- it’s needed most. Since our founding in 1956, we have com- mined by the Board of Directors. The salary structure for IFC’s mitted nearly $180 billion of our own funds for private sector Executive Vice President and CEO is determined by position- investments in developing countries, and we have mobilized ing a midpoint between the salary structure of staff at the more than $40 billion more from others. highest level, as determined annually by independent U.S. compensation market surveys, and the salary of the World In working to end extreme poverty and boost shared pros- Bank Group President. The compensation of our executive perity, we collaborate closely with other members of the leadership is transparent. IFC’s Executive Vice President and Bank Group. CEO, Jin-Yong Cai, received a salary of $399,400, net of taxes. There are no executive incentive compensation packages. IFC ANNUAL REPORT 2015 83 Seated (left to right): Hervé de Villeroché, France ▪ Patrizio Pagano, Italy ▪ Subhash Chandra Garg, India ▪ Merza Hasan (Dean), Kuwait ▪ Rionald Silaban, Indonesia ▪ Masahiro Kan, Japan ▪ Gwen Hines, United Kingdom ▪ Nasir Mahmood Khosa, Pakistan Standing (left to right): Jose A. Rojas R., Venezuela, RB ▪ Frank Heemskerk, Netherlands ▪ Ursula Müller, Germany ▪ Jörg Frieden, Switzerland ▪ Louis Rene Peter Larose, Seychelles ▪ Franciscus Godts, Belgium ▪ Shixin Chen, China ▪ Alister Smith, Canada ▪ Satu Santala, Finland ▪ Ana Dias Lourenco, Angola ▪ Khalid Alkhudairy, Saudi Arabia ▪ Sung-Soo Eun, Korea, Rep. ▪ Alex Foxley, Chile ▪ Antonio Silveira, Brazil ▪ Mohamed Sikieh Kayad, Djibouti ▪ Andrei Lushin, Russian Federation Not pictured: Matthew McGuire, United States OUR MEMBER COUNTRIES — STRONG SHAREHOLDER SUPPORT GRAND TOTAL 100% UNITED STATES 20.99% JAPAN 6.01% GERMANY 4.77% FRANCE 4.48% UNITED KINGDOM 4.48% INDIA 3.82% RUSSIAN FEDERATION 3.82% CANADA 3.02% ITALY 3.02% CHINA 2.30% 174 OTHER COUNTRIES 43.29% 84 IFC ANNUAL REPORT 2015 ACCOUNTABILITY In the infrastructure sector, IEG evaluations demonstrated that IFC can contribute to successful development outcomes in tough regulatory environments and frontier regions. In the manufacturing sector, successful projects benefited from innovation and cost efficiencies, thus contributing to private sector development results. IEG’s major reports are disclosed INDEPENDENT on its website: http://ieg.worldbankgroup.org. EVALUATION GROUP The Independent Evaluation Group contributes lessons from OFFICE OF THE COMPLIANCE its evaluations to IFC’s learning agenda. IEG is indepen- dent of IFC management and reports directly to the World ADVISOR OMBUDSMAN Bank Group’s Board of Directors. Its mission is to strengthen the development effectiveness of Bank Group institutions The Office of the Compliance Advisor Ombudsman, or CAO, through excellence in evaluations that inform strategies and is the independent accountability mechanism for IFC and future work. MIGA. CAO addresses complaints from people affected by IFC and MIGA projects with the goal of enhancing environ- IEG evaluates IFC’s eligible investment and advisory projects. mental and social outcomes. CAO is led by Osvaldo Gratacós, Evaluation ratings are reported in IEG’s annual evaluation who was appointed in July 2014 after an independent selec- of Bank Group results and performance. The most recent tion process. He reports to the World Bank Group President. report for 2014 showed a decline in overall development effectiveness of investment projects compared with the pre- CAO facilitates dispute resolution between communities vious period. The decline was driven largely by the effects and IFC clients, conducts compliance investigations of IFC’s of the global financial crisis and ­ project-­ specific factors. IFC’s environmental and social performance, and provides inde- advisory services showed a significant improvement in their pendent advice to the President and management. development effectiveness, particularly in Latin America and In FY15, CAO managed 63 cases in 25 countries related to the Caribbean and in East Asia and the Pacific, and in the IFC agribusiness, education, extractives, manufacturing, ­ Private Partnerships business line. Public-­ infrastructure, financial intermediary, and advisory services IEG’s recent evaluation of IFC’s business model for deliver- projects. Of these, 16 were new complaints regarding IFC ing advisory services on investment-climate reform found projects. At fiscal year end, CAO had closed 20 cases, with a number of strengths to the standardized, focused, short- nine in assessment, 14 in dispute resolution, and 20 in ongoing term delivery model. IEG recommended that, as services are compliance review. folded into a new global practice, the Bank Group could take advantage of the respective strengths of both World Bank and IFC models. IFC ANNUAL REPORT 2015 85 Through dispute resolution, CAO worked with communities and companies to address concerns regarding significant IFC Cameroon Oil Pipeline, the Oyu projects, including the Chad-­ Tolgoi mine in Mongolia, and the Bujagali hydropower proj- ect in Uganda. CAO concluded long-term mediations after monitoring settlements between local stakeholders related to resettlement around the Sihanoukville airport expansion in Cambodia, and a chronic health issue affecting sugar work- ers in Nicaragua. In Uganda, CAO is monitoring settlements between two communities and a client of the IFC-­ supported Agri-Vie Fund regarding impacts of commercial forestry plan- tations and land displacement. In its compliance function, CAO closed eight appraisals of IFC’s performance related to 16 complaints with no further action, and three appraisals are in process. CAO is con- ducting seven investigations of IFC’s performance related to projects in the advisory services, agribusiness, financial-­ intermediary, hydropower, mining, and infrastructure sectors. CAO is monitoring IFC actions in response to six compliance investigations regarding the Tata Ultra Mega power project in India; Dinant and Ficohsa cases related to agribusiness ­ nancial-­ and fi intermediary investments in Honduras, respec- tively; Quellaveco, a mining investment in Peru; Avianca, an investment in a Colombian airline; and IFC’s global ­ intermediary portfolio. After monitoring IFC, CAO financial-­ closed one investigation related to advisory services for the power sector in Kosovo. IFC engaged with CAO’s advisory function for a workshop on lessons learned from financial-intermediary investments in May 2015, and on guidance being developed by CAO for project-level grievance mechanisms. For IFC and its clients