IFC, the World Bank Group's private-sector arm

The mandate and the geography

IFC describes its mission as advancing economic development and improving people's lives by encouraging the growth of the private sector in developing countries, which it does by investing in projects, mobilising other investors, and sharing expertise. The geography is the developing and emerging markets of the World Bank Group's membership rather than a single region, which distinguishes IFC from every regional bank in this set.

IFC is the private-sector institution of the Group. That is the arm distinction that matters here: the World Bank lends to governments, and IFC invests in companies and financial institutions without a sovereign guarantee.

The instruments, and which of them reach a fund

IFC's investment product lines are loans, equity investments, trade and commodity finance, derivatives and structured finance, and blended finance. Alongside those it mobilises additional capital through parallel loans, loan participations, partial credit guarantees, securitisations, loan sales, risk-sharing facilities, and fund investments.

Two of those are the routes a manager cares about. IFC invests directly in the equity of companies and financial institutions, and it also invests through private-equity funds. It also invests through profit-participating loans, convertible loans, and preferred shares, so the equity line is broader than ordinary common stock.

Two published numbers, and what they actually describe

IFC states that it generally invests between 5 percent and 20 percent of a company's equity. That is a share of ownership rather than a cheque size, and it is a genuine constraint on structure: IFC takes minority positions and encourages the companies it backs to broaden share ownership through public listings.

IFC states that it finances projects and companies through loans from its own account typically for 7 to 12 years. That is a tenor, and it is long by venture standards. A fund whose own life is shorter than the instruments its anchor investor is used to should expect questions about the mismatch rather than assume it will go unnoticed.

Neither number is a ticket. IFC does not publish a standard investment size on the pages cited here, and no standard ticket is publicly stated.

The route is direct, fund-level, and intermediated at the same time

IFC runs all three at once, and separating them is the single most useful thing a manager can do before approaching it. Direct finance goes to companies and financial institutions. Fund investment goes to private-equity funds, where IFC is a limited partner and the fund makes the investment decisions. Intermediary finance goes to banks and other financial institutions that on-lend.

The boundary is stated explicitly. IFC does not lend directly to micro, small, and medium enterprises or to individual entrepreneurs, though many of its investment clients are financial intermediaries that on-lend to smaller businesses. A company that reads IFC's headline numbers and expects a direct loan has misread which of the three routes applies to it.

What this means for a manager preparing to approach IFC

The general development finance readiness layer applies here as it does everywhere, and the DFI pathway guide covers it. What is specific to IFC is narrower and worth preparing separately.

• Be clear which route you are asking about. A fund commitment, a co-investment alongside IFC in a portfolio company, and an intermediary facility are three different conversations with three different teams.
• Model the ownership constraint. If IFC's direct equity discipline sits at 5 to 20 percent of a company, expect its fund diligence to ask how your own position sizing and follow-on reserves behave.
• Expect duration questions. A 7 to 12 year loan book is the reference frame of the institution you are talking to, so fund life, extension provisions, and exit assumptions get read against it.
• Bring the additionality case in IFC's terms, meaning what your fund reaches that commercial capital in that market does not.
• Have the environmental and social management system operating rather than written, since IFC's own performance standards are the reference most other DFIs in this set point at.