What Is The Full Form Of IFC? – International Finance Corporation
The full form of IFC is the International Finance Corporation. International Finance Corporation is a global financial institutionFinancial InstitutionFinancial institutions refer to those organizations which provide business services and products related to financial or monetary transactions to their clients. Some of these are banks, NBFCs, investment companies, brokerage firms, insurance companies and trust corporations. that solely focuses on the development of the private sector in developing economies by offering the same necessary services advisory, investment, and asset managementAsset ManagementAsset management is a method of managing funds and investing in both traditional and specialized products in order to generate returns consistent with the investor's risk tolerance. .
It aims to create better livelihoods and other opportunities for people to deal with poverty and have a better standard of living. IFC is an international financial institution aiming to develop private industries in developing nations. IFC aims to create better livelihood opportunities for people to rise above poverty and enjoy a better standard of living. International Finance Corporation also offers various services in investment, advisory, and asset management.
Table of contents
- IFC is a global financial institution that helps develop the private sector in developing countries to improve living standards and reduce poverty. The International Finance Corporation is the full name of IFC.
- IFC was established in 1956 to promote economic development and support private business expansion in emerging nations. It invests in profitable projects while reducing poverty.
- Engro Foods received a $145 million investment from the International Finance Corporation, allowing Friesland Campina to acquire a 51% stake. This partnership benefited farmers and distributors, created 1,000 new jobs in Pakistan’s dairy industry, and reduced waste in milk production.
How Does It Work?
International Finance Corporation(IFC) considers only a few investment proposals. These investment proposals are solely selected based on their focus on establishing, improving, and growing productive privately held companies that will ultimately bring development to an underperforming economy. Agricultural, financial, industrial, and other commercial industries are eligible for International Finance Corporation funding if only their operations are found productive.
IFC is authorized to make funding as and however, it may deem fit, excluding the investment in capital stocksCapital StocksThe capital stock is the total amount of share capital (including equity capital and preference capital) that has been issued by a company. It is a way of raising funds by the company to meet its various business goals. and equity shares. IFC does not have a uniform interest rate policy for its investment function. In an IFC, the interest rates are to be negotiated for each case based on a few relevant factors, including the level and types of risks involved, the right to participate in profits, and so on. International Finance Corporation invests only when the enterprises have relevant experience and competent management.
International Finance Corporation was established in the year 1956. International FinanceInternational FinanceInternational Finance is a section of Financial Economics that deals with the macroeconomic relationship & monetary transactions between 2 or more countries. It includes concepts like Exchange Rates, Interest Rates, FDI, & Balance of Payments etc. Corporation was established as a private affiliate of the WB or World Bank. IFC has its headquarters in Washington, D.C., U.S. IFC was established to infuse and advance economic development and encourage the growth of the private industry in developing economies by strictly making an investment in commercial and profitable projects and simultaneously curbing poverty in the same.
The purpose of International Finance Corporation are:
- In association with the private sectorPrivate SectorThe private sector is a section of the national economy that the government does not own. The business conducted under this sector is carried out by companies or entrepreneurs who focus on profit maximization and customer satisfaction. investors, IFC aims to fund the foundation, improvement, growth, and expansion of the private sector industries and simultaneously pave the way for the development of its member nations.
- IFC seeks to attract more and more investment opportunities, national and international private capital, and experienced management.
- IFC even seeks to stimulate and create favorable conditions for smooth national and international private capital flow into meaningful and productive investments in member nations.
The objectives of International Finance Corporation are:
- IFC boosts the flow of private capital (both national and international).
- IFC even encourages the development of private capital markets in developing and under-developed economies.
- International Finance Corporation(IFC) even encourages the private industry in developing economies by financing the private sector projects, offering guidance and technical assistance to the industries and the government, and assisting the companies of the developing economies in mobilizing their finances in the global financial marketsFinancial MarketsThe term "financial market" refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces..
- IFC also acts as a clearinghouse by bringing together private capital, experienced management, and investment opportunities.
- IFC actively invests in productive private industries in association with the private sector investors and, thereby, focuses on areas where required private capital is not flowing due to genuine reasons.