on ­ more information, visit www.cao-­ombudsman.org. 86 IFC ANNUAL REPORT 2015 WORK ING WITH DEVELOPMENT PARTNERS IFC collaborates and builds long-term relationships with development partners across the globe while pursuing our shared goals of ending poverty and increasing shared pros- perity. Our development partners strongly support the work of IFC, to which they committed nearly $263 million in FY15. IFC builds on partnerships and improves collaboration by PARTNERSHIPS deepening our dialogue with partners and seeking new ave- nues to improve efficiencies and create impact. We and the World Bank hold joint consultations with a variety of partners to deepen our engagement  — ​including the Netherlands, I FC works with governments, Norway, Switzerland, and the U.K. in FY15. IFC has also played a key role in shaping the narrative for the future financing corporations, foundations, and framework for sustainable development by showcasing the other multilateral organizations importance of private sector involvement in development. and development institutions to foster In May, the Bank Group organized the Development Finance Forum in Rotterdam. The forum provided an ideal platform innovative partnerships that create for strategists, policymakers, and advisors in the public and prosperity and eradicate poverty. Our private sector to meet and reflect on critical initiatives that can collaborative approach emphasizes the contribute to sustainable development. power of sustained partnerships, focuses Through development-partner trust funds, IFC continues to provide financing and knowledge on private sector devel- on results measurement and efficiency, opment. The following initiatives highlight the concerted and leverages the contributions of our effort we have made to collaborate in innovative ways with development partners to maximize our partners: impact on the lives of the poor. THE ROCKEFELLER FOUNDATION The Rockefeller Foundation partnered with IFC in FY15 to unlock private sector investment for infrastructure proj- ects across emerging markets. The foundation committed $10  million to launch a ­ development facility, which project-­ will provide grants to support legal, technical, and financial advice to governments working with IFC. These projects will help cities build resilience and support poor and vulnera- ble communities. The facility will also help accelerate the IFC ANNUAL REPORT 2015 87 development of projects and increase the number of proj- Innovation for Financial Inclusion program is supported by a ects that obtain financing. The foundation and IFC aim to contribution of more than 16 million British pounds from the jointly raise an additional $40 million to $90 million from other U.K. The program will also provide expertise to help develop- partners, which could support the development of up to 80 ing countries implement a strategic framework to modernize ­ medium-to-large-scale projects globally. government, retail, and remittance payment systems. DEPARTMENT FOR INTERNATIONAL DEVELOPMENT THE EUROPEAN UNION The United Kingdom’s Department for International The European Union pledged €9 million in December 2014 to Development and the Bank Group formed a new partnership promote sustainable urban development in five Indian cities. that will focus on the use of technological innovations to The Eco-­Cities Program in India, which is designed to address deliver financial services to some of the world’s poorest and the challenges of rapid urbanization in India, is aligned with most excluded people, particularly women and people liv- the Indian government’s Smart Cities agenda, which seeks to ing in fragile and ­ affected areas. The Harnessing conflict-­ create 100 new cities with modern infrastructure. FINANCIAL COMMITMENTS TO IFC ADVISORY SERVICES (US$ Millions Equivalent) Unaudited figures SUMMARY FY14 FY15 INSTITUTIONAL/MULTILATERAL PARTNERS FY14 FY15 Governments 272.51 199.85 Climate Investment Funds 16.62 8.36 Institutional/Multilateral Partners 46.66 24.69 European Commission 19.68 11.43 Corporations, Foundations, and NGOs 19.38 38.01 Financial Sector Deepening Trust 0.60 0.00 Total 338.56 262.55 Global Green Growth Institute (3GI)* 0.60 0.00 Islamic Development Bank 0.31 0.00 GOVERNMENTS FY14 FY15 Livelihoods and Food Security Trust Fund 3.62 0.00 Australia 7.01 34.38 MENA Transition Fund 5.24 3.65 Austria 11.24 7.43 Trade and Markets East Africa Canada 48.12 4.25 (TradeMark East Africa – TMEA) 0.00 1.25 Denmark 4.47 9.22 Total 46.66 24.69 France 0.00 2.49 Germany 0.99 0.00 CORPORATIONS, FOUNDATIONS, AND NGOs FY14 FY15 Hungary 20.00 0.00 Bill & Melinda Gates Foundation 2.00 20.51 Ireland 2.65 0.00 BP Exploration (Caspian Sea) Limited 0.40 0.00 Italy 4.72 0.00 Dingyi Venture Capital (HK) Limited 3.00 0.00 Japan 36.71 5.96 eBay Foundation Corporate Advised Fund of Korea 3.00 0.13 Silicon Valley Community Foundation (SVCF) 0.00 0.10 Netherlands 55.00 0.63 Ford Foundation 0.15 0.20 New Zealand 0.00 1.41 Goldman Sachs Foundation 11.33 0.00 Norway 3.27 18.13 Marie Stopes International 0.00 3.95 Sweden 2.76 3.63 Nestlé SA* 0.00 1.50 Switzerland 47.72 33.31 PepsiCo Foundation* 0.00 1.50 United Kingdom 16.60 56.13 Rockefeller Foundation 0.00 10.00 United States 8.26 22.73 SABMiller PLC* 0.25 0.25 The Coca-Cola Company* 2.25 0.00 Total 272.51 199.85 Total 19.38 38.01 *Contributor to the 2030 Water Resource Group 88 IFC ANNUAL REPORT 2015 MANAGING RISKS TREASURY SERVICES IFC raises funds in the international capital markets for private sector lending and to ensure sufficient liquidity to safeguard ­ riple-A credit ratings. IFC’s t PORTFOLIO MANAGEMENT Issuances include benchmark bonds in core currencies such as U.S. dollars, thematic issuances to support strategic priorities Portfolio management is an intrinsic part of managing IFC’s such as climate change, and issuances in ­ emerging-­ market business to ensure strong financial and development results currencies to support c market development. Most of ­ apital-­ of our projects. IFC’s lending is denominated in U.S. dollars, but we borrow in many currencies to diversify access to funding, reduce bor- IFC’s management reviews our entire portfolio globally on rowing costs, and support local capital markets. a quarterly basis and reports on the portfolio performance to the Board annually. Our portfolio teams, largely based in Over the years, IFC’s funding program has grown to keep field offices, complement global reviews with asset-by-asset pace with our lending — ​ in FY15, new borrowings totaled the quarterly reviews. equivalent of $15.6 billion. On the corporate level, IFC