International Finance Corporation (IFC): Definition and Example

What Is the International Finance Corporation (IFC)?

The International Finance Corporation (IFC) provides financing of private-enterprise investment in developing countries around the world, through both loans and direct investments. Affiliated with the World Bank, it also provides advisory services to encourage the development of private enterprise in nations that might be lacking the necessary infrastructure or liquidity for businesses to secure financing.

How the International Finance Corporation (IFC) Works

The IFC was established in 1956 as a member of the World Bank Group, focused on investing in economic development. It claims to be the largest global development institution focused on the private sector in developing countries. The IFC says it also seeks to ensure that private enterprises in developing nations have access to markets and financing.

The IFC's most recent stated goals include the development of sustainable agriculture, expanding small businesses' access to microfinance, supporting infrastructure improvements, as well as promoting climate, health, and education policies. The IFC is governed by its 184 member countries and is headquartered in Washington, D.C.

IFC Global Financing

To raise money, the IFC issues bonds in markets around the world. As of 2021, the IFC has issued $10.553 billion worth across 178 bonds in 20 currencies.

In fiscal year 2021, the IFC invested $31.5 billion in long-term and short-term finance, including $10.8 billion mobilized from other investors.

Example of an IFC Investment

The IFC provided $145 million in financing to help one of the world’s largest dairy producers, FrieslandCampina, acquire a controlling stake of 51% of Engro Foods, Pakistan’s leading dairy processor. Although Pakistan is the fourth-largest milk-producing country in the world, demand has consistently outpaced supply due to poor infrastructure and an outdated supply chain. Small subsistence farms account for nearly 80% of the industry’s output. 

FrieslandCampina has promised to share its experience and best practices with the smaller farmers who supply Engro Foods, along with the majority of the dairy processors in Pakistan. The stated goal is to help these small farmers increase productivity and reduce waste.

The IFC said it expects that 200,000 farmers and 270,000 distributors will benefit from FrieslandCampina's acquisition of Engro Foods. In addition, the investment is projected to create 1,000 new jobs in the dairy supply chain.

Criticism of the IFC

The IFC has faced criticism as its size and influence around the globe have grown. It says one of its primary goals is to reduce poverty through economic development, but critics say it has begun to act more like a private investment bank with a focus on corporate profit, sometimes with disregard for the environmental and social impacts of its projects.