The World Bank’s internal watchdog on Thursday criticized the organization’s handling and oversight of its investment in a chain of Kenyan schools that were subject to an internal investigation after allegations that students were abused.
The investigation, which started in 2020, has consumed World Bank officials and shareholders in recent months and led to scrutiny of its investment arm, the International Finance Corporation, which invested in the educational project a decade ago.
Countries that make up the board of the I.F.C. have been debating how to compensate victims of the abuse. While the scandal predates the tenure of Ajay Banga, the World Bank’s new president, it has emerged as one of the first tests of his management.
Mr. Banga will be responsible for directing any changes related to how the bank invests in private-sector projects. He has already faced criticism for appearing to be dismissive of suggestions that the I.F.C. was interfering in the investigation, and U.S. lawmakers have told him that the bank’s future funding could hinge on his handling of the matter.
The watchdog report, published by the World Bank’s Compliance Advisor Ombudsman, concluded that the I.F.C. “did not consider the project’s potential child sexual abuse risks or consider the capacity of its client to satisfy environmental and social requirements in relation to child sexual abuse risks and impacts.”
The World Bank held a $13 million stake in Bridge International Academies from 2013 to 2022. It divested from the program after complaints of sexual abuse at the schools, which led to internal investigations about the episodes and a review of how its investment arm oversees such programs.
The report, referring to Bridge International Academies, added that the “I.F.C. failed to regularly monitor or substantively address project-related child sexual abuse and gender-based violence risks and impacts with its client.”
It went on to recommend that the victims of the abuse receive financial compensation.
However, a management “action plan” that the board of the I.F.C. had agreed upon did not fully heed those recommendations. Instead, the plan said that it would “directly fund a remediation program for survivors of child sexual abuse” for up to 10 years. The plan would pay an unspecified amount of money for psychological support and adolescent sexual and reproductive health services.
The decision over whether to directly compensate the victims was the subject of intense internal debate among board members, with some arguing that the bank should not be taking such direct financial responsibility for what happened at the program.
In an email to the staff of the World Bank that was sent on Wednesday night, Mr. Banga, who was not at the helm during the period of abuse, acknowledged that mistakes were made in the handling of the program and the investigation and was contrite.
“I am sorry for the trauma these children experienced, committed to supporting the survivors and determined to ensure we do better going forward,” Mr. Banga wrote.
Acknowledging accusations that I.F.C. officials tried to cover up allegations of wrongdoing, Mr. Banga added that he would appoint an outside investigator to ensure that the previous investigation was free of interference.
“We should have responded earlier and more aggressively,” he said. “This is a difficult moment for our institution, but it must be a moment of introspection.”
Human rights groups and civil society organizations have been critical of the proposed action plans, arguing that they do not go far enough to compensate victims.
On Thursday, they continued to lament the lack of direct financial support in the action plan, which proposes to pay for counseling services and health support for the victims.
“I.F.C.’s action plan fails to do the one thing that is required of it: provide remedy to the Bridge survivors,” said David Pred, the executive director of the human rights group Inclusive Development International.
In recent days, U.S. lawmakers have also been urging the Treasury Department, which helped steer Mr. Banga’s nomination to lead the bank, to press for more to be done and to reject the action plan.
“I’m concerned that failing to provide direct and meaningful compensation will not only harm the survivors and their families, but it will also harm the reputation of the I.F.C., which has a critical mission around the world, and that of the United States as its largest shareholder,” Representative Maxine Waters, the top Democrat on the House Financial Services Committee, wrote in a letter to Treasury Secretary Janet L. Yellen on Wednesday.
The Treasury Department, which had pushed for the victims to be compensated, said in a statement on Thursday that it accepted the findings of the report. However, it suggested that the survivors should be consulted as the I.F.C. determines how best to compensate them.
“We believe I.F.C. should keep all remedy options on the table while the consultations proceed,” the Treasury Department said in a statement.
The statement added that the department was also concerned about allegations of interference in the investigation and welcomed an independent review of how it was handled.
“We are deeply troubled by the broader accountability issues raised by this case,” it said.