combines the analysis of our $50.4 billion portfolio performance with projections of global FY15 BORROWING IN INTERNATIONAL MARKETS macroeconomic and market trends to inform decisions about CURRENCY AMOUNT ($ EQUIVALENT) PERCENT future investments. IFC also regularly tests the performance of the portfolio against possible macroeconomic develop- U.S. dollar 8,621,527,000.00 54.5% Australian dollar 2,381,909,500.00 15.1% ments to identify and proactively address risks. Brazilian real 1,247,752,840.45 7.9% On the project level, IFC actively monitors compliance with Japanese yen 690,844,961.00 4.4% investment agreements, visits sites to evaluate project status, Indian rupee 646,237,823.36 4.1% Chinese renminbi 611,959,012.97 3.9% and helps identify solutions to address potential problems. We Euro 340,150,000.00 2.2% systematically track environmental and social performance, Other 1,278,496,063.62 8.1% and measure financial and development results. Total 15,818,877,201.40 100.0% For projects in financial distress, our Special Operations Department determines the appropriate remedial actions. It seeks to negotiate agreements with creditors and sharehold- ers to share the burden of restructuring so problems can be LIQUIDITY MANAGEMENT worked out while the project continues to operate. Investors and other partners participating in IFC’s operations Liquid assets on IFC’s balance sheet totaled $39.5 billion as of are kept regularly informed on project developments. IFC June 30, 2015, compared with $33.7 billion a year earlier. Most consults or seeks their consent as appropriate. liquid assets are held in U.S. dollars. The exposure arising from assets denominated in currencies other than U.S. dollars is hedged into U.S. dollars or matched by liabilities in the same currency to eliminate overall currency risk. The level of these assets is determined with a view to ensure sufficient resources to meet commitments even during times of market stress. IFC ANNUAL REPORT 2015 89 CAPITAL ADEQUACY AND PROMOTING SUSTAINABILITY FINANCIAL CAPACITY Sound risk management plays a crucial role in ensuring IFC’s ability to fulfill our development mandate. The very nature of IFC’s business, as a long-term investor in dynamic yet IFC’S SUSTAINABILITY volatile emerging markets, exposes us to financial and oper- ational risks. FR AMEWORK Prudent risk management and a solid capital position enable Sustainability is critical to companies’ business success. It’s us to preserve our financial strength and play a countercyclical critical, too, for their customers, surrounding communities, role during times of economic and financial turmoil. In addi- and broader stakeholder groups. tion, IFC’s financial strength results in low borrowing costs, allowing us to provide affordable financing to our clients. In a time of climate change, resource scarcities, and ris- ing social pressures, businesses face a growing need for a The soundness and quality of IFC’s risk management and stronger approach to environmental, social, and governance ­riple-A credit rating, financial position can be seen in our t issues. It takes an integrated approach to address the chal- which has been maintained since coverage began in 1989. lenges of sustainability  — ​one that manages financial risks We assess IFC’s minimum capital requirement in accordance and nonfinancial risks in a unified way while embedding with our economic capital framework, which is aligned with sustainability into the way companies do business. the Basel framework and leading industry practice. Economic IFC’s Sustainability Framework reflects this approach. capital acts as a common currency of risk, allowing us to It is designed to help our clients improve their business model and aggregate the risk of losses from a range of differ- performance, enhance transparency, engage with the people ent investment products as well as other risks. affected by the projects we finance, protect the environment, IFC’s total resources available consist of paid-in capital, and achieve greater development impact. In doing so, it retained earnings net of designations and certain unreal- enables us to fulfill our strategic commitment to environmen- ized gains, and total loan-loss reserves. The excess available tal social sustainability and good corporate governance while capital, beyond what is required to support existing business, contributing to private sector growth and job creation. allows for future growth of our portfolio while also providing a buffer against unexpected external shocks. As of June 30, 2015, total resources available reached $22.6 billion, while the minimum capital requirement totaled $19.2 billion. SUSTAINABILITY IN PR ACTICE IFC works to ensure sustainability in four key dimensions  — ​ financial, economic, environmental, and social. Being financially sustainable enables IFC and our clients to make a long-term contribution to development. Making our projects economically sustainable ensures that they contribute to the host economies. 90 IFC ANNUAL REPORT 2015 In all of our investment decisions, IFC gives the same weight Managing environmental, social, and governance risks in our and attention to environmental, social, and governance risks portfolio and promoting sustainable practices are an inte- as we do to credit and financial risks. In more challenging management approach. gral part of IFC’s business and risk-­ markets, we work with clients whose potential high-­ reward When a project is proposed for financing, IFC conducts a business investments and sustainable inclusive growth face social and environmental review as part of our due diligence. a growing array of complex environmental, social, and gov- This review takes into account the client’s assessment of the ernance risks. project’s impact and the client’s commitment and capacity to manage it. It also assesses whether the project adheres to These challenges require best-in-class environmental, social, the IFC Performance Standards and Corporate Governance and governance risk-­ management and flexible solutions. Our Methodology. Where there are gaps, we and the client agree work includes helping clients address risks that are beyond on a plan to ensure that the standards are met over time. We their ability or responsibility to solve alone, to leverage the supervise our projects throughout the life of our investment. capabilities of the World Bank Group to find durable solutions, and to work with other stakeholders to help unlock investment when it is constrained by significant sustainability risks. IFC clients continue to indicate that our expertise is an impor- CORPOR