Out of Sight, Out of Mind: How Financial Intermediaries Obscure Accountability for Community Harm

Various transparency and accountability challenges arise when development finance institutions use financial intermediaries, such as national and regional banks, without proper safeguards. We examine whether the IFC’s draft remedial approach addresses these challenges by exploring complaints from communities regarding problematic projects in Kenya and Guatemala.

Certain Development Finance Institutions (DFIs), such as the International Finance Corporation (IFC) of the World Bank, seek to achieve their stated aim of reducing poverty and increasing shared prosperity in developing countries by providing financing to the private sector.

However, rather than infrastructure or energy, the sector that receives the largest portion of IFC financing is the financial sector itself – essentially national and regional banks, private equity and hedge funds – which can then on-lend that money. These are commonly referred to as financial intermediaries (FIs).

This article delves into what happens when money is outsourced into the private financial sector through financial intermediaries, where transparency and accountability frameworks are weak, and examines how that affects communities’ access to remedy.

Read the full article from the Accountability Console newsletter here.