The World Bank Needs a New Business Model—Here's How It Should Look

At barely 1-year-old, Federico Restreppo’s niece, Milagros, was already struggling to breathe. Medellín, Colombia, where both Restreppo and Milagros are from, sits in a valley ringed by the Andes Mountains, which trap smog spewed from the city’s cars and buses. One person in Medellín dies every three hours from air pollution-related causes, up to 90% of which comes from vehicles.?

Alarmed by Milagros’s health, in 2018 Restreppo founded Energia Vectorial , a startup that converts gas-powered cars to electric by swapping out combustion engines and fuel tanks and replacing them with electric motors and battery packs. Restreppo’s customers save money on gasoline and cut pollution.

Restreppo’s not the only one who sees a business opportunity here: similar startups have sprouted in Argentina, Mexico, and Uruguay. For the cash-strapped middle class in countries like these, converting gas-guzzlers is a more likely path to electrification than millions of people splashing out on Teslas. But car conversion remains a cottage industry. When I asked Restreppo if the World Bank or any development finance institutions are looking to help scale businesses like his, he shook his head no. That’s a problem.

Shareholders of the World Bank know it needs to be reformed, in large part to address the climate crisis. And with former Mastercard CEO Ajay Banga now at the lender's helm, now is the time to do it. In a study conducted by Devex, 74% of development experts agree the World Bank needs to adopt a completely new model focused on crowding in private sector investment. Among experts who work at the World Bank or used to work there, 69% feel the same way.?

Of course, Banga can’t do it alone. The challenge will be fundamentally changing the bank’s identity—instead of being a banker to countries, it needs to become a deal-maker for entire industries.?

So what should this new business model look like? Restreppo’s business shows a path. Today, electric motors used by Energía Vectorial have to be imported to Colombia from abroad, usually China. As for the batteries, several South American countries are rich in lithium deposits, one of the materials central to their production. But instead of making the batteries regionally, the minerals are extracted, shipped to China for manufacturing, and then shipped back. If the goal is cut down on emissions, this is hardly the way to do it.?

In cases like electrifying gas-powered cars, the World Bank is uniquely positioned to modernize and align government regulation across an entire region. It can provide guarantees to investors in case of political changes or currency fluctuations. And it can invest alongside the private sector, giving them confidence and shouldering a part of the risk. While this effort won’t result in a ribbon-cutting on a World Bank-funded bridge, it just might transform entire industries, creating jobs and benefiting the climate.

Converting cars is almost certainly easier than converting the World Bank from a slow-moving bureaucracy (their average loan takes seven years to prepare) to a nimble deal-maker. But there’s no alternative. Rich country shareholders made it clear at the Spring Meetings that there is no new taxpayer money coming anytime soon. Spurring economic growth in low-and-middle-income countries while addressing climate change will require a new approach that crowds-in billions, even trillions, of investor dollars.

Already, there’s change: in April the World Bank announced it would expand its lending by an additional $5 billion each year. But shifting the bank’s entrenched culture will be harder. Banga, who has a long history of forging the kind of public-private partnerships the bank so desperately needs, seems ready to try.?

There is no one-size fits all answer to the many ongoing crises the world is facing. But companies like Energía Vectorial and the innovation they bring to the table will be part of the solution. Development experts agree: it’s time for the World Bank to pull itself out of the past, and pivot to a model that will help save the future.?