Independent Evaluation of IFC's Development Results 2008

IFC's Additionality in Supporting Private Sector Development

The IEG report finds that the development results of IFC-supported private sector operations in developing countries improved in the last three years, driven by better performance in two regions with a large share of IFC operations: Latin America and Europe and Central Asia. However, project performance stagnated in Africa, Asia and the Middle East – where IFC is growing fastest, and where sound IFC work quality and portfolio risk management will be crucial for better results going forward. In a first, detailed look at IFC additionality – or unique value added –

IEG found that while most projects exhibited at least one form of additionality, the quality of additionality appeared to be much better in LAC and ECA than in Africa and Asia. Better strategic consideration, operationalization and tracking of additionality across all regions will be fundamental to IFC’s success as a development institution, given the close connection the report finds between additionality and development outcomes.

• Fast Track Brief [pdf]
• Foreword [pdf]
• Executive Summary [pdf]
• IFC Managment Response to IEG-IFC [pdf]
• Chairperson's Summary: Committee on Development Effectiveness [pdf]
• Full Report [pdf]
• Presentation [ppt]

• Sixty three percent of evaluated investment operations (75 percent by dollar volume) on balance met or exceeded specified development benchmarks and standards. The evaluation shows that pursuing development effectiveness need not be at the expense of IFC’s profitability on its investments. Nearly 60 percent of projects combined high development outcomes with acceptable financial returns for IFC investments while some 25 percent had low development ratings with less-than-acceptable IFC financial returns.
• Results were, on average superior in Europe and Central Asia (ECA) and Latin America and the Caribbean (LAC), but much weaker in Africa, Asia, and Middle East and North Africa (MENA) and in smaller projects, mainly due to factors such as a country’s business climate, sector choices, the quality of the sponsor, project risks and IFC’s work quality.
• In IEG’s first look at IFC’s additionality, the report finds at least one form of financial additionality (in the form of loan tenor or other features), appears to be present in 85 percent of cases, and at least one form of operational or institutional additionality in about a third. At the same time, the quality of IFC’s role and contribution lagged in Africa and Asia, and in the financial and social sectors.
• Going forward, IFC must ensure strong work quality and portfolio risk management while its operations are growing rapidly (particularly in riskier countries, sectors and client groups), substantially improve environmental and social performance in Africa, continue efforts for improving the quality of advisory services performance re-porting, and increasingly stress the strategic thrust, operationalization, and tracking of the institution’s additionality.

• IFC should pay strong attention to work quality and portfolio risk management as it continues to grow and decentralize its operations, particularly in newer markets and in view of a possible downturn in global economic growth.
• IFC should ensure that it addresses continued environmental and social performance shortcomings in Africa, particularly as they relate to IFC supervision quality and client commitment to sustainability issues.
• IFC should continue, with input from IEG, to strengthen the steps it is taking to improve the data on the performance of advisory services operations, including efforts to improve understanding among staff about results measurement, quality assurance by managers, as well as performance monitoring beyond project closing.
• IFC should clearly map out its additionality in its strategies (including those developed with the World Bank) and develop guidelines and incentives to help operational staff better identify and deliver additionality. IFC could complement these efforts by advancing its metrics for estimating and tracking additionality through the project lifecycle, taking account of the analytical framework outlined in this report.
• IFC should carry out further analysis of additionality in lagging regions, sectors, and client groups to identify what specific steps are required to enhance performance.