Abstract
The International Finance Corporation wants to increase its development impact in fragile states. Currently, the IFC’s fragile-state portfolio mirrors that of overall foreign direct investment stocks in such countries: focused in extractive industries and mobile telephony. That suggests potentially limited value-added from the Corporation’s investments in terms of crowding in private capital. If the IFC is trying to increase its portfolio and development impact in fragile states, it should look for sectoral opportunities that share some of the features of mines and mobile investments but currently attract limited FDI—where corporation investment could act as a catalyst to private investments. These features include limited reliance on broader infrastructure, regulatory institutions or local skilled labor, comparatively simple financing, and the generation of large enough rents to provide revenues to government while remaining profitable. Off-grid electricity is a sector that is evolving towards such features and the IFC should consider a stronger push towards off-grid projects in fragile states.