ATE GOVERNANCE tant factor in their decision to work with us. Nearly 90 percent of the clients that received support from us on environmen- Improving corporate governance is a priority for IFC. We pro- tal and social matters found our assistance to be helpful in vide investment support and advice on good practices for improving relationships with stakeholders, strengthening improving board effectiveness; strengthening shareholder brand value and recognition, and establishing sound risk-­ management governance, internal rights; and enhancing risk-­ management practices. controls, and corporate disclosure. We work in close collaboration with the World Bank to ensure that regulation in emerging markets is developed using IFC’s IFC PERFORMANCE frontline experience as an investor. We also advise regulators, stock-­market administrators, and others with an interest in STANDARDS implementing good corporate governance practices. Our experience allows IFC to apply global principles to the At the core of our Sustainability Framework are the IFC realities of the private sector in developing countries. As a Performance Standards that help our clients avoid, mitigate, result, development banks and other investors working in and manage risk as a way of doing business sustainably. They emerging markets now look to IFC for leadership on corpo- help clients devise solutions that are good for business, good rate governance. for investors, and good for the environment and communities. We do this in a variety of ways  including through the IFC — ​ Our Performance Standards have become a global bench- Corporate Governance Methodology, a system for evalu- mark of sustainability practices. The Equator Principles, which ating corporate governance risks and opportunities that is reflect these standards, have been adopted by more than 80 recognized as the most advanced of its kind among develop- financial institutions worldwide, including 25 from emerging ment finance institutions. This methodology is the basis for a markets. In addition, other financial institutions also reference coordinated approach to corporate governance now imple- IFC’s Performance Standards in their policies  — ​including 15 mented by more than 30 development finance institutions. European development finance institutions and 34 export credit agencies. IFC ANNUAL REPORT 2015 91 IFC also helps strengthen local partners that provide IFC continues to be ­ carbon-­neutral for global business oper- ­ corporate-­ governance services over the long term. This ations. In FY15, carbon emissions from our global business includes training materials and i building tools in ­nstitution-­ operations totaled about 47,400 metric tons of carbon dioxide corporate-­ the areas of ­ governance associations, codes and equivalent. We purchased carbon credits from a portfolio of scorecards, board leadership training, dispute resolution, the five projects — ​including energy-efficiency, cook stove, and training of business reporters, and implementation of good renewable-energy projects in India and Uganda. IFC chose governance practices in firms. projects that bring tangible development benefits to the com- munities in which they take place. Strong corporate governance depends on diversity in board leadership. We strive to increase the number of women who serve as nominee directors on the boards of our clients. FY14 CARBON EMISSIONS INVENTORY FOR IFC’S GLOBAL OPERATIONS Twenty-eight percent of IFC nominee directors are women. ­ Metric tons of carbon dioxide equivalent Business Travel 32,609.00 69% HQ Office Electricity 7,244.37 15% OUR FOOTPRINT Country Office Electricity Other 4,391.77 3,173.77 7% 9% COMMITMENT Total Emissions 47,418.92 100% IFC’s Footprint Commitment is to make sustainability an — ​ integral part of our internal business operations  holding ourselves accountable to the same environmental and social standards we ask of our clients. Using natural resources efficiently is an important part of that commitment. Electricity use accounts for about 25 percent of carbon emissions generated by IFC’s internal operations worldwide. Between 2007 and 2015, we sought to reduce electricity consumption by 15 percent per workstation in our headquarters offices. We achieved a 25  percent reduction during that time. In 2016, we will set a more ambitious target  one that — ​ includes some of our country offices. Reducing paper waste is a priority. A new centrally managed World Bank Group print system is being rolled out to modernize our print technology, while eliminating waste and reducing costs by an estimated $2  million within a year for Washington offices of the Bank Group. At IFC headquarters, the new system reduced the printer-to-staff ratio to 1:12 from 1:2. Today, less than 0.5 per- ­ cent of headquarters staff have a personal printer. The system avoids abandoned print jobs and reduces toner waste. 92 IFC ANNUAL REPORT 2015 INDEPENDENT ASSURANCE MATERIAL AREAS STATEMENTS INDICATORS REPORT ON A SELECTION OF IFC policy “Our Staff” (p. 80) “Managing Risks” (p. 88) SUSTAINABLE DEVELOPMENT Development “Enhancements to the Results-Measurement Investment projects Rated High: 63% (p. 79); overall investment INFORMATION effectiveness of System” (p. 75) DOTS scores detailed by industry (p. 79), by region (p. 79), and investments and by performance area (p. 79); and weighted and unweighted “IFC’s Results-Measurement System” advisory services DOTS scores (p. 27) (pp. 73–74) Advisory Projects Rated High: 73% (p. 79); and detailed values by “Development Reach and Results” I business area (p. 79) and by region (p. 79) (pp. 76–77) n response to a request made by IFC, we performed a review on a Reach of IFC’s clients ”Local Capital Markets — Building Efficient Employment (millions): 2.5 (p. 78) Capital Markets” (pp. 42–43) Patients served (millions): 17.3 (p. 78) selection of sustainable development “Health and Education — Strengthening Students reached (millions): 3.5 (p. 78) information in the Annual Report for Human Capital” (pp. 54–55) Farmers reached (millions): 3.4 (p. 78) “Employment — Taking a Comprehensive the financial year ending June 30, 2015, Approach to Job Creation” (pp. 48–49) Gas distribution (millions of persons reached): 35.0 (p. 78) including quantitative indicators (“the “Technology — Using Digital Technology Power distribution (millions of persons reached): 43.6 (p. 78) to Empower the Poor” (pp. 38–39) Indicators”) and qualitative statements Water distribution (millions of persons reached): 23.4 (p. 78) (“the Statements”). We selected Trade Finance — Number of transactions (millions): 1.8 (p. 78) Trade Finance — Amount ($ billions): 266 (p. 78) statements that were deemed to be of particular stakeholder interest, and NUMBER AND AMOUNTS OF MICROFINANCE LOANS AND involved a potential reputation risk SME LOANS FOR CY14 (p. 78) Number of loans Amount for IFC, together with statements on Type of loans (millions) ($ billions) corporate responsibility management Microloans 43.6 35.3 Small and medium loans 4.3 234.4 and performance. The Indicators and the Statements are related to the following material areas: IFC ANNUAL REPORT 2015 93 MATERIAL AREAS STATEMENTS INDICATORS Environmental and “IFC Performance Standards” (p. 90) social ratings IFC COMMITMENTS BY ENVIRONMENTAL AND SOCIAL CATEGORY (p. 26) Commitments Number of Category ($ millions) projects A 1,508 25 B 3,244 157 C 215 57 FI 256 15 FI-1 1,311 17 FI-2 2,937 100 FI-3 1,067 35 Total 10,539 406 Sustainable business “Climate Change — Helping Contain Commitments in Climate-related investments for FY15 (p. 59): a Global Threat” (pp. 44–45) $2,349 million “Gender — Expanding Economic Carbon Emissions (p. 91):  47,419 tCO 2 equivalent in FY14 Opportunities for Women” (pp. 50–51) “Advice” (pp. 65–66) “Our Footprint Commitment” (p. 91) Influence on private “Agribusiness — Feeding the World Sustainably” (pp. 46–47) sector development “SMEs — Accelerating Local Entrepreneurship” (pp. 34–35) “Infrastructure — Creating a Strong Foundation for Development” (pp. 30–31) “Urbanization — Reinforcing Cities and Urban Centers” (pp. 40–41) “Access to Finance — Opening Up New Pathways to Prosperity” (pp. 32–33) Engagement in the “IDA and Conflict-Affected Areas — Creating Opportunity in Strife-Torn Environments” (pp. 52–53) poorest and fragile countries Working with others ”Cross-Border Investment — Mobilizing Capital for Development” (pp. 36–37) IFC accountability “Office of the Compliance Advisor Ombudsman“ (pp. 84–85) 94 IFC ANNUAL REPORT 2015 Our review aimed to provide limited assurance1 that: NATURE AND SCOPE OF 1. the Indicators were prepared in accordance with the reporting criteria applicable during fiscal year 2015 (the OUR REVIEW “Reporting Criteria”), consisting in IFC instructions, proce- dures and guidelines specific to each indicator, a summary We performed the following review to be able to express of which is provided in the Annual Report, for the indi- a conclusion: cators related to Commitments by Environmental and › We assessed the Reporting Criteria, policies and principles, Social Category (p. 26) and Development effectiveness of with respect to their relevance, their completeness, their investments and advisory services (Monitoring and tracking neutrality and their reliability. results, p. 74) and on IFC’s website for the others; › We reviewed the content of the Annual Report to identify 2. the Statements have been presented in accordance with key statements regarding the sustainability and develop- “IFC’s Access to Information Policy,“ which is available ment areas listed above. on IFC’s website2 and the principles of relevance, com- pleteness, neutrality, clarity and reliability as defined by › At the corporate level, we conducted interviews with more international standards3. than 25 persons responsible for reporting to assess the application of the Reporting Criteria or to substantiate It is the responsibility of IFC to prepare the Indicators and the Statements. Statements, to provide information on the Reporting Criteria and to compile the Annual Report. › At the corporate level, we implemented analytical proce- dures and verified, on a test basis, the calculations and the It is our responsibility to express a conclusion on the Indicators consolidation of the Indicators. and the Statements based on our review. Our review was con- ducted in accordance with ISAE 3000, International Standard › We collected supporting documents for the Indicators or on Assurance Engagements from IFAC 4. Our independence Statements, such as reports to the board of directors or is defined by IFAC professional code of ethics. other meetings, loan agreement, internal and external pre- sentations and reports, or survey results. › We reviewed the presentation of the Statements and the Indicators in the Annual Report and the associated notes on methodology. 1. A higher level of assurance would have required more extensive work. 2. http://www.ifc.org/ifcext/disclosure.nsf/content/disclosure_policy 3. ISAE 3000 from IFAC, Global Reporting Initiative (GRI), or AA1000 Accountability Standard. 4. ISAE 3000: “Assurance Engagement other than reviews of historical data,” International Federation of Accountants, International Audit and Assurance Board, December 2003. IFC ANNUAL REPORT 2015 95 LIMITATIONS OF in implementing the Performance Standards. These indicators introduce a new assessment approach from a results-oriented OUR REVIEW rating to a performance approach, which measures how cli- ents are improving their own E&S performance. Our review was limited to the Statements and Indicators iden- Also, the scope of indicators to assess the Private Sector tified in the table above and did not cover other disclosures Development (PSD) performance area of DOTS should be in the Annual Report. broadened to better reflect the impact on final beneficiaries Our tests were limited to document reviews and interviews over the life cycle of the projects, and rationales to support at IFC’s headquarters in Washington, D.C. Within the scope the DOTS PSD rating should be strengthened. IFC is com- of work covered by this statement, we did not participate in mitted to enhancing the relevance of its development results any activities with external stakeholders or clients and only and Reach-related procedures on a continuous basis. There conducted limited testing aimed at verifying the validity of is indeed work in progress on the harmonization of the PSD information on a sample of individual projects. indicators among IFIs. Finally, while the Reach indicators capture the contribution of IFC Clients overall, IFC’s reporting regarding its contribution and development results could be enhanced by disclosing INFORMATION ABOUT THE incremental data  i.e., additional beneficiaries after IFC’s — ​ REPORTING CRITERIA investment — ​ and by applying a contribution factor — ​ the share of IFC’s investment in overall investment. such as AND THE STATEMENT PREPAR ATION PROCESS COMPLETENESS With regards to the Reporting Criteria and the Statement The Indicators’ reporting perimeter covers the most rel- preparation policies and principles, we wish to make the evant IFC activities. The scope covered by each indicator ­following