World Bank evaluator calls for more poverty reduction with growth

An insightful evaluation of the work of the International Finance Corporation, the private-sector-focused lender within the World Bank Group, has noted that while 86 per cent of IFC investment projects “contributed positively to overall economic growth,” approximately “about 60 per cent [of the IFC’s investment projects] do not provide identifiable opportunities for the poor.”

Highlighting the positive dimensions of IFC lending, the Independent Evaluation Group [IEG] of the World Bank, an arm of the multilateral lender that is responsible for critically assessing performance across the Group, said in an evaluation report released this week that the IFC was “on the right track” in directing its efforts to fight poverty.

However the IEG also cautioned that the linkages between investment, growth and poverty reduction were “far from automatic”, given that market failures, rigidities and “built-in forces of exclusion” could limit the participation of the poor in growth, “which must be addressed more systematically”.

Specifically Vinod Thomas, Director-General of Evaluations at the World Bank Group, said, “IFC’s efforts on supporting growth are generally beneficial for the poor but the impact of growth on poverty reduction depends not only on the pace but crucially also on the pattern of growth.”

Mr. Thomas, who recently also spoke to The Hindu about the inter-related nature of the ongoing food, climate change and poverty crises, added that the IEG’s findings with regard to the IFC were of great importance especially for middle-income countries, “which have experienced robust growth in recent years, yet where the distribution of economic benefits to the poor has lagged.”

Providing country-level examples the latest IEG study described the case of Crucially, an IFC investment in a packaging and container manufacturer in Latin America, where the investment had helped the company expand its network of recycled paper collection enterprises resulting in an estimated creation of 12,000 jobs.

Noting that the project “strongly contributed to economic growth and established employment opportunities for low-income waste collectors in several countries,” the IEG report said that its project evaluations indicated that the IFC’s “poverty focus need not come at the expense of the Corporation’s financial success, and that a broad range of IFC interventions can enhance both the pace of growth and its pro-poor pattern.”