IFI governance

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UK reviews of World Bank paint a mixed picture

7 April 2011

In March, the UK government endorsed the World Bank in a review that justified its £888 million annual contribution to the Bank’s International Development Association (IDA, see Update 74), despite identifying serious weaknesses – including limited client country leadership, and insufficient focus on poverty, gender and fragile contexts.  In a parallel inquiry, UK parliamentarians said the institution “desperately needs reforming”.

In March, the Department for International Development (DFID) released the findings of its reviews of multilateral and bilateral aid.  It graded 43 multilateral recipients of UK aid on their contribution to international and UK development objectives, particularly focus on poor countries, results, fragile contexts, gender equality and climate change.  They were also graded on ‘organisational strengths’: cost consciousness, partnerships with countries and other actors, strategic and financial management, transparency and accountability.

The review was criticised by UK civil society organisations as a hasty exercise emphasising a selective UK agenda over developing country input and ownership (see Update 72).  They called for the review to prioritise poverty reduction results, developing country views, and democratic accountability and transparency.

IDA, the World Bank’s low-income country arm, was one of nine organisations rated “very good value for money for UK aid”, based on its scale, breadth and delivery.  It was also praised for anticipated reforms, strong evaluation and grievance mechanisms.  However, DFID found that the “poverty focus of projects needs strengthening” and was “at best uneven” in the social sectors.  IDA was said to be “weak” on implementing gender policies and on “staffing, timeliness and delivery in fragile states”, as well as collaborating with other actors in those contexts (see Update74, 72).

Developing country officials’ criticisms of unpredictable financing were not strongly echoed by DFID; however the review did reflect their concerns about limited use of country systems and high transaction costs (see submission). The review also called the lack of client country voice within IDA a “major weakness”.

In response, IDA defended its record in fragile contexts with reference to a 2006 Independent Evaluation Group (IEG) report, a list of unattributed development gains and an assertion of its progress in collaborative processes, despite criticism from officials in, for example, southern Sudan (see Update70).  The Bank flatly contradicted DFID’s criticisms of its relationships with country governments, saying it “is a true partner with its client countries.”

Action for Global Health, a European network of NGOs, issued a statement saying they were “concerned, that despite a number of significant challenges outlined in [the multilateral aid review, IDA] is judged ‘very good value for money’ … This raises a concern that little reform for better health aid delivery will be undertaken by the World Bank…  In its leadership role within the World Bank, the UK should prioritise a major reform agenda and the achievement of concrete results for health.”

IFC: “good value” – for middle-income countries

The Bank’s private sector arm, the International Finance Corporation (IFC), did not score as well as IDA, but was still considered “good value for money”.  Although the IFC’s private sector focus was seen to match DFID’s priorities, the review echoed civil society concerns about the IFC’s “weak” focus on poor countries (see Update 73), where other institutions “are in the lead”.  The IFC has invested 89 per cent of its portfolio in middle-income countries, whereas only 10 per cent of commitments in 2010 were in low-income countries and 5 per cent in fragile states.  DFID also noted that “some of its health and education investments are not targeted at the poorest” and while delivery generally is judged good, there is “some evidence of weaker delivery in critical areas including Africa.”  Gender, which is not included in the IFC’s strategic targets nor mainstreamed in the Doing Business report (see Update 67), was also cited as a weakness.  Growing attention to climate issues earned a satisfactory rating.

The IFC was also rated “weak” on “partnership behaviour” for inconsistent engagement at the project level and with donors, other multilateral organisations and countries.  Despite this and low-income countries holding 3 per cent of the vote at the IFC (see Update 70), it gained a “strong” organisational rating overall.

Climate Investment Funds: model or muddle?

The Bank-hosted Climate Investment Funds (CIFs, see Update 68), were also rated “good value for money” for UK aid, despite “mixed” evidence on country leadership and engaging with other developing country stakeholders, and with only one fund so far fully operational.

While DFID’s review reiterates that the CIFs will no longer receive contributions once new funding structures are negotiated, it emphasises their role in “informing future climate change architecture”, particularly in terms of governance and results management, though the latter has been criticised by civil society groups (see Update 75, briefing).  It also says that the climate and sustainability “approaches and policies used in the CIFs are those we want to see mainstreamed in the [multilateral development banks (MDBs)]”.  DFID largely attributes the CIFs’ “weak” performance on gender equality and “unsatisfactory” attention to fragile contexts to MDB involvement.

DFID rates the CIFs’ transparency as satisfactory, noting the potential to disclose additional commercial information as well as concerns about closed executive sessions.  Civil society observers have raised concerns on these points (see briefing).

Parliamentarians demand reform

The UK parliamentary International Development Committee conducted an enquiry into the World Bank Group alongside the multilateral aid review.  Its March report endorsed the UK’s IDA contribution, though said it should be subject to greater parliamentary scrutiny.  Committee chair Malcolm Bruce MP said in a press release that the Bank “desperately needs reforming.  The UK should use its clout as the second-largest donor to the World Bank aid programme to demand it becomes fairer and more open and accountable.”

The report recommended that “DFID press the World Bank to strengthen the independence of the IEG” and that “DFID continue to work towards agreeing an open and merit-based process for selecting the current president’s successor. Such a strategy would need to include giving up Europe’s monopoly on the post of managing director of the International Monetary Fund”.  It also called for parliamentarians to “be given the opportunity to debate more fully the key decisions taken by the Bank” and for “the Bank’s achievements on gender to be closely monitored to ensure that the promotion of girls’ education is an early priority for IDA16”.

DFID will respond to the committee’s report by early May.