comments: has been indicated in the comments next to the data in the Annual Report. In particular, in line with IFC’s new practice of reporting short-term finance (STF) business separately from long-term finance (LTF) business, a specific set of Reach indi- RELEVANCE cators has been implemented since last year to reflect the IFC presents sustainability information on its own impact and impact of the Global Trade Finance Program. The related on environmental and social risks, impacts and outcomes figures have been reviewed and are presented in the Reach of projects it financed directly or through financial inter- data table (p. 78). mediaries. The development results of IFC Investment and It also appears that, FY15 being the first year that DOTS E&S Advisory Services are assessed through its Development performance is rated under a new set of E&S indicators, com- Outcome Tracking System (DOTS) and the implementation pletion rate on the indicators for this performance area is of its evaluation strategy. lower compared to FY14. In the Environmental and Social (E&S) DOTS performance area, IFC has implemented for its direct investments a new set of core indicators that assess the progress of IFC’s clients 96 IFC ANNUAL REPORT 2015 NEUTRALITY AND CLARITY CONCLUSION IFC provides information on the methodologies used to Based on our review, nothing has come to our attention that establish the Indicators in the comments next to the pub- causes us to believe that: lished data or in the related sections. Further information is available on the IFC website. › the Indicators were not established, in all material aspects, in accordance with the Reporting Criteria; › the Statements were not presented, in all material aspects, in RELIABILITY accordance with “IFC’s Policy on Disclosure of Information” and the principles of relevance, completeness, neutrality, IFC has strengthened internal controls on major contributors clarity and reliability as defined by international standards. of the Reach indicators at project level, in addition to the con- trols performed at the corporate level. As these indicators are Paris-La Défense, August 7, 2015 directly collected from clients that can sometimes be based on estimates rather than their audited financial statements, The independent auditors the internal controls in place are essential to ensure that data ERNST & YOUNG et Associés reported are consistent with IFC’s own definitions and calcu- lation methodologies. However, these controls should be further enhanced: at proj- ect level, by ensuring that the controls are consistently applied across industries and regions; at corporate level, by reviewing the quality of the checks performed and the traceability of the data source used. Eric Duvaud In addition, IFC should consider limiting the use of extrap- Partner, Cleantech and Sustainability olation for Reach indicators where data from clients is not available. IFC ANNUAL REPORT 2015 97 ELEMENTS SIGNIFICANT INFLUENCES NET INCOME Yield on interest earning Market conditions including spread levels and degree of assets competition. Nonaccruals and recoveries of interest on loans formerly in nonaccrual status and income from participation notes on individual loans are also included in income from loans. Liquid asset income Realized and unrealized gains and losses on the liquid asset portfolios, which are driven by external factors such as: the interest rate environment; and liquidity of certain asset classes within the liquid asset portfolio. Income from the equity Global climate for emerging markets equities, fluctuations investment portfolio in currency and commodity markets and ­ company-­ s pecific performance for equity investments. Performance of the equity FINANCIAL PERFORMANCE portfolio (principally realized capital gains, dividends, equity impairments, gains on non-­ monetary exchanges and unrealized SUMMARY gains and losses on equity investments). Provisions for losses on loans Risk assessment of borrowers and probability of default and loss and guarantees given default. T Other income and expenses Level of advisory services provided by IFC to its clients, the level he overall market environment has a of expense from the staff retirement and other benefits plans, and the approved administrative and other budgets. significant influence on IFC’s financial Gains and losses on other Principally, differences between changes in fair values of performance. The main elements of IFC’s non-­trading financial borrowings, including IFC’s credit spread, and associated instruments accounted for derivative instruments and unrealized gains associated with the net income and comprehensive income and at fair value investment portfolio including puts, warrants and stock options influences on the level and variability of net which in part are dependent on the global climate for emerging markets. These securities are valued using internally developed income and comprehensive income from models or methodologies utilizing inputs that may be observable or non-­o bservable. year to year are: Grants to IDA Governors–­ Level of the Board of ­ approved grants to IDA. OTHER COMPREHENSIVE INCOME Unrealized gains and losses on Global climate for emerging markets equities, fluctuations in currency listed equity investments and and commodity markets and ­ company-­ s pecific performance. Such debt securities accounted for equity investments are valued using unadjusted quoted market as ­available-for-sale prices, and debt securities are valued using internally developed models or methodologies utilizing inputs that may be observable or non-­o bservable. Unrecognized net actuarial Returns on pension plan assets and the key assumptions that gains and losses and underlay projected benefit obligations, including financial market unrecognized prior service interest rates, staff expenses, past experience, and management’s costs on benefit plans best estimate of future benefit cost changes and economic conditions. 