MENA Fem Movement for Economical, Development and Ecological Justice
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World Bank Board Denies Recourse to Millions of Victims of Predatory Lending, Sets a Dangerous Accountability Precedent

Last week, the World Bank Group’s Board of Directors overruled its own independent  accountability mechanism – the Compliance Advisor Ombudsman (CAO) – and allowed the  International Finance Corporation (IFC), the institution’s private sector arm, to avoid  accountability for the microfinance debt crisis it has contributed to in Cambodia. In response,  CAO Director General Janine Ferretti has resigned. The Board must answer for its actions and  explain how it will uphold the integrity of its accountability system going forward.  

A CAO investigation found that IFC violated its own Sustainability Framework’s requirements in  its investments in six banks providing microfinance in Cambodia, and this noncompliance  contributed to predatory lending practices that have led to the loss of land and livelihoods,  hunger, increased suicide risks, and threats of retaliation against the very communities that are  supposed to benefit from microfinance programs.  

The harms caused by the microfinance industry in Cambodia are well documented and were  confirmed by CAO. However, in an unprecedented fashion, the World Bank Group Board  rejected CAO’s noncompliance findings and recommendations to address the harm from its  investments. In direct contradiction to the CAO investigation, and without any evidence, the  Board published a statement on June 24th declaring that, ”there has been no policy  noncompliance under IFC’s Policy on Environmental and Social Sustainability.” Although  required by the Board-approved CAO policy, IFC refused to develop and submit to the Board a  management action plan with time-bound commitments to address the noncompliance. Instead, it has promised piecemeal actions in a “Special Management Action Plan” that do not address  most of CAO’s recommendations. Furthermore, according to unofficial reports, IFC has  suggested that victims of predatory micro-finance lending or other consumers harmed by IFC financed products will no longer have access to recourse through CAO. This is completely  unacceptable. 

It is not the role of the Board to determine whether or not IFC Management has acted in  compliance with its Sustainability Framework. CAO was established to serve as an independent  arbiter and hold the institution accountable to the policy commitments made by IFC’s  shareholders. If the Board can reject CAO’s policy on a case-by-case basis, then it means that  CAO is no longer a reliable and predictable mechanism and can no longer credibly shield IFC  from legal liability.  

This decision sets a dangerous precedent for accountability at the World Bank Group. It comes  at a time when the Board has already shaken the public’s confidence in its accountability  architecture by approving a hasty merger of the institution’s public and private sector  accountability mechanisms. At this point, the only conclusion we can reach is that the Board  prioritizes its investment portfolio over environmental and social protections. 

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We call upon the Board to: 

1) Meet with us to explain how they reached this decision.  

2) Publish the voting record of each member of the Board. 

3) Require IFC to accept CAO’s findings and develop an effective Management Action Plan  in consultation with the complainants. 

4) Disclose how any other current and future cases to CAO alleging environmental and  social harms stemming from its microfinance portfolio will be handled fairly and  predictably. 

5) Explain who will be leading CAO following Janine Ferretti’s departure and before the  new mechanism is established, and how this leadership vacuum will not further  undermine accountability on other CAO cases. 

6) Commit to a transparent and inclusive leadership selection process, which includes civil  society participation on the selection committee, to ensure the independence and  integrity of the new World Bank Group accountability mechanism. Despite the Board’s  assertion that a transparent recruitment process has been underway since June 9th, the  job posting, terms of reference, and recruitment process have not been publicly  disclosed. 

7) Reaffirm its commitment to strong due diligence and supervision to ensure that the costs  of economic development do not fall disproportionately on poor or vulnerable people. 8) Reaffirm its commitment to strong accountability and ensure that the institution’s new  independent accountability mechanism is equipped to do its work effectively.  

