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Sexual abuse investigation poses leadership test for World Bank's Ajay Banga

by SuperiorInvest

At the World Bank's annual meetings last year in Morocco, the organization's new president, Ajay Banga, outlined a broad vision of how he wanted to rid the world of poverty while keeping the planet habitable.

Four months later, Banga, who took over the top job last June, faces his first major management test and some early signs of unrest that have little to do with his aspirations to modernize the bank and boost his ambitions to combat climate change.

The challenge is related to an investment the World Bank made a decade ago in a chain of schools in Kenya. The educational project was partially financed through the International Finance Corporation, the bank's investment arm. It became a source of controversy when allegations emerged in 2020 of widespread sexual abuse in schools, prompting an investigation by the bank's internal watchdog.

The IFC executive board has been reviewing a revised “action plan” that could come into effect this week.

In recent months, World Bank leaders have been involved in tense deliberations over how much responsibility to accept and whether to compensate victims. The debate has divided countries investing in the bank and focused attention on Banga, which will be responsible for finalizing and executing the action plan.

The case has drawn scrutiny from development experts and lawmakers, amid suggestions that the World Bank failed to monitor how its money was used and even took steps to cover up irregularities.

While answering questions at an event sponsored by the Center for Global Development in early February, Banga, a former financial executive, surprised some in the audience when he ruled out the possibility of a cover-up. In response to another question about labor disputes and the bank's integrity, he expressed frustration at a job that just a year ago he traveled the world campaigning for.

“By the way, I would love to be fired,” Banga said. “I can return to my life in the private sector. Much more interesting.”

A spokesman for Mr. Banga emphasized that he expressed no dissatisfaction with the job, that he joined the bank because he wants to lead it and that he believes strongly in the bank's mission and staff.

Banga was tapped by President Biden to bolster the bank's efforts to combat climate change and inject a new sense of urgency into a lumbering institution that was founded after World War II.

His appointment came after the resignation of David Malpass, who was appointed by President Donald J. Trump and who frustrated the Biden administration and many Democratic lawmakers when he was wrong about the causes of climate change.

In his first year in office, Banga has encouraged rich countries to increase their contributions to the bank, and recently took steps to restructure its loan guarantee program to increase private investments in renewable energy.

World Bank presidents have often faced thorny management tests, and although the latest controversy surrounding the bank's investments in Bridge International Academies in Kenya predates Banga, it is now his problem.

“The honeymoon is over,” said Paul M. Cadario, a former top executive at the World Bank, who posed the question to Banga at the February forum. He said he found Mr. Banga's response frivolous.

The World Bank had a $13 million stake in Bridge International Academies from 2013 to 2022. It divested from the program following allegations of sexual abuse in schools, prompting internal investigations into the episodes and a review of how the Corporation Financiera Internacional supervises such programs.

A draft of the bank's ombudsman report, which was reviewed by The New York Times, detailed more than a dozen cases of child sexual abuse at schools operated by Bridge in Kenya. The report, which was reported last year by The Intercept, also criticized the IFC for its lack of oversight of the project and suggested it had been looking the other way when complaints arose. He recommended counseling and compensation for victims.

The IFC executive board, overseen by members of the World Bank and Mr. Banga, has spent recent months struggling to agree on an action plan. The bank's member countries have been divided over how much responsibility the IFC should take for school abuse and whether directly compensating victims would create a precedent that could complicate other World Bank projects.

Civil society groups have called on the bank to do more to help victims and have expressed alarm over an agreement between the IFC and Bridge to keep some of the findings of its investigation confidential. They have also criticized a plan proposed by the IFC that would not directly compensate abuse victims.

“IFC's proposed response to one of the most egregious cases of harm resulting from a lack of due diligence in an ill-conceived investment is no remedy for the people who were actually harmed,” said David Pred, executive director and co – founder of Inclusive Development International, a human rights group.

Justin Sandefur, senior fellow at the Center for Global Development, said that while the issue might be a minor financial issue for the World Bank, it had broader implications for Banga as a leader who is trying to forge more partnerships with the private sector. sector.

“I think symbolically it has now started to become a big deal in the sense that he is willing to take a clear shot and turn a new leaf on this,” Mr. Sandefur said.

The process is also being closely watched by lawmakers responsible for approving the money the United States provides to the bank. In a letter to Mr. Banga in January, Sen. Elizabeth Warren, D-Mass., and Sen. Peter Welch, D-Vermont, warned that future funding from the World Bank could depend on its handling of the Kenya school investigation. .

“We view the Bridge case as a litmus test for the conversation currently taking place around IFC's responsibility to remedy the social and environmental harm caused by its projects,” the senators wrote, “especially those in which “The IFC does not follow its own policies, which we see as an important basis for any proposal to increase the funds available to the World Bank Group.”

Warren and Welch have also raised concerns with the Treasury Department, which led Banga's selection for the World Bank and assisted him in the nomination process. In late December, a senior Treasury official told lawmakers that the department was examining allegations of violence in schools and was concerned about accusations that the IFC was trying to cover them up.

“We share your deep concern and alarm at the possibility that children may have been sexually abused in the context of an IFC project,” wrote Corey Tellez, acting assistant secretary of the Treasury's Office of Legislative Affairs. “Treasury vehemently condemns violence against children and any other violations of human rights.”

A World Bank spokesperson declined to make Banga available for an interview. The board, which failed to agree on an action plan in January, plans to meet again to consider a “survivor-centered” response.

During the public debate in February, Mr. Banga said he did not believe a sexual abuse scandal had been covered up and noted that foundations other than the IFC had also invested in Bridge schools.

“I think there are a number of things that management could have done better, and that is the discussion we are going to have with the board shortly,” Mr. Banga said.

The board meeting was supposed to take place in February, but has not yet been scheduled. According to a person familiar with the process, the revised action plan will take effect Thursday if the board does not call a meeting to review it further.

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