98 IFC ANNUAL REPORT 2015 Global equity markets in emerging economies have been vol- Change in Income before Net Unrealized Gains and Losses on atile in the year ended June 30, 2015 (FY15) but have generally trading financial instruments accounted for at fair value non-­ declined over FY15. Economic downturns in certain countries and grants to IDA FY15 vs FY14 (US$ millions): in Europe and Central Asia, Latin America and the Caribbean, the depreciation of most of IFC’s investment currencies against the US Dollar, IFC’s functional currency, and the INCREASE (DECREASE) downward trend in oil prices have also negatively impacted FY15 VS FY14 financial results for FY15 and for IFC’s equity investment port- Higher other-than-­temporary impairments on equity folio in particular. investments and debt securities $ (484) Lower gains on equity investments and associated As a result of the combination of the macro environment for derivatives, net (383) emerging markets and ­ investment-­specific developments, Lower income from liquid asset trading activities (132) IFC has recorded higher other-than-­ temporary impairments Higher provisions for losses on loans, guarantees and on equity investments and debt securities, higher unrealized other receivables (83) losses on equity investments and higher provisions for losses Higher income from loans and guarantees, realized gains and losses on loans and associated derivatives 58 on loans which, together with lower income from liquid assets, Higher foreign currency transaction gains on non-­trading have been the main drivers of IFC’s financial results in FY15 activities 72 when compared to FY14. IFC was however able to generate Other, net 25 higher realized gains on a small number of equity divestments Overall change in income before net unrealized gains and which were concentrated in two divestments that occurred in losses on non-­ trading financial instruments accounted for the first three months of FY15. at fair value and grants to IDA $ (927) IFC has reported income before net unrealized gains and Net unrealized losses on non-­ trading financial instruments losses on non-­trading financial instruments accounted for at accounted for at fair value totaled $106 million in FY15 (net fair value and grants to IDA of $855 million in FY15, as com- unrealized losses of $43 million in FY14) resulting in income pared to $1,782 million in FY14. before grants to IDA of $749 million in FY15, as compared to Allocable Income was $1,327 million, 18 percent lower than in $1,739 million in FY14. Grants to IDA totaled $340 million in FY14 ($1,614 million). FY15, as compared to $251 million in FY14. Net losses attrib- utable to non-­controlling interests totaled $36 million in FY15 ($5 million gains in FY14). Accordingly, net income attributable to IFC totaled $445 mil- lion in FY15, as compared with $1,483 million in FY14. IFC’s net income for each of the past five fiscal years ended June 30, 2015 is presented below (US$ millions): NET INCOME (LOSS) For the years ended June 30 (US$ millions) 2011 1,579 2012 1,328 2013 1,018 2014 1,483 2015 445 IFC ANNUAL REPORT 2015 99 SELECTED FINANCIAL DATA AS OF AND FOR THE LAST FIVE FISCAL YEARS (US$ MILLIONS): AS OF AND FOR THE YEARS ENDED JUNE 30 2015 2014 2013 2012 2011 CONSOLIDATED INCOME HIGHLIGHTS Income from loans and guarantees, realized gains and losses on loans and associated derivatives 1,065 $ $ 1,123 $ 996 $ 993 $ 802 (Provision)/release of provision for losses on loans & guarantees (171) (88) (243) (117) 40 Income from equity investments and associated derivatives 427 1,289 732 1,548 1,601 Income from debt securities and realized gains and losses on debt securities and associated derivatives 132 89 69 71 67 Income from liquid asset trading activities 467 599 500 313 529 Charges on borrowings (258) (196) (220) (181) (140) Other income 505 461 441 448 222 Other expenses (1,423) (1,418) (1,401) (1,207) (981) Foreign currency transaction gains and losses on non-­ trading activities 53 (19) 35 145 (33) Income before net unrealized gains and losses on non-­ trading financial instruments accounted for at fair value and grants to IDA 855 1,782 909 2,013 2,107 trading financial Net unrealized gains and losses on non-­ instruments accounted for at fair value (106) 441 (43) (355) 72 Income before grants to IDA 749 1,739 1,350 1,658 2,179 Grants to IDA (340) (251) (340) (330) (600) Net income 409 1,488 1,010 1,328 1,579 controlling interests Less: Net losses (gains) attributable to non-­ 36 (5) 8 – – Net income attributable to IFC $ 445 $ 1,483 $ 1,018 $ 1,328 $ 1,579 CONSOLIDATED BALANCE SHEET HIGHLIGHTS Total assets 87,548 $ $ 84,130 $ 77,525 $ 75,761 $ 68,490 Liquid assets, net of associated derivatives 39,475 33,738 31,237 29,721 24,517 Investments 37,578 38,176 34,677 31,438 29,934 Borrowings outstanding, including fair value adjustments 51,265 49,481 44,869 44,665 38,211 Total capital $ 24,426 $ 23,990 $ 22,275 $ 20,580 $ 20,279 Of which Undesignated retained earnings 20,457 $ $ 20,002 $ 18,435 $ 17,373 $ 16,032 Designated retained earnings 184 194 278 322 335 Capital stock 2,566 2,502 2,403 2,372 2,369 Accumulated other comprehensive income (AOCI) 1,197 1,239 1,121 513 1,543 Non-­controlling interests 22 53 38 – – 100 IFC ANNUAL REPORT 2015 KEY FINANCIAL RATIOS 2015 2014 2013 2012 2011 FINANCIAL RATIOS a Return on average assets (GAAP basis)b 0.5% 1.8% 1.3% 1.8% 2.4% Return on average assets (non-GAAP basis)c 1.3% 1.8% 0.9% 2.8% 1.8% Return on average capital (GAAP basis)d 1.8% 6.4% 4.8% 6.5% 8.2% Return on average capital (non-GAAP basis)e 4.6% 6.5% 3.1% 9.9% 6.0% Overall liquidity ratiof 81% 78% 77% 77% 83% External funding liquidity level 494% 359% 309% 327% 266% Debt to equity ratiog 2.6:1 2.7:1 2.6:1 2.7:1 2.6:1 Total reserves against losses on loans to total disbursed portfolioh 7.5% 6.9% 7.2% 6.6% 6.6% Capital measures: Total Resources Required ($ billions)i 19.2 18.0 16.8 15.5 14.4 Total Resources Available ($ billions)j 22.6 21.6 20.5 19.2 17.9 Strategic Capitalk 3.4 3.6 3.8 3.7 3.6 l Deployable Strategic Capital 1.1 1.4 1.7 1.8 1.8 Deployable Strategic Capital as a percentage of Total Resources Available 5% 7% 8% 9% 10% a. Certain financial ratios, as described below, are calculated excluding the effects of unrealized gains and losses on investments, other non-­ trading financial instruments, AOCI, and impacts from consolidated Variable Interest Entities (VIEs). b. Net income for the fiscal year as a percentage of the average of total assets at the end of such fiscal year and the previous fiscal year. c. Return on average assets is defined as annualized Net income, excluding unrealized gains/losses on investments accounted for at fair value, income from consolidated VIEs and net gains/losses on non-­ trading financial investments, as a percentage of total disbursed loan and equity investments (net of reserves), liquid assets net of repos, and other assets averaged for the current period and previous fiscal year. d. Net income for the fiscal year as a percentage of the average of total capital (excluding payments on account of pending subscriptions) at the end of such fiscal year and the previous fiscal year. e. Return on average capital is defined as annualized Net income, excluding