The International Finance Corporation responds to Cheryl Strauss Einhorn's investigation into the World Bank's investment arm.
- By Bruce Moats
We are deeply disappointed by your article, "Can You Fight Poverty With a Five-Star Hotel?," which raises an important question about the International Finance Corporation’s (IFC) impact fighting poverty in developing countries. It failed to be fair and it failed to fully examine our impact.
What is our record?
Every dollar of profit we make is reinvested to support private sector development, increasingly in the poorest countries. Since 2007, our profits have totaled more than $10 billion. Of that amount, we’ve contributed about $2 billion to the International Development Association (IDA), making us a major contributor to the World Bank’s fund for the poorest in recent years.
The rest has been reinvested in developing countries-creating jobs, modernizing infrastructure, expanding access to finance for small entrepreneurs, and building the conditions for sustained prosperity. This is what our member countries want us to do, and we believe it is the right thing to do.
Since IFC began in 1956, we have invested more than $125 billion in developing countries, improving the lives of millions. In Ghana, for example, IFC’s support for KHI Ghana helped create 1,500 construction jobs and more than 300 permanent jobs at the Movenpick Hotel-providing much-needed employment and opportunities for small businesses while also supporting environmental and social best practice. In Egypt, our investment in Orascom Construction Industries is expected to provide more than 2,500 jobs and help boost agricultural production. Those are just two small examples of our impact. In the last few years, roughly half of our projects have been in countries with a per capita income of less than $1,175.
The World Bank Group’s recent World Development Report focused on the importance of creating jobs. One of its conclusions was that 90 percent of all jobs in the developing world are created by the private sector. That is the central part of our mission to fight poverty: encouraging private companies to invest in developing countries, which creates jobs in areas that are starved for private investment. In 2011 alone, our investments provided 2.5 million jobs in developing countries.
Our investments are not nearly enough-not at a time when 1 billion people go hungry every day and 600 million jobs need to be created within this decade. That’s why we encourage other investors-small, medium, and large-to join us. By working with them, we demonstrate the benefits of investing in challenging markets, and help ensure that our values of sustainable development are incorporated into their work.
In addition to failing to examine this record, the writer, Cheryl Strauss Einhorn, also made several factual errors. One is the IFC was established to "muster cheap loans" for private businesses. We don’t provide "cheap" loans, and never have. IFC’s loans are at market rates.
A second is that she says the IFC "likes to work with huge corporations" and "tycoons." Yet she provides no support for that broad claim about our preferences. In fact, she later says 20 percent of IFC’s investment projects were for amounts less than $5 million-the type that tycoons typically avoid.
And critically, a third is an incorrect summation of a 2011 report by the World Bank’s Independent Evaluation Group on the IFC’s performance. She concludes that the report finds that IFC’s work "at times may even sacrifice the poor." The report, however, makes no such finding. Its conclusions are far more nuanced, and we invite readers to judge for themselves.
Finally, Ms. Einhorn hindered her own ability to accurately report the story by identifying herself not as a reporter on assignment but as a college professor conducting "research." This is a clear violation of ProPublica’s own ethics code. ProPublica’s editor’s note acknowledges Ms. Einhorn was "incomplete" in identifying herself.
Can we and others who work with the private sector improve and make a larger impact on poverty? Yes. But articles like this one don’t help make a case for that. Ms. Einhorn’s reporting was flawed because she failed to examine IFC’s record and then to make an independent evaluation of all relevant facts. We also expect a degree of fairness from such highly respected media. Its absence in this case is a disservice to readers who trust you to uphold the high standards of fair and impartial journalism.
Bruce Moats is the director of corporate relations at the International Finance Corporation.
Much of this letter supports the theme of the story, which is that the government-funded IFC is hugely profitable and is operated much like a profit-minded bank, and that it helps the poor only secondarily rather than as its central focus. The few assertions of error we think are wrong. Mr. Moats says the IFC doesn’t make "cheap" loans, only loans at market rates. That is semantics. The IFC has long been proud of saying it makes loans to borrowers who can’t get private financing. What is a market rate for a loan that isn’t made? Mr. Moats says we offer no evidence for the statement that the IFC likes to work with huge corporations and tycoons; we named more than a dozen and could easily have named two or three times that many. Mr. Moats doesn’t like our conclusion that the 2011 report by the World Bank’s own Independent Evaluation Group portrayed the IFC as a profit-oriented, deal-driven organization that often fails to reach the poor, and at times may even sacrifice the poor, in a drive to earn a healthy return on its investments. Mr. Moats says the report is more "nuanced" than that and invites readers to judge for themselves. We join in that invitation.