In rush to fill finance gap, World Bank must ensure private gain is not at public expense

The World Bank shouldn’t forget its goals to “end poverty and boost shared prosperity” as it increasingly relies on the private sector to finance development, Oxfam warned at the start of the institution’s Spring Meetings.

A complaint filed yesterday against the International Finance Corporation, the Bank’s private sector arm, by Kenyan parents and teachers over their support of the controversial Bridge International Academies is a reminder of the risks of private lending in certain sectors.

The complaint says Bridge violates national laws and education standards, and deepens inequalities by charging fees too expensive for poor families to afford. Oxfam and other organizations have repeatedly called on the World Bank to review their support for this company and other similar “low-fee” private schools.

“The World Bank has committed to financing 'development' through the private sector, but at what cost? Investment does not equal development,” said Nadia Daar, the head of Oxfam International’s Washington office.

The World Bank is currently negotiating with donor governments for a capital increase for their middle-income lending arm. President Jim Yong Kim has made the Bank’s potential to mobilize private funding a cornerstone of these negotiations.

“The Bank used to speak about reaching those in extreme poverty, the threat of economic and gender inequality and the importance of citizen engagement. Now’s it’s almost all about leveraging the private sector whenever possible,” said Daar.

Instead of over-relying on the private sector, Oxfam is urging all donors, including the World Bank and International Monetary Fund, to support “domestic revenue mobilization” strategies that encourage countries to raise and spend their income progressively and transparently.

“Progressive taxation and spending is key to funding quality public healthcare and education for all,” said Daar. “These services should be free from burdensome ‘out-of-pocket fees’ which restrict access for poor women and girls. This is just one of the problems we’ve seen with the Bridge schools in Kenya. Is this really how the Bank should be spending its new capital?”