unrealized gains/losses on investments accounted for at fair value, income from consolidated VIEs and net gains/losses on non-­ trading financial investments, as percentage of the paid-in share capital and accumulated earnings (before certain unrealized gains/losses and excluding cumulative designations not yet expensed) averaged for the current period and previous fiscal year. f. Overall Liquidity Policy states that IFC would at all times maintain a minimum level of liquidity, plus undrawn borrowing commitments from the IBRD, that would cover at least 45% of the next three years’ estimated net cash requirements (target range of 65-95%). g. Leverage (Debt/equity) ratio is defined as the number of times outstanding borrowings plus outstanding guarantees cover paid-in capital and accumulated earnings (net of retained earnings designations and certain unrealized gains/losses). h. Total reserves against losses on loans to total disbursed loan portfolio is defined as reserve against losses on loans as a percentage of the total disbursed. i. The minimum capital required consistent with the maintenance of IFC’s AAA rating. It is computed as the aggregation of risk-based economic capital requirements for each asset class across the Corporation. j. Paid in capital plus retained earnings net of designated retained earnings plus general and specific reserves against losses on loans. This is the level of available resources under IFC’s risk-based economic capital adequacy framework. k. Total resources available less total resources required. l. 90% of total resources available less total resources required. IFC ANNUAL REPORT 2015 101 COMMITMENTS FY15 AND FY14 LONG-TERM FINANCE AND CORE MOBILIZATION FY15 FY14 (US$ MILLIONS) In FY15, Long-Term Finance was $10,539 million, as compared to $9,967 million in FY14 and Core Mobilization was $7,133 mil- Total Long-Term Finance and Core Mobilization1 $ 17,672 $ 15,110 lion, as compared to $5,143 million for FY14, a total increase LONG-TERM FINANCE of 17 percent. In addition, the average outstanding balance Loans $ 7,019 $ 7,327 for Short-Term Finance was $2,837 million at June 30, 2015, as Equity investments 3,187 2,324 compared to $3,006 million at June 30, 2014. Guarantees 273 286 Client risk management 60 30 Core Mobilization is financing from entities other than IFC that becomes available to clients due to IFC’s direct involvement in Total Long-Term Finance $ 10,539 $ 9,967 raising resources. lFC finances only a portion, usually not more CORE MOBILIZATION than 25 percent, of the cost of any project. All IFC-­ financed Loan participations, parallel loans, and other mobilization projects, therefore, require other financial partners. IFC mobi- Loan participations $ 1,853 $ 2,043 lizes such private sector finance from other entities through a Parallel loans 1,522 730 number of means, as outlined in the table at right. Managed Co-­ lending Portfolio Program 818 320 Other Mobilization 881 606 Total loan participations, parallel loans and other mobilization $ 5,074 $ 3,699 AMC Sub-debt Capitalization Fund $ 150 $ 516 ALAC Fund 86 84 Catalyst Funds 66 75 Equity Capitalization Fund 3 7 Russian Bank Cap Fund – 2 Global Infrastructure Fund 226 146 GIF Co-­Investments 230 – Total AMC $ 761 $ 830 OTHER INITIATIVES Global Trade Liquidity Program and Critical Commodities Finance Program $ 750 $ 500 Public Private Partnership 548 114 Total other initiatives $ 1,298 $ 614 Total Core Mobilization $ 7,133 $ 5,143 1. Debt security commitments are included in loans and equity investments based on their predominant characteristics. 102 IFC ANNUAL REPORT 2015 ACTIVITIES OF THE FUNDS MANAGED BY AMC FY15 VS FY14: AS OF JUNE 30, 2015 FOR THE YEAR ENDED JUNE 30, 2015 DISBURSEMENTS FROM TOTAL ASSETS UNDER MANAGEMENT INVESTORS TO FUND FROM OTHER FROM OTHER DISBURSEMENTS DISBURSEMENTS MADE TOTAL FROM IFC INVESTORS FROM IFC INVESTORS MADE BY FUND BY FUND (NUMBER)* Equity Capitalization Fund 1,275 $ $ 775 $ 500 $ 6 $ 4 $ 8 1 Sub-Debt Capitalization Fund 1,725 225 1,500 29 196 254 4 ALAC Fund 1,000 200 800 29 112 94 7 Africa Capitalization Fund 182 – 182 – 3 – – Russian Bank Cap Fund 550 250 300 5 5 – – Catalyst Funds 418 75 343 9 41 36 46 Global Infrastructure Fund** 1,430 200 1,230 27 298 293 7 China-­Mexico Funds 1,200 – 1,200 – 6 – – FIG Fund 344 150 194 – – – – GEM FOF 406 81 325 – – – – Total $ 8,530 $ 1,956 $ 6,574 $ 105 $ 665 $ 685 65   * Number of disbursements may include multiple disbursements to a single investee company or fund. investment fund managed by AMC on behalf of Fund LPs. ** Includes co-­ AS OF JUNE 30, 2014 FOR THE YEAR ENDED JUNE 30, 2014 DISBURSEMENTS FROM TOTAL ASSETS UNDER MANAGEMENT INVESTORS TO FUND FROM OTHER FROM OTHER DISBURSEMENTS DISBURSEMENTS MADE TOTAL FROM IFC INVESTORS FROM IFC INVESTORS MADE BY FUND BY FUND (NUMBER)* Equity Capitalization Fund 1,275 $ $ 775 $ 500 $ 8 $ 5 $ 21 3 Sub-Debt Capitalization Fund 1,725 225 1,500 77 514 544 8 ALAC Fund 1,000 200 800 21 83 89 9 Africa Capitalization Fund 182 – 182 – 3 – – Russian Bank Cap Fund 550 250 300 9 10 4 2 Catalyst Funds 418 75 343 3 15 12 17 Global Infrastructure Fund 1,200 200 1,000 32 165 172 6 China-­Mexico Funds – – – – – – – FIG Fund – – – – – – – GEM FOF – – – – – – – Total $ 6,350 $ 1,725 $ 4,625 $ 150 $ 795 $ 842 45   * Number of disbursements may include multiple disbursements to a single investee company or fund. IFC ANNUAL REPORT 2015 103 LETTER TO THE BOARD OF GOVERNORS The Board of Directors of IFC has had this annual report prepared in accordance with the Corporation’s by-laws. Jim Yong Kim, President of IFC and Chairman of the Board of Directors, has submitted this report with the audited financial statements to the Board of Governors. The Directors are pleased to report that, for the fiscal year ended June 30, 2015, IFC expanded its sustainable development impact through private sector investments and advice. 104 IFC ANNUAL REPORT 2015 STAY CONNECTED W EB & SOCIAL MEDIA RESOURCES IFC’s website, www.ifc.org, provides comprehensive information on every aspect of our activities. It includes contact information for offices worldwide, news releases and feature stories, data on results measurement, disclosure documents for proposed investments, and key policies and guidelines. The online version of IFC’s Annual Report 2015 provides downloadable PDFs of all materials in this volume and translations as they become available. It is available at www.ifc.org/annualreport. The website also provides more information on sustainability, including a Global Reporting Initiative index. 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