From Project Bankability to Building Productive and Financeable Economies
As the World Bank Group places job creation, private sector mobilization and productive transformation back at the center of its agenda, evaluations by the Independent Evaluation Group (IEG) of the International Finance Corporation’s (IFC) engagement in fragile economies invite us to ask a fundamental question: Is making projects bankable enough to transform an economy?
The Thiam Threshold – Strategic Relevance Threshold proposes shifting the debate to another dimension: that of systemic coherence among investments, businesses, value chains, infrastructure, territories, skills, markets and finance.
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This question goes beyond the case of IFC alone. It could contribute to the debate surrounding the return of industrial policy within the World Bank Group and also inform the African Development Bank’s strategies for industrialization and private sector development.
The Return of Industrial Policy Changes the Question
For several decades, much of mainstream development thinking prioritized macroeconomic stability, market openness, improvements in the business environment and the creation of conditions conducive to private investment.
These dimensions remain necessary. But they are not always sufficient to produce the expected structural transformation.
Under the presidency of Ajay Banga, the World Bank Group has placed job creation and private sector mobilization back at the center of its agenda. Its strategy increasingly recognizes that sustainable job creation requires a combination of public policies, infrastructure, investment and private initiative.
This evolution opens an especially important debate for developing economies and, even more so, for fragile countries:
How can the private sector become not merely a beneficiary or mobilizer of financing, but a genuine actor in an organized and cumulative process of productive transformation?
IEG evaluations of IFC and MIGA interventions in fragile and conflict-affected situations provide a particularly relevant basis for examining this question. They highlight the specific challenges involved in developing private investment in such environments and the need for stronger coordination among the World Bank Group’s various instruments.
The purpose is not to put IFC on trial.
It is to ask a different question: Are traditional private sector financing instruments sufficient to transform economies whose productive structures are themselves fragmented or insufficiently organized?
Financing a Project Is Not the Same as Building a Financeable Economy
A fragile economy cannot always be regarded as an ordinary economy to which a higher risk premium simply needs to be added.
Fragility may be more structural.
Producers exist, but they are not connected to processors. Businesses exist, but their suppliers are insufficiently organized. Infrastructure is built, but it does not necessarily connect production basins to markets. Banks may have liquidity while lacking projects with acceptable risk profiles. Entrepreneurs may identify opportunities without having access to the instruments needed to turn them into bankable projects.
The problem is therefore no longer merely the availability of capital.
It becomes a question of the coherence of the productive system.
IEG’s evaluation of the World Bank Group’s Fragility, Conflict and Violence Strategy 2020–2025 rightly underscores the importance of more holistic approaches and stronger coordination between public and private instruments. It also identifies opportunities to strengthen the contribution of IFC and MIGA to country engagement strategies in fragile environments.
This leads to an essential distinction between what might be called transactional bankability and systemic bankability.
The first consists of making a specific investment possible:
Project → Structuring → Financing → Investment → Results
The second follows a more complex logic:
Productive Potential → Entrepreneurs → Businesses → Suppliers → Processors → Infrastructure → Value Chains → Markets → Financing → New Investments
In the first case, a project is made bankable.
In the second, an economy is progressively built that is capable of continuously generating new bankable projects.
This distinction is fundamental.
An economy may host several individually successful projects without undergoing genuine structural transformation.
This is precisely where the Thiam Threshold can provide a complementary analytical framework.
From Performance to Strategic Relevance
Development institutions legitimately have instruments for assessing the financial and development performance of their operations.
But an additional question deserves to be asked:
Taken collectively, do these interventions achieve a sufficient level of coherence to trigger a cumulative transformation of the economic system in which they operate?
Three levels can therefore be distinguished.
The first is transactional performance: Is the project financially viable and properly implemented?
The second is development performance: Does it generate jobs, income, goods, services or positive externalities?
The third is systemic strategic relevance: Does it help strengthen the relationships among the various components of the economy in ways that enable new activities and new investments to emerge?
The Thiam Threshold thus leads to a simple proposition:
An accumulation of successful projects does not necessarily produce structural transformation when those projects remain insufficiently connected to one another.
The Strategic Relevance Threshold seeks precisely to identify the minimum level of coherence, congruence, relevance and complementarity among objectives, capabilities, instruments, institutions, incentives and intervention sequences beyond which mobilized resources begin to produce the systemic outcomes being pursued.
From Financial De-Risking to Productive De-Risking
This perspective invites us to revisit the very concept of de-risking.
In fragile economies, development finance institutions legitimately use guarantees, blended finance and various risk-sharing mechanisms.
The IDA Private Sector Window operates precisely within this logic. World Bank Group management has emphasized that this type of blended finance can help create markets, de-risk projects, reduce the costs borne by first movers and facilitate private investment in fragile environments.
But there is another form of de-risking:
productive de-risking.
An agricultural producer becomes less risky when there is an identifiable industrial buyer.
The industrial processor becomes less risky when its supply is secured.
The transporter becomes less risky when the flow of goods becomes regular.
A logistics platform becomes less risky when several productive activities use its services.
An SME becomes easier to finance when its future revenues are secured through contractual relationships with companies located downstream in its value chain.
