Viewpoint: Why We Should Be Worried By the World Bank Shoveling $36 Billion to ‘Financial Intermediaries’

Thursday, April 2, 2015

Everyone’s heard of the World Bank, but far fewer people know of its private sector arm, the International.

Finance Corporation, which describes itself as ‘the largest global development institution focused exclusively on the private sector in developing countries’. It’s huge and growing, and it’s got some nasty skeletons in its cupboard – today it comes in for a good kicking from The Suffering of Others, a report by a logotastic coalition of 12 NGOs, including Oxfam, ahead of theWorld Bank Group Spring Meetings.

Nearly two thirds of the IFC’s lending goes to the financial sector, mainly to ‘financial intermediaries’ (FIs), including commercial banks, private equity and hedge funds.

Now there’s no question that poor countries and people need access to finance: access to financial services and private finance plays a critical role in economic and social development, and is often sorely lacking. The trouble arises because the IFC is shovelling billions into FIs in a ‘hands off’ strategy that has led to some spectacular own goals – the report brings together some horrific case studies of the social and environmental impact of these loans, including rubber, sugarcane and palm oil plantations in Cambodia, Laos and Honduras, a dam in Guatemala and a power plant in India. Other risky projects include yet more power plants and dams in West Papua, Laos and Guatemala, a mine in Vietnam, and sugar plantations in Guatemala.

In the words of one community representative from Cambodia, ‘We want the World Bank to know that its money is being used to destroy our way of life. Nowadays, we are surrounded by companies. They have taken our community lands and forests. Soon we fear there will be no more land left for us at all and we will lose our identity. Does the World Bank think this is development?’

That Cambodian community and a number of others have taken complaints to the World Bank’s Compliance Adviser/Ombudsman (CAO), and the IFC has promised to shape up, but the report argues that it has made nowhere near enough progress to date.

Source: Oxfam International (link opens in a new window)

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