Abstract
This chapter analyzes the historical origins of development finance from 1947 through the early 1970s, with particular focus on the experiences of the World Bank. Using a mix of analyst reports and recently declassified archival materials, this chapter examines how the Bank’s early experiences reinforced that private investment was the only viable, long-term strategy for economic development. As such, the Bank prioritized catalyzing investment through project loans in strategic investments and privately-owned DFCs. Despite variable successes, this strategy validated a broader perspective that development assistance should be temporary, abide by market principles, mobilize private entrepreneurs, and leverage the domestic financial system for long-term sustainability. These principles laid the foundation for the emergence of marketized development financial instruments.
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Notes
- 1.
The IBRD later became incorporated with the International Finance Company (IFC), International Development Agency (IDA), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID) to collectively comprise the World Bank Group.
- 2.
Nevertheless, the Board of Governors was careful not to give too much power to the IFC, however, putting into the amendment that the IFC “the Corporation shall not assume responsibility for managing any enterprise in which it has invested and shall not exercise voting rights for such purpose or for any other purpose which, in its opinion, properly is within the scope of the managerial control” (IFC 1961, 10).
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Volberding, P. (2021). 1950–1970: The World Bank, DFCs, and the Foundations of Private Investment Mobilization. In: Leveraging Financial Markets for Development. Executive Politics and Governance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-55008-0_2
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