At the World Bank's annual meeting in Morocco last year, the organization's new president, Ajay Banga, laid out a comprehensive vision for how to rid the world of poverty while keeping the planet habitable. was outlined.
Four months later, Banga, who took the top job in June last year, faces his first major executive challenge and fears that have little to do with his ambitions to modernize the bank and step up its ambitions to fight climate change. are facing early signs of.
The challenge is related to an investment the World Bank made in a chain of schools in Kenya a decade ago. The education project was partially funded through the International Finance Corporation, the bank's investment arm. The bank sparked controversy in 2020 when allegations of widespread sexual abuse at the school surfaced, prompting an investigation by the bank's internal watchdog.
IFC's Board of Directors is considering a revised Plan of Action, which could take effect as early as this week.
In recent months, World Bank leadership has been undergoing difficult deliberations over how much responsibility to accept and whether to compensate victims. The debate has divided opinion among the bank's investors, with all eyes on Banga, who is responsible for finalizing and implementing the action plan.
The incident has attracted intense scrutiny from development experts and lawmakers, with accusations that the World Bank failed to police the use of funds and even took steps to cover up misconduct. There is.
During a question-and-answer session at an event hosted by the Center for Global Development in early February, Banga, a former financial executive, surprised some in the audience by denying the possibility of a cover-up. In response to a separate question about employment disputes and the health of banks, he expressed dissatisfaction with the job he traveled the world campaigning to secure just a year ago.
“By the way, I'm happy to be fired,” Banga said. “You can go back to private industry life. It's much more interesting.”
Mr. Banga was selected by President Biden to strengthen the bank's efforts to combat climate change and inject a new sense of urgency into the lumber industry, which was founded after World War II.
His appointment follows the resignation of David Malpass, who was appointed by President Donald J. Trump and frustrated the Biden administration and many Democratic lawmakers with vague statements about the causes of climate change.
In his first year in office, Mr. Banga encouraged rich countries to increase their contributions to banks and recently took steps to restructure loan guarantee programs to increase private investment in renewable energy.
World Bank presidents often face tough management tests, and the recent controversy over the Bank's investment in Kenya's Bridge International Academy predates Mr. Banga but now concerns him. .
“The honeymoon is over,” said Paul M. Cadario, a former World Bank senior manager who questioned Mr. Banga at a forum in February. He said he found Mr Banga's response flippant.
The World Bank held a $13 million stake in Bridge International Academy from 2013 to 2022. The school withdrew from the program following complaints of sexual abuse at the school, leading to an internal investigation into the episode and a review of how the International Finance Corporation oversees such education. program.
A draft report by the bank's ombudsman, seen by The New York Times, detailed more than a dozen cases of child sexual abuse at schools operated by Bridge in Kenya. The report, published by The Intercept last year, also criticized IFC for a lack of oversight of the project and suggested it turned a blind eye when complaints surfaced. It recommended counseling and compensation for victims.
World Bank members and the IFC board, which Banga oversees, have struggled in recent months to agree on an action plan. There is growing debate among World Bank member countries over the extent to which IFC should be held responsible for abuses at the school, and the precedent that directly compensating victims could complicate other World Bank projects. Opinions are divided as to whether it should be created.
Civil society groups have called on the bank to do more to support victims and have expressed concern about the agreement between IFC and Bridge to keep some of its findings confidential. They also criticized IFC's proposed plan for not directly compensating abuse victims.
“IFC’s proposed response to one of the most egregious cases of harm resulting from a failure to conduct due diligence on inappropriate investments provides no relief to those actually harmed,” said the Executive Director and Co-Director. David Pred said. -Founder of the human rights organization Inclusive Development International.
Justin Sandefur, a senior fellow at the Center for World Development, said the issue may be a small-scale financial issue for the World Bank, but it's broader for Banga as a leader seeking to forge more partnerships with private companies. He said it would have a significant impact. sector.
“I think it's emblematic of it starting to become a bigger issue now in that he's shooting straight and trying to turn a new page on this,” Sandefur said. .
The process is also being closely watched by lawmakers who are responsible for approving the funds the U.S. provides to banks. Sens. Elizabeth Warren, D-Massachusetts, and Peter Welch, D-Vermont, wrote in a January letter to Mr. Banga that future funding to the World Bank is dependent on his response to his investigation into Kenyan schools. He warned that it could become more difficult.
“We view the Bridge case as a litmus test for the ongoing conversation surrounding IFC’s responsibility to remediate the social and environmental harm caused by its projects,” the senators wrote. . It is an important basis for any proposals to increase the resources available to the World Bank Group. ”
Warren and Welch also expressed concern about the Treasury Department, which guided Banga's selection to the World Bank and assisted in the nomination process. In late December, a senior Treasury Department official told lawmakers that the department was investigating allegations of violence at schools and was concerned about allegations that IFC was trying to cover up violence.
“We share deep concern and alarm at the prospect that children may have been sexually abused in connection with IFC projects,” said Cory Telles, acting assistant secretary in the Treasury Department's Legislative Division. wrote. “The Treasury strongly condemns violence against children and all other human rights violations.”
A World Bank spokesperson declined to interview Mr. Banga. The board failed to agree on an action plan in January but will reconvene to consider a “survivor-centered” response.
In a public forum in February, Banga said he did not believe the sexual abuse scandal had been covered up and noted that foundations other than IFC also invested in Bridge Schools.
“I think there are some things that the management could have done better, which I will discuss with the board soon,” Banga said.
A board meeting was scheduled to take place in February, but has not yet been scheduled. Unless the board convenes a meeting for further consideration, the revised action plan will take effect Thursday, according to people familiar with the process.