The five strategies of International Finance Corporation are:
- The first strategy is to strengthen its focus on frontier marketsFrontier MarketsA frontier market refers to the economy that prevails low liquidity, poor accessibility, high risk and small market capitalization. Such a pre-emerging market is considered a developing nation with an underdeveloped capital market. (IDA countries and non-IDA economies) and FCS or Fragile and conflict situations.
- The second strategy addresses climate change, social and environmental sustainability, etc.
- The third strategy is encouraging the private sector’s growth, including the food supply chain, health, education, and water.
- The fourth strategy is to encourage the development of the local and national financial markets with the help of institution building, use, and mobilization of more innovative financial products, and focus on MSMEs or micro, small and medium enterprises.
- The fifth and last strategy is to build and maintain long-term relationships with clients in developing economies by fully using its products and services and stimulating transboundary growth.
Let us understand the concept with the help of a suitable example as given below:
Pakistan ranks number four globally when it comes to the production of milk. Its small-scale dairy farmers produce almost 80 percent of the country’s milk. Instead of such huge milk production, the demand for milk has always outweighed the same supply. Poor infrastructure and conventional and ineffective processes are majorly why the country’s dairy industry has struggled to balance the demand and supply of milk. Because of an inefficient supply chain, the country’s overall milk industry has become inefficient.
International Finance Corporation contributed nearly $145 million to a Dutch co-operative, Friesland Campina, to acquire a 51 percent stake in Engro Foods, which happens to be Pakistan’s leading milk processing company. Engro Foods was now able to receive this association’s benefits and raw materials from Friesland Campina. This enhanced the productivity and efficiency of the country’s small-scale farmers and reduced their waste. This acquisition and association were expected to benefit 270,000 distributors and 200,000 farmers and create 1000 new job vacancies in Pakistan’s dairy industry.
International Finance Corporation offers investment, advisory, as asset management services that further comprise loans, trade, and supply chain financeSupply Chain FinanceSupply Chain Finance, also called Reverse Factoring, is an arrangement in which the supplier gets advance payment for receivables through a financier on behalf of the buyer. It provides significant benefits for both the buyer & the supplier. , equity, blended finance, treasury client solutions, syndicated loans, client risk management services, structures as well as securitized finance, liquidity management, treasury services, venture capitalVenture CapitalVenture capital (VC) refers to a type of long-term finance extended to startups with high-growth potential to help them succeed exponentially. , etc. Let us understand them in detail.
- Investment – The corporation provides various financial services and solutions to different projects or private sector companies to help in their growth, expansion and job creation in the market.
- Advisory – To help companies promote and grow their business, IFC provides advisory services through expertise, consulting, and technical assistance.
- Manage risk – Risk management is an important aspect of any business, which can be associated with changing market scenario and investment opportunities. The corporation helps in this field with assistance in the form of insurance and guarantees to control the risk.
- Market access – It gives new businesses access to new markets and trading opportunities so that they can connect to national and international investors.
- Social responsibility – The corporation guides in promoting sustainable and business practices that are environment friendly and also looks into social responsibility. Such a guidance leads to growth in an ethical, social and responsible way.
- Development of Infrastructure – It invests in projects for infrastructural development including transportation, telecom, education, power and energy, etc, which leads to an all round development of a region and overall improvement in the living standards of the people.
Thus, we see from the above details how the corporation participates actively in various types of services to help businesses flourish.
Frequently Asked Questions (FAQs)
The IFC is the private sector branch of the World Bank Group, with a mission to alleviate global poverty.
IFC obtains cash by issuing bonds on global capital markets to finance customer loans and preserve our financial stability. IFC has benefited from a constant triple-A credit rating based on sound financial performance to develop considerable and distinctive brand awareness in the marketplace.
The IFC frequently issues social bonds in various currencies and tenors on public and private markets. The International Capital Market Association’s (ICMA) Social Bond Principles align with the Social Bond Program.
IFC funding and support are typically available to private sector companies and projects in eligible countries. These include local businesses, multinational corporations, financial institutions, and other private sector entities.
This has been a guide to what is the Full Form Of IFC. We explain the history, purpose, objectives, strategies, examples & services that it provide.. You may refer to the following articles to learn more about finance –