Signatories  

Organizations 

  1. AbibiNsroma Foundation – Ghana 
  2. Accountability Counsel – International 
  3. Alternative Law Collective – Pakistan 
  4. Arab Watch Coalition – United States  
  5. Asia Indigenous Peoples Network on Extractive Industries and Energy (AIPNEE) – Philippines 
  6. ASOCIACIÓN AMBIENTE Y SOCIEDAD – Colombia  
  7. Asociación unión de talleres 11 de septiembre – Bolivia  
  8. Association for Farmers Rights Defense, AFRD – Georgia 
  9. Bank Climate Advocates – United States  
  10. Bank Information Center – United States  
  11. BankTrack – The Netherlands  
  12. CEE Bankwatch Network – Czech Republic 
  13. Center for Economic and Social Rights (CESR) – Global  
  14. Centre for Human Rights and Development – Mongolia  
  15. Cohesión Comunitaria e Innovación Social – Mexico  
  16. Colectivo Voces Diversas – El Salvador 

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  1. Community Empowerment and Social Justice Network (CEMSOJ) – Philippines  18. Deep Sea Mining Campaign – United Kingdom  
  2. Equitable Cambodia – Cambodia  
  3. Fundación Acue – Chile  
  4. Fundación CAUCE: Cultura Ambiental – Causa Ecologista – Argentina  22. Fundación Libera contra la Trata de Personas y la Esclavitud en Todas sus Formas – Chile  
  5. Fundeps – Argentina  
  6. Germanwatch – Germany  
  7. HRM “Bir Duino -Kyrgyzstan” – Kyrgyzstan 
  8. Inclusive Development International – United States  
  9. Indigenous Peoples Alliance Of the archipelagos Chapter Sumbawa (AMAN  SUMBAWA) – Indonesia  
  10. Indigenous Peoples Rights International-IPRI – Philippines/Global  29. Inisiasi Masyarakat Adat (IMA) – Indonesia  
  11. International Accountability Project – Global 
  12. Jamaa Resource Initiatives – Kenya  
  13. Just Finance International – The Netherlands  
  14. Just Ground – United States 
  15. Kapaeeng Foundation – Bangladesh 
  16. KTNC Watch – Republic of Korea  
  17. Liberia Artisanal Fishermen Association LAFA – Liberia  
  18. Manushya Foundation – Thailand  
  19. MenaFem Movement for Economic, Development And Ecological Justice – SWANA/Morocco 
  20. MiningWatch Canada – Canada 
  21. Nash Vek PF – Kyrgyzstan 
  22. Oil Workers’ Rights Protection Organization Public Union – Azerbaijan 42. Oyu Tolgoi Watch – Mongolia 
  23. Peace Point Development Foundation -PPDF – Nigeria  
  24. People Ecology Network – India  
  25. Philippine Movement for Climate Justice – Philippines  
  26. Recourse – International  
  27. Rivers & Rights – Southeast Asia (Regional) 
  28. Rivers without Boundaries – International  
  29. Rivers without Boundaries Coalition – Mongolia 
  30. Society For Women Rights & Development ( SWoRD) – Pakistan  51. Sustentarse – Chile  
  31. The William Gomes Podcast – United Kingdom 
  32. Trend Asia – Indonesia  
  33. Uganda Consortium on Corporate Accountability – Uganda  
  34. Urgewald – Germany  
  35. WEED – World Economy, Ecology & Development – Germany  
  36. Wemos – The Netherlands 

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  1. Witness Radio – Uganda  
  2. Yemeni Observatory for Human Rights – Yemen  
  3. Uzbek Forum for Human Rights – Uzbekistan/Germany 

Individuals 

  1. Dr. Guljakhon Amanova – Uzbekistan 
  2. Ms. Sophia Cramer – Independent Researcher and Policy Advisor 63. Ms. Fiona Faye, University of Kassel, Afrique-Europe-Interact 64. Prof. Arntraud Hartmann, SAIS Europe Johns Hopkins University 65. Prof. David Hunter, Peregrine Environmental Consulting, LLC 66. Prof. Aram Ziai, University of Kassel and Global Partnership Network