International Finance Corporation (IFC)

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Recently, the International Finance Corporation (IFC) issued an update to its Green Equity Approach (GEA) policy saying that it will no longer allow financial intermediary clients to support new coal projects.

About International Finance Corporation:

  • It was founded in 1956 with Washington, DC as its headquarters.
  • It is a member of the World Bank Group.
  • Mandate: Advance economic development and improve the lives of people by encouraging the growth of the private sector in developing countries.
  • Functions: It helps countries develop their private sectors in a variety of ways
    • Investing in companies through loans, equity investments, debt securities and guarantees.
    • Mobilizing capital from other lenders and investors through loan participations, parallel loans and other means.
    • Advising businesses and governments to encourage private investment and improve the investment climate.
  • Governance: The IFC is owned and governed by its member countries. It is a corporation whose shareholders are member governments that provide paid-in capital and have the right to vote on its matters.
  • The President of the World Bank Group is also the President of the IFC.

What is the World Bank Group?

  • The World Bank Group is a vital source of financial and technical assistance to developing countries.
  • It was established in 1944 through the Bretton Woods Agreement its mission is to fight poverty with passion and professionalism, for lasting results.
  • The World Bank is the collective name for the International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA), two of five international organisations owned by the WB Group.
  • The World Bank Group consists of five distinct yet complementary organizations:
    • International Bank for Reconstruction and Development (IBRD): It provides loans, credits and grants
    • International Development Association (IDA): It provides low or no-interest loans to low-income countries.
    • International Finance Corporation (IFC): It provides investment, advice and asset management to private companies and governments.
    • Multilateral Investment Guarantee Agency (MIGA): It ensures lenders and investors against political risks such as war.
    • International Centre for Settlement of Investment Disputes (ICSID): It settles investment disputes between investors and countries.
  • India is not a member of the International Centre for Settlement of Investment Disputes (ICSID)


Q1) What is a debt instrument?

A debt instrument is a tool an entity can use to raise capital. It is a documented, binding obligation that provides funds to an entity in return for a promise from the entity to repay a lender or investor in accordance with terms of a contract.

Source: IFC will no longer allow financial intermediary clients to support new coal projects