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International Finance Corporation

 ➤ 1. Establishment

The International Finance Corporation was established in 1956 to encourage private enterprises and to increase the rate of economic development.

The private enterprise is mainly responsible for very high rate of economic development in developed countries. In undeveloped in undeveloped countries, the projects of private competitive enterprises are not in existence on large scale.

It is one of the reasons of slow economic growth of these countries. One of the economic backwardness of newly independent countries was that they have to wait for very long time for beginning the process of rapid economic development.

There was worry of the failure of democratic system because of the different approach of private enterprises.


➤ 2. Objectives

The IFC is an associate institution of the IBRD. Their objects are similar to that of objectives of IBRD.

Following are the important objectives of IFC- 

1. To encourage foreign

2. To enterprises private enterprises

The IFC undertakes several activities for achieving the above stated objectives. Because of this opportunities are available to develop undeveloped areas by encouraging foreign investments. It results in proper environment for industrialization.


➤ 3. Means of Collecting Funds

  1. Capital:

The initial authorized capital of IFC was $1oo million. In 1963, it was raised to $11o million.

2. Other Sources:

The IFC received fund from various other sources from all over the world. It also creates reserve funds. This fund is used for meeting contingencies.


➤ 4. Management

Management of IFC is similar to that of IBRD. The management consists of board of governors, board of directors and chairman. The board of governors formulates policies, board of directors looks after day-to day operation. The chairman is the head of the institution and he also acts as a chairman of the Board of Directors.


➤ 5. Functions

The IFC provides loans as per the policies.

 Following are the important functions of IFC:

To encourage foreign investment and to create proper environment for increasing investment and thereby improve working of capital market especially in developing countries like India. 

1. To provide finance and other help to institutions providing finance and other help in improving operations of such institutions, to encourage advanced countries to invest in backward countries.

2. To create proper environment for investment in countries all over the world.


➤ 6. Critical Evaluation

 1. The IFC has provided finance to developing countries but this is not sufficient for economic

 2. The rate of interest on loan of the IFC is very high.           

 3. The countries which are in need of funds are in Asia and Africa but the IFC has given financial help on large scale to Latin American Countries.

4. The IFC has taken lead for the development of the private sector. So the government interference is reduced resulting in capitalistic trends in  there  countries.

Though there are strong points of the IFC certain deficiencies are also their in its operations. The real question is how well the IFC can reduce the degree of these deficiencies in coming years.


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