Financial Intermediary Funds (FIFs) are financial arrangements that leverage a variety of public and private resources in support of international initiatives, enabling the international community to provide a direct and coordinated response to global priorities. FIFs often involve innovative financing and governance arrangements, as well as flexible designs which enable funds to be raised from multiple sources and channeled in a coordinated manner to a range of recipients in the public and private sectors. FIFs also have a customizable structure, allowing flexibility depending on the needs of the partnership and agreements with the World Bank.
In 2019, the World Bank introduced a new Financial Intermediary Fund Management Framework. The new framework recognizes the value of FIFs in the development toolkit and acknowledges the need for increased selectivity to avoid unnecessary fragmentation of the aid architecture, and the impact of such fragmentation on clients. The framework raised the bar on criteria and approvals needed for the establishment of new FIFs, sought to increase transparency, and strengthen the Bank¡¯s risk management throughout the lifecycle of a FIF, and the FIF portfolio as a whole.
Å·ÃÀÈÕb´óƬ's distinctive role across FIFs is the provision of financial intermediary services, as Trustee of the funds. For all FIFs, the World Bank provides a set of agreed financial services that involve receiving, holding, and investing contributed funds, and transferring them when instructed by the FIF governing body. Under some FIFs, the Bank also provides customized treasury management or other agreed financial services. Some examples of such services include: bond issuance, hedging intermediation, and monetization of carbon credits.
FIF Trusteeship Models
The Bank as a trustee enters into transfer agreements with implementing or supervising agencies and transfers funds to these agencies upon instructions from the governing body. Here, the implementing or supervising agencies are responsible for monitoring the use of funds.
The Bank as a trustee makes direct transfers to recipient entities upon instructions from a governing body, which assumes the overall responsibility for the use of funds.
FIF Trusteeship does not involve overseeing or supervising the use of funds. This is the role of other implementing agencies that receive funding and are responsible for project or program implementation. Transfers are generally made by the Trustee to external agencies (e.g., United Nations agencies or Multilateral Development Banks) for the implementation of activities. In the case of FIFs whose governing bodies have the legal and other required capacities to take on responsibility for the use of funds (e.g., Global Fund to Fight AIDS, Tuberculosis and Malaria), the Bank transfers funds received from donors directly to multiple third-party entities, usually in recipient countries, based on instructions from and on behalf of the governing body.
In addition to its role as a trustee for FIFs. The Bank may also:
- Be an implementing agency responsible for the appraisal and/or supervision of projects or programs financed by the FIF,
- Provide secretariat services to the FIF, or
- Be a FIF donor