The threat is acute in sub-Saharan Africa, where nearly half the population still lives in poverty and many countries remain mired in conflict. I saw firsthand the region’s challenges – and promise – in the days after I became chief executive of the International Finance Corporation, a member of the World Bank Group that focuses exclusively on promoting private sector growth in emerging markets.
I believe sustainable private sector development is an essential component of any lasting cure to the scourge of poverty. Consider just one example: the IFC’s $12m loan to the Kenya Tea Development Agency, our first since I became chief executive in October.
In Kenya, tea exports generate more than $1bn a year in foreign-exchange earnings, benefiting 10 per cent of the population. The IFC’s loan is helping the world’s largest producer of black tea build a 200,000-square-foot warehouse in Mombasa, expanding its storage capacity and generating new opportunities for the more than half a million small tea farmers who are shareholders in the agency. The result: higher living standards, increased revenues and more stability in a sector that provides over two-thirds of the region’s jobs.
In my new position, I’ve started to travel around the world – to Haiti, Kenya, Senegal and remote regions of China – to see the impact that companies like the Kenya Tea Development Agency can have, and also to see what still has to be done.
Amid the uncertain global economic picture, the start of 2013 is an important time for stocktaking in the world of development. The World Bank Group, under the leadership of President Jim Yong Kim, is in the midst of a major rethinking on how it can be more effective and deliver on some of the greatest challenges of our time: ending extreme poverty at a much faster rate and expanding shared prosperity that lifts vulnerable populations and provides good jobs for them. Those changes – including ongoing discussions at the IFC – will be announced in the next several months.
The world’s development needs are urgent: 600m jobs must be created within a decade just to keep up with population growth, 1bn people go hungry every day, and nearly 1.3bn scrape by on less than $1.25 a day.
Our World Development Report this year focused on jobs. It found that 90 per cent of employment in the developing world is created by the private sector. As public resources grow scarce, developing countries are turning to the private sector with more urgency to create jobs and expand their economies. They are looking to international institutions to mobilize private capital for development, particularly in fragile and conflict-affected countries. In these markets, where typical private sector investors are too often reluctant to deploy capital, the IFC is willing to take greater risks, demonstrating the benefits of investing in tough places.
Our ability to do more, of course, depends on our ability to remain profitable. Every dollar of profit we make is reinvested directly in developing countries – or in the International Development Association (IDA), the World Bank’s fund for the poorest. Since 2007, the IFC has contributed more than $2bn to this World Bank fund. We have also quintupled our own direct investments in these low-income countries – to nearly $6bn in 2012. Our model is truly a virtuous circle.
For more than half a century, the IFC has been a leader in emerging markets, providing capital and advice that have helped build prosperity and eradicate poverty. We actually coined the term “emerging markets”. This is our specialty. Backed by a capital base of just $2.4bn from our 184 member countries, we have invested more than $125bn in developing countries since 1956, improving the lives of millions.
Still, we must now make sure our finite resources are used in the most effective, targeted way possible in the developing world. If we become more effective, if governments create better business environments and if the power of the private sector is more fully unleashed, the world will know. Families will earn more. Children will stay in schools. And the shameful number of people living in the worst kind of poverty will be dramatically reduced.
Jin-Yong Cai is chief executive and executive vice president of the International Finance Corporation (IFC), a member of the World Bank Group.