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Opinion: World Bank progresses its efforts in the world’s fragile and conflict-affected places – but is it enough?

May 2, 2024
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Every two years since 2016, the World Bank has been convening its ‘Fragility Forum’ – an important gathering across the humanitarian, development and peace ‘nexus’ on improving its efforts in fragile and conflict-affected contexts (FCS). The forum is critical recognition that the World Bank’s primary mandate of poverty alleviation cannot be achieved if it does not achieve it in fragile and conflict-affected places where 75% of the world’s extreme poor live.

It was not lost on many participants that 2024’s edition comes in the context of a far less optimistic time than previous years. In 2016, it was estimated more than 1.2 billion people lived in areas affected by conflict and fragility – today, that number is up 600 million, to 1.9 billion people.

Yet, over this same time, foreign direct investment into these places has fallen markedly, highlighting the difficulty that the World Bank and other international financial institutions (IFIs) have had in stimulating private sector development in fragile places. The link between lack of investment and increased displacement, food insecurity and climate vulnerability is clear and cannot be forgotten.

These negative trends  have developed despite the fact that the main World Bank funds (IBRD/IDA) grew by an average of 26.2 percent per year in FCS over the past five years and IFC more than doubled its own account long-term finance commitments in FCS from USD 1.2 billion (cumulatively) in FY17–19 to USD 2.8 billion in FY20–22. MIGA, the World Bank’s risk and insurance arm, has also significantly expanded its portfolios in FCS up to USD 3.5B from USD 2.1 B over the last three years. All this has been achieved as the IFC’s own impact measurement and monitoring system showed the impact of IFC investments in FCS was higher than in non-FCS.

A conclusion one can draw is that this progress is important, but coming from a low base and not enough. Basic conflict sensitivity tools, key to doing no harm, are still being rolled out to staff – while partnerships, a cornerstone in efforts to scale up in FCS – are still largely with large UN bureaucracies rather than with more locally situated civil society and non-governmental organisations that can better help situate and de-risk investments.

These factors relate to one of the major challenges acknowledged by Anna Bjelde, the MD of the World Bank, in her opening remarks - that the Bank is still struggling with understanding how it can play a more meaningful role in conflict prevention, echoing words by Jim Yong Kim eight years ago at the 2016 forum. This is reflected in how the great scaling up of the Bank’s activity in FCS has been in places where conflict has already broken out, such as Ethiopia and Sudan for instance.

It is in this conflict prevention role that Peace Finance approaches provide hope and solutions for IFIs seeking tangible solutions to build resilience to conflict. Intentional Peace Finance approaches articulated by the Finance for Peace Peace Finance Impact Framework (PFIF) put an intentional peace strategy at the front and centre of a potential investment approach, rather than as post-hoc consideration or as a component of a due diligence process. This is clearly needed, as the Bank’s own midterm evaluation of its FCV strategy stated: In some contexts, the World Bank Group’s [WBG’s] work with the private sector would benefit from a better acknowledgment of and reference to conflict dynamics.”

Practically, the PFIF can help IFIs find ways their investments can more intentionally improve social cohesion, trust between groups, as well as between society and the state, and potentially reinforce peace processes and political settlements. Often these outcomes mean benefits are more evenly shared and that communities have greater agency in the design of investments that affect and benefit them.

By doing so, the Bank and other IFIs can play a greater role in preventing conflict before its outbreak, but also play a more catalytic role to crowd-in private investment which often perceives risks in FCS as greater than what they actually are. With partners, we look forward to showcasing positive examples of Peace Finance approaches at the 2026 edition of the forum.

© Finance for Peace 2023