A new report finds that international finance institutions play a key role in catalyzing job creation and growth through the private sector in emerging markets, particularly as governments face increased pressure on public resources.
The report, International Finance Institutions and Development through the Private Sector, was produced by 31 international finance institutions (IFIs) and was launched during the World Bank-International Monetary Fund Annual Meetings.
According to the report, IFIs provide the private sector in developing countries with critical capital and knowledge. Private sector direct foreign investment finance has reached over $40 billion in commitments a year–about 5% of capital flows to emerging markets.
IFIs help companies set standards and manage risk in areas such as environmental and social standards; corporate governance; health and safety, sponsor and business integrity; labor and human rights; revenue transparency; and international financial reporting.
Another finding is that IFIs catalyze additional financing from other private sector players. Each $1 of capital supplied to IFIs can lead to $12 in private sector project investment.
The report also highlights that IFIs support entrepreneurship and innovation, helping demonstrate the viability of private solutions in new or challenging areas.
“More jobs mean higher incomes for families and are key to reducing still-high poverty in Asia and elsewhere in the world. Since the private sector generates most of the jobs, development institutions should focus on helping create dynamic and sustainable private sector firms,” said Lakshmi Venkatachalam, Vice President (Private Sector and Cofinancing Operations) at the Asian Development Bank (ADB), which helped produce the report.
ADB aims to scale up private sector development and private sector operations to 50% of the Bank’s annual operations by 2020.
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