International Finance Corporation watchdog in turmoil following scathing report on microfinance in Cambodia
Over nearly three decades, the organization tasked with watching the World Bank Group’s private investment arm has handled a multitude of complaints against projects financed by the institution, ranging from the displacement of indigenous populations by massive hydroelectric dams to labor disputes at car manufacturers.
But the watchdog, known as the Compliance Advisor Ombudsman (CAO), was plunged into crisis last month, after the board of the International Finance Corporation (IFC) rejected its finding that the bank had failed to follow its own safeguard policies when backing Cambodian microfinance lenders engaged in aggressive debt collection practices.
The CAO’s head, Janine Ferretti, resigned the day after the board announced its response to the report in a statement which drew heavy criticism from organizations that have fought to promote accountability at the IFC.
The board’s decision to reject the CAO’s findings has raised concerns that the World Bank is abandoning its commitment to independent oversight of its private-lending operations, setting a potentially problematic example for other development banks, which often follow its lead on governance issues.
“This decision sets a dangerous precedent for accountability at the World Bank Group,” a group of over 60 nonprofits and development finance experts wrote in a statement following the decision.
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