In such a configuration, projects begin to de-risk one another.
Financial guarantees remain necessary in certain circumstances. But they cease to be the only mechanism for reducing risk.
Productive coherence itself becomes an instrument of de-risking.
This idea could make an important contribution to the contemporary debate on industrial policy.
Building Clusters of Projects That Mutually De-Risk One Another
A modern industrial policy should therefore not be limited to identifying priority sectors or financing companies considered individually.
It should begin with the productive potential of a territory and progressively organize the value chains, physical infrastructure, skills, economic services, inter-firm relationships and financial infrastructure required for their development.
Growth poles can thus emerge.
Connected through physical, institutional and programmatic linkages, they can form multipolar growth centers.
Investments then cease to be a juxtaposition of projects.
They become clusters of integrated projects that mutually de-risk one another.
It is precisely at this stage that private capital can intervene on a larger scale, because risk is no longer reduced solely through financial instruments: it is also reduced through the increasing density and coherence of the economic system itself.
This approach leads us to reformulate the question posed to IFC.
The question is no longer simply:
How can more projects be financed in fragile economies?
But rather:
How can IFC, together with the other institutions of the World Bank Group, governments and the private sector, help create the conditions under which more projects can become naturally bankable?
The difference is considerable.
The World Bank Group’s True Potential: Acting as a System
The World Bank has instruments that enable it to intervene in infrastructure, institutions and public policy.
IFC can finance businesses and mobilize private capital.
MIGA can help mitigate certain risks.
IDA can provide concessional resources and, through its Private Sector Window, facilitate certain operations in the most challenging environments.
The true potential of this institutional ecosystem emerges when these instruments no longer operate as a juxtaposition of mechanisms but as components of a coherent architecture for productive transformation.
This is precisely where the Thiam Threshold could provide a methodological contribution.
Even before financing is mobilized, it would allow a fundamental question to be asked:
Are the objectives, instruments, institutional capabilities, financing mechanisms and intervention sequences sufficiently coherent with one another for their combination to produce the transformations being sought?
The question is therefore no longer solely about IFC’s performance.
It becomes a question of the strategic relevance of the World Bank Group’s collective intervention architecture.
Industrial Policy Is Not About Picking Winners
The return of industrial policy should not lead to a repetition of the administrative policies of the past.
It is not necessarily the role of governments or international institutions to choose which companies will win.
Rather, it is about building the conditions that enable more economic actors to become competitive and productive.
This requires organizing coherence among the productive microeconomy, the structuring mesoeconomy, physical and financial infrastructure, public and private investment, territories, and national, regional and global value chains.
Macroeconomic outcomes should then progressively reflect the aggregate results of this productive transformation.
Here, the Thiam Threshold raises an additional question:
At what level of coherence among these different elements does their interaction begin to generate cumulative transformational effects?
This may be one of the central questions that the new generation of industrial policies will have to answer.
A Lesson for the African Development Bank
This reflection extends beyond IFC and the World Bank Group.
It could also contribute to the African Development Bank’s thinking on industrialization, private sector development and the continent’s structural transformation.
The African Development Bank has long placed industrialization among its priorities and intervenes, in particular, in SME financing, industrial development and the establishment of integrated industrial platforms.
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But the same questions apply.
An industrial zone without local supply chains can become an enclave.
Infrastructure without sufficient productive activity can remain underutilized.
An SME financing mechanism without businesses connected to solvent markets may encounter disbursement difficulties.
An industrialization policy without appropriate financial infrastructure may generate projects that the financial system does not know how to finance.
And an accumulation of individually successful but insufficiently connected projects may never achieve the critical mass required for structural transformation.
This critical mass of coherence is precisely what the Thiam Threshold seeks to conceptualize.
From Financing Development to Organizing Transformation
IEG evaluations have the merit of documenting the specific challenges encountered when development institutions seek to mobilize the private sector in fragile economies. They also highlight the importance of more integrated approaches among the different components of the World Bank Group.
The Thiam Threshold invites us to extend this reflection by asking:
What needs to be made coherent before financing can become truly transformative?
From this perspective, IFC’s challenge in fragile economies may not simply be to find more bankable projects.
It is to contribute, together with the other institutions of the World Bank Group, governments and the private sector, to progressively building economies capable of generating more bankable projects themselves.
Likewise, the challenge for the new industrial policies of the World Bank and the African Development Bank will not simply be to mobilize more financing for the private sector.
It will be to organize coherence among production, infrastructure, businesses, territories, value chains, finance and markets.
Because:
Financing can enable a project to exist. But it is coherence among projects that enables an economy to transform.
This may be where one of the contributions of the Thiam Threshold – Strategic Relevance Threshold lies in the contemporary development debate: moving from a logic of project accumulation to a logic of transformation architecture; from the exclusively financial de-risking of investments to the productive de-risking of systems; and from the constant search for bankable projects to the construction of productive economies that, through their own coherence, progressively become structurally financeable.
The analyses relating to the Thiam Threshold, systemic bankability, productive de-risking and clusters of integrated projects constitute the analytical framework proposed by the author. They are not attributed to IEG, IFC, the World Bank or the African Development Bank.
