Sex Abuse Inquiry Poses Leadership Test for World Bank’s Ajay Banga

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

Four months later, Mr. Banga, who assumed the top job last June, is confronting his first big management test and some early signs of unrest that have little to do with his aspirations to modernize the bank and supercharge its ambitions to combat climate change.

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

The executive board of the I.F.C. has been reviewing a revised “action plan” that could take effect as soon as this week.

In recent months the World Bank’s leadership has been engaged in fraught deliberations over how much responsibility to accept and whether to compensate the victims. The debate has divided the countries that are invested in the bank and put a spotlight on Mr. Banga, who will be responsible for finalizing and carrying out the action plan.

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

While fielding questions at an event sponsored by the Center for Global Development in early February, Mr. Banga, a former finance executive, surprised some in the audience when he dismissed the possibility of a cover-up. In response to another question about employment disputes and the integrity of the bank, he expressed frustration about a job that just a year ago he traveled the world campaigning to secure.

“I’d be happy to be fired, by the way,” Mr. Banga said. “I can go back to my private-sector life. Much more interesting.”

Mr. Banga was selected 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 in the aftermath of 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 equivocated about the causes of climate change.

In his first year on the job, Mr. Banga has encouraged wealthy countries to increase their contributions to the bank, and he recently took steps to restructure its loan guarantee program to increase private renewable energy investments.

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 Mr. Banga, it is now his problem.

“The honeymoon is over,” said Paul M. Cadario, a former senior manager at the World Bank, who posed the question to Mr. Banga at the forum in February. He said he found Mr. Banga’s response to be flippant.

The World Bank held a $13 million stake in Bridge International Academies from 2013 to 2022. It divested from the program following complaints of sexual abuse at the schools, which led to internal investigations about the episodes and a review of how the International Finance Corporation oversees such programs.

A draft of the report by the bank’s ombudsman, which was reviewed by The New York Times, detailed more than a dozen cases of child sex abuse at schools operated by Bridge in Kenya. The report, which was disclosed last year by The Intercept, also criticized the I.F.C. for its lack of oversight of the project and suggested that it had been looking the other way when complaints emerged. It recommended counseling and compensation for the victims.

The executive board of the I.F.C., which is overseen by the World Bank’s members and Mr. Banga, has spent the last several months struggling to agree on a plan of action. Countries that are members of the bank have been divided over how much responsibility the I.F.C. should take for the abuse at the school and whether directly compensating the 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 the victims and have expressed alarm over an agreement between the I.F.C. and Bridge to keep some of the findings of its investigation confidential. They have also criticized a plan proposed by the I.F.C. that would not directly compensate victims of abuse.

“I.F.C.’s proposed response to one of the most egregious cases of harm that has resulted from a due diligence failure on an ill-conceived investment is no remedy at all for the people who were actually harmed,” said David Pred, the executive director and co-founder of Inclusive Development International, a human rights group.

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

“I think symbolically now it’s started to become a big deal in that is he willing to shoot straight and turn over a new page on this,” Mr. Sandefur said.

The proceedings are also being watched closely by lawmakers, who are responsible for approving the money that the United States provides to the bank. In a letter to Mr. Banga in January, Senator Elizabeth Warren, Democrat of Massachusetts, and Senator Peter Welch, a Vermont Democrat, warned that the future funding for the World Bank could depend on his handling of the investigation into the Kenya school.

“We view the Bridge case as a litmus test for the conversation currently taking place around I.F.C.’s responsibility to remedy social and environmental harm caused by its projects,” the senators wrote, “especially those where I.F.C. is not following its own policies, which we see as an important foundation for any proposal to increase the funds available to the World Bank Group.”

Ms. Warren and Mr. Welch have also raised concerns with the Treasury Department, which steered the selection of Mr. Banga to the World Bank and helped him through the nomination process. In late December, a senior Treasury official told the lawmakers that the department was examining the claims of violence at the schools and was concerned about the allegations that the I.F.C. sought to conceal them.

“We share your profound concern and alarm at the prospect that children may have been sexually abused in the context of an I.F.C. project,” wrote Corey Tellez, the 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 spokesman declined to make Mr. Banga available for an interview. The board, which failed to agree on an action plan in January, is planning to reconvene to consider a “survivor centric” response.

During the public discussion in February, Mr. Banga said that he did not believe a sex abuse scandal was covered up and noted that other foundations besides the I.F.C. were also invested in the Bridge schools.

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

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