Recently, the World Bank Group’s Board of Directors made the unprecedented decision to overrule its own independent accountability mechanism: the Office of the Compliance Advisor Ombudsman. Independent accountability mechanisms at development finance institutions address complaints from communities experiencing harms ranging from environmental damage to gender and sexual violence.
Normally, when investigating non-compliance with institutional policies, the board approves an action plan to address the non-compliance and remedy the harm. As advocates for communities harmed by development finance, we have seen the transformative impact that this accountability process can have, if followed. This is not what happened in June.
In response to a 2022 complaint, a Compliance Advisor Ombudsman investigation found that the International Finance Corporation (IFC) — the private sector wing of the World Bank Group — violated its own sustainability framework in its investments in six microfinance institutions in Cambodia. These investments enabled predatory lending practices that led to the loss of land and livelihoods, hunger, increased suicide risks and threats of retaliation.
Instead of following the process required by the accountability mechanism policy, the board invalidated the findings and allowed IFC to create a “special” action plan that does not fully address the Compliance Advisor Ombudsman’s recommendations and the harmed communities’ demands. Moreover, the board is preventing the office from addressing any other microfinance complaints. As a result of this massive overstep, Compliance Advisor Ombudsman Director General Janine Feretti resigned, and over 100 civil society organizations and experts have called on the bank to reverse course.
Microfinance excluded today. Something else tomorrow
The decision argues that microfinance, which has well-documented shortcomings that the World Bank acknowledges, is not governed by IFC’s Sustainability Framework. Microfinance experts disagree. The controversy points to a larger issue plaguing the institution: the false choice between efficiency and accountability.
Increasing global challenges and shrinking bilateral commitments to development aid have pushed multilateral institutions like the World Bank to demonstrate that they can do development more efficiently. Three years ago, the bank underwent a self-proclaimed “evolution” to become a “bigger and better bank” with a redoubled focus on “impact, speed and efficiency.”
But the institution has increasingly seen accountability to project-affected communities as inefficient, rather than recognizing that it is necessary for effective development. Although the board’s response in the Cambodia case is unprecedented, it is only the latest in a string of problematic decisions limiting accountability.
Recently, the World Bank entered a series of Full Mutual Reliance Frameworks with other development finance institutions. These agreements allow certain co-financed projects to apply only one institution’s environmental and social standards. Unfortunately, they also limit harmed communities’ access to only that financier’s independent accountability mechanisms, barring them from using the other lender’s mechanism despite the project being supported by both institutions. This is a problem because independent accountability policies vary in the rights afforded to complainants, making a difference for the outcomes communities can expect.
Similarly, the board kicked off 2026 by approving a hydroelectric power project in Bhutan co-financed by the World Bank’s public and private sector arms that stripped affected communities’ access to its Compliance Advisor Ombudsman office. The bank celebrated this project as emblematic of an efficient, “One World Bank” approach.
Accountability is not inefficient
Independent accountability mechanisms allow institutions to hear directly from harmed communities and course correct, protecting themselves from reputational damage. They also legitimize international financial institutions’ operations in-country and are often the sole pathway to remedy for project-related harm when local accountability channels — such as courts — are inaccessible or function poorly. Without these independent mechanisms, international financial institutions would not have a legitimate claim to legal immunity.
In the Cambodia case, reports claim that the institution wanted to limit the World Bank’s Compliance Advisor Ombudsman’s jurisdiction over microfinance to prevent a flood of complaints, since IFC is one of the largest international funders of the microfinance sector. If IFC is afraid of receiving many complaints, wouldn’t that indicate that its current microfinance activities aren’t efficient and effective? In the future, will other sectors be excised from accountability because they are “too big to fail?”
Rather than shrinking the scope of what the bank can be held accountable for, the institution should focus on preventing and addressing harm so that development is sustainable. Restricting communities’ ability to spotlight harm is counterproductive.
Next steps for World Bank accountability
The Cambodia case saga is happening while the bank is integrating its Compliance Advisor Ombudsman with other independent accountability mechanisms that cover the institution’s public sector investments. While the board committed to the principle of “no regression” from the protections that communities enjoy under the existing independent accountability policies, recent events undermine trust in that commitment.
To us, “no regression” primarily means not diluting the Compliance Advisor Ombudsman policy, which has strengths recognized by several board-commissioned external reviews.
But there are signs that dilution is already happening. The bank has launched a recruitment process for the leader of the new independent accountability mechanism that does not include civil society stakeholders on the selection committee, falling short of past recruitment processes. In another departure, current World Bank staff are not prevented from applying for the position, potentially undermining the mechanism’s independence.
Here’s what the World Bank needs to do to restore trust:
Ensure the new independent accountability mechanism covers all the institutions’ activities. Any investment, regardless of sector or type, can contribute to harm. Creating accountability “carveouts” only allows harm to continue and prevents the institution from learning lessons.
Commit to a strong independent accountability policy and better delivery of remedy. The integration of the bank’s independent accountability mechanisms should build on the principle of non-regression by taking the best policies and practices from each. The new policy should increase its accessibility and independence. It must also contain an explicit remedy mandate, as an accountability mechanism that does not facilitate remedy is of little use to communities.
The World Bank Group must stop mistaking accountability for inefficiency. Effective development is impossible without strong accountability to impacted people.
Feature image credit: UKinUSA/Wikimedia Commons
