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Development finance institutions adopt IFC’s standard for corporate governance
Submitted by mffocus on Wed, 11/30/2011 - 20:57
in
Microfinance Focus, November 30, 2011: The International Finance Corporation (IFC), a member of the World Bank group, is working with other institutions to promote global standards for corporate governance. 30 development finance institutions (DFIs) have agreed to adopt a set of standards based in part of IFC’s Corporate Governance Methodology.
IFC’s Corporate Governance Methodology is a system for evaluating corporate governance risks and opportunities that is recognized as the most advanced of its kind. DFIs plan to use these guidelines to assess the quality of corporate governance at companies they invest in. They also will urge global financial institutions to consider these guidelines for their own investments in developing countries.
The benefits of this is that well-run companies are better able to attract capital, respond to competitive challenges, and build conditions necessary for long-term success. Also they safeguard themselves, through sound corporate governance, against the perils of mismanagement and corruption. In doing so, they also help bolster national economies.
The working group representing the 30 DFIs included IFC, the Black Sea Trade & Development Bank, the Latin American development bank CAF, CDC of the U.K., the European Bank for Reconstruction and Development, the Islamic Development Bank, the Dutch development bank FMO, and the German development bank DEG. Some of the banks, such as FMO, have already begun to implement the new guidelines. Others are expected to adopt them later in 2011.
IFC believes that in this initiative, their expertise as providers of financing and advisory services allows them to play an important role in improving corporate governance. Adoption of a common approach by DFIs sets a standard for due diligence and helps establish common expectations among our clients, raising the bar for corporate governance in emerging markets.
Corporate Governance and Voluntary Codes
We all know from experience that establishing Voluntary Codes is an easy way to show something of good intention and promise there where governments, companies and other organisations (including socio-politically motivated NGOs) don't act to improve the rights of poor citizens on professional sustainable financial (or any other) services. That should be a shame for a sector that states to be driven by moral conscience which is micro-finance.
There is a list of concrete actions for Consumers that the United Nations, thus ALL the world's countries, promised to enforce, in 1985. And the Pink Book of the world's Micro-Finance coordinating agency CGAP, that promotes "Best Practices" for investors/donors was published (and regularly updated) in 1995. That these Codes did apparently not work should reinforce the shame.
In my view the WORLD bank group that includes IFC should assist local governments to establish legal systems in which the governance of any kind of corporates is better monitored and in case of weakness or criminality sanctioned. Governments should facilitate effective access to that legal system for all citizens. Maybe the enlightened good-willed champions of Micro-Finance want to prevent that many of their friends will be held liable in local courts and that that threat would seriously reduce funding to the Micro-Finance funding industry.
Respectfully, Peter
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