Last week, Philippe Le Houérou, the CEO of the International Finance Corporation (IFC), penned an extraordinary Op-ed in Devex that called for greater accountability at the World Bank Group’s private sector arm. The piece, titled "At IFC, accountability is of utmost importance," was unprecedented for a number of reasons: First, it does not claim such problems are rare, but rather recognizes that projects financed by the IFC can cause harm and that such problems will likely increase as the IFC moves into more challenging markets, including fragile states. Second, it proposes a new, systemic response to harms caused by IFC projects. Finally, it acknowledges the value of the independent process led by the Compliance Advisor Ombudsman (CAO), and that it should not be superseded by the management-led proposals he is suggesting.
While many leaders of the Bank have paid lip service to strengthening accountability over the years, few have been as open and honest as Le Houérou about the frequency of negative impacts of development finance—and acknowledging that project-related risks are likely on the rise as IFC increases investments in states experiencing fragility, conflict and violence. In fragile states, where people often face serious risks of retaliation for even raising project-related complaints, having access to strong accountability mechanisms and proactive responses to such risks by management is critical. Embracing an independent, public review of project shortcomings and even failures, not only leads to greater learning—and better development outcomes—it also demonstrates support for ordinary people who risk their lives, livelihoods and reputations to engage with their governments and international institutions around development projects.
Le Houérou’s statement is also unique in that it offers a proposal for developing concrete, proactive solutions for addressing the problems he identifies. His suggestion for an approach to addressing complaints that would “identify learnings to implement immediately across all projects” has been done before at other institutions, but often in an ad hoc way. The most recent example at the World Bank Group was management’s response to the Inspection Panel’s investigation of the Uganda Transport Sector Development Project. In that case, after the Panel process was complete, management took the unusual step of putting together a “lessons learned and agenda for action” document, which looked at institutional failures more broadly than just the management response to the individual case. It also led to the establishment of a task force which included outside experts to advise the Bank and prevent future instances of gender based violence. Le Houérou’s commitment to launching a more systemic response across IFC’s lending could institutionalize this type of response, and those responsible for launching the new approach at IFC should look to this process as a possible model that prioritizes better development outcomes over sweeping problems under the rug.
One of the most important underpinnings of an effective IAM is its independence from management, yet it is also the one that most often leads to tension between the two—particularly when senior leadership fails to promote a culture of respect for the independent accountability process. Le Houérou’s statement is a step in the right direction here as well. Importantly, he differentiates the CAO process from management or client-led processes, recognizing that people impacted by development projects must have “a place to turn” besides project-level grievance mechanisms, which usually lack the independence and sensitivity of an effective IAM. Independence builds trust among project-affected communities, who must feel safe to raise concerns without fear of reprisal, and neither project-level grievance mechanisms nor management-led responses can offer the independence, expertise, and confidentiality that appealing to an independent mechanism has.
Currently, CAO is seen as a leader among IAMs for many reasons—including the scope of its mandate that currently exceeds its counterpart on the World Bank’s public sector side. However, for the last several years many complainants have struggled under a system where management has been unwilling to adequately respond to CAO recommendations. The proposals Le Houérou made in Devex have the potential to be a game changer in this regard, ensuring that CAO investigations lead to effective remedy for project affected people. We therefore look forward to working with IFC to ensure that these new proposals are implemented in a way that complements the independent process led by the CAO, and that strengthens the accountability system across the World Bank Group.