International Finance Corporation – Definition

Cite this article as:"International Finance Corporation – Definition," in The Business Professor, updated November 29, 2018, last accessed August 10, 2020, https://thebusinessprofessor.com/lesson/international-finance-corporation-explained/.

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International Finance Corporation Definition

The International Finance Corporation (IFC) is an organization established in 1956 by the World Bank Group with an aim of reducing poverty and creating jobs in developing countries through the development of private enterprises. The IFC has 184 countries as its members and its headquarter is located in Washington, D.C.

A Little More on the International Finance Corporation

The organization provides investment and asset management services to the private sector in developing countries. This is done to support the development of private companies and institutions in these countries that lack the basic infrastructure needed for business. They also support these companies by securing or guaranteeing financing.

The IFC also provides support to private companies in gaining access to securities markets and other appropriate financing. The corporation’s objectives include:

• the development of agriculture which is sustainable
• expanding small scale businesses through enhanced facilities like microfinance,
• improving their infrastructure.
• develop robust and friendly policies around healthcare and education.

Along with financial support and advise, IFC also brings global experience, technical knowledge and innovation in their thought process to support developing nations in solving issues ranging from financial to operational and even political issues.

Example of an International Finance Corporation Investment

A good example of the IFC partnering with developing countries is the arrangement with Pakistan’s dairy industry in 2017. Pakistan is the fourth largest country in the world in milk production; however, there has always been more demand than supply. The dairy industry in Pakistan has been struggling to meet demand expectations due to poor infrastructure and outdated processes in its supply chain. Since small dairy farms accounted for almost 80% of the industry’s production, due to poor supply chain, the entire process was inefficient.

The IFC contributed $145 million to support a Dutch cooperative FrieslandCampina to acquire 51% stake in Pakistan’s leading dairy processor Engro Foods. In the process, the expertise of FrieslandCampina was shared with the local farmers in Pakistan who supplied raw material to Engro Foods. This facilitated the overall increase in productivity and efficiency of small farmers and processors and decrease their wastes. IFC believed that 200,000 farmers and 270,000 distributors would benefit from the acquisition and experience sharing. Additionally, 1000 new jobs were projected to be created in the daily supply chain of Pakistan.

References for International Finance Corporation

https://www.ifc.org/wps/wcm/connect/corp_ext_content/ifc_external_corporate_site/home

https://en.wikipedia.org/wiki/International_Finance_Corporation

https://www.investopedia.com/terms/i/international-finance-corporation.asp

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