Fragile investments

Last month International Alert’s international institutions team travelled to the World Bank’s annual meetings in Washington DC, where they launched a new report, Fragile reforms: World Bank and Asian Development Bank financing in fragile and conflict-affected situations.

The report looks at how well the banks translate their global commitments on working conflict-sensitively into practice. It concludes that the banks and their leadership still have much to reform if the millions of dollars they channel to fragile and conflict-affected countries are to support sustainable peace and development for the most vulnerable communities.

Critically, the banks are moving to invest more money in countries affected by conflict and fragility, yet they have not fully addressed difficult questions related to operating in these situations or put in place sufficient systems to ensure the ever-increasing flow of funding does not do more harm than good for local peace and development processes.

In addition to increasing concessional financing to fragile and conflict-affected situations via the International Development Association (IDA), the World Bank Group’s International Finance Corporation (IFC) – the arm of the World Bank that finances private sector investments – has committed to spending 50% more of its budget in fragile and conflict-affected situations. Similarly, the Asian Development Bank’s operational plan focuses on the need to increase their spending in fragile and conflict-affected situations. Yet, neither bank have indicated clearly how they will ensure these newly increased funds will be spent in a way that is better informed by and sensitive to local conflict and fragility dynamics. We are concerned that increased flows of funding without greater attention to conflict and fragility will make already complex and volatile local conflict dynamics worse.

Our report, which draws on field research from Kyrgyzstan, Nepal and Sri Lanka, produced three core messages to guide bank decision-making on financing for fragile and conflict-affected countries. Namely, banks should:

  1. take account of conflict and fragility dynamics, including new forms of fragility related to sub-national conflict and criminal violence, when financing projects in middle income as well as low-income countries;
  2. apply conflict-sensitivity continuously from project preparation right through to project completion and conduct regular project oversight, taking into account the experiences and perspectives of diverse project stakeholders to inform rigorous risk management; and
  3. work collaboratively to secure the support of a country government for conflict-sensitivity at the outset and avoid approving funds where country government support for conflict-sensitivity is not forthcoming.

The report concludes that achieving better peace and development results from project financing to fragile and conflict-affected countries is as much a political challenge for bank leadership and shareholders as it is a technical resource management challenge. Both parts of the equation need attention. 

You can read the report in full here and read an article about our work at the World Bank annual meetings, including clips from our panel discussion, here.

To find out more about Alert’s work with development banks, contact Monica Stephen, Head of International Institutions, at mstephen@international-alert.org or visit www.international-alert.org/institutions