Although development finance institutions are best known for their financial support to client countries, they also play a key role in institution and capacity building, knowledge transfer, and technical assistance. Advisory services represent a growing share of activities and a core value proposition for these institutions, yet these activities are underevaluated, and little is known about the impact of knowledge products and services on enhancing the capacities of the institutions’ clients.

Capacity development interventions—also known as capacity building, nonlending operations, technical assistance, technical cooperation, and advisory services—aim to improve skills, knowledge, and systems.1 They have become integral to effective and sustainable development because individuals, communities, and institutions need the outputs of these interventions to develop and become self-sustaining. Development finance institutions and other nongovernmental institutions have increasingly recognized the key role these interventions play in making development effective and sustainable. This is evidenced by an increase over the years in the size of advisory services provided and reflected in the United Nations 2030 Agenda for Sustainable Development (United Nations Department of Economic and Social Affairs, n.d.). In 2022, about 10 percent of the flows of official development assistance to technical cooperation activities were earmarked primarily for strengthening countries’ capacities (OECD 2025).2

Advisory services and analytics represent 40–50 percent of total World Bank expenditures on projects, which in FY 2022 were $783 million (World Bank 2022). The advisory services of the International Finance Corporation (IFC) have also grown rapidly since 2001. Annual advisory services expenditures, for both client-facing (that is, external engagements in which IFC provides technical services and assistance directly to clients) and non-client-facing (for example, diagnostics, knowledge generation, market assessments, and product and project development whose main purpose is to inform IFC strategies or operations) program activities, increased from $24 million in 2001 to $270.3 million in FY24 (IFC 2024; World Bank 2009). Most recently, the World Bank, IFC, and the Multilateral Investment Guarantee Agency have taken steps to integrate their knowledge work under a single framework and revive the organization’s identity as the Knowledge Bank, highlighting the increasing significance of knowledge in the World Bank Group’s development work. Over the years, data from advisory services projects validated by the Independent Evaluation Group (IEG) show that client-facing advisory projects have also become more complex, bigger, and longer.3 As figure I.1 shows, in FY08 the average size of an IFC advisory project was approximately $500,000, and the average project lasted 21 months. By FY23, the average project size had increased to $1.65 million, and projects lasted an average of 4.5 years.

Figure I.1. Evolution of Size and Duration of Advisory Services Projects

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Figure I.1. Evolution of Size and Duration of Advisory Services Projects

Source: Independent Evaluation Group validation database based on International Finance Corporation’s portfolio data.

Note: This figure is based on the Independent Evaluation Group’s annual sample of completed client-facing advisory services projects with development effectiveness rating, selected for the Independent Evaluation Group validation purposes.

Despite the steady increase in the volume of advisory services, many development finance institutions lack systematic approaches and systems for measuring and assessing the outcomes of advisory services projects. The Evaluation Cooperation Group, which consists of 11 international financial institutions, promotes a more harmonized approach to evaluation methodologies among international financial institutions. However, while the group has developed Good Practice Standards for various types of financing instruments, there are currently no such standards specifically addressing the evaluation of advisory services. Several factors contribute to this gap. First, advisory services projects often yield behavioral or institutional changes that are harder to capture, let alone quantify, than the results of investments and loans (Timmis 2018). Second, advisory services projects generally reveal their impacts only over the long term, making it challenging to track and evaluate them within typical project cycles (Azevedo and Colnar 2023). Third, advisory services and analytics are often delivered along with other interventions, making it difficult to disentangle their contributions.

Self-evaluation systems are critical for supporting performance management and internal and external accountability and enhancing operational quality through learning (World Bank 2016, 2025). Yet, whereas development finance institutions have self-evaluation systems for investment operations (frequently with independent validations), they generally do not have them for advisory services projects. Evaluations of advisory services projects are often ad hoc, conducted to meet donors’ reporting requirements or to serve decision-making needs of country or program teams rather than systematically assessing outcomes and impacts (IMF 2013). Such ad hoc approaches tend to overlook systemic issues and opportunities and can introduce biases in assessing the overall performance of capacity development portfolios, as the evaluated projects may not represent the issues underlying the general portfolio.

In this regard, IFC is among the exceptions. Although its advisory services portfolio is largely donor funded, focused on soft outcomes such as behavioral change and therefore facing impact assessment challenges, IFC has established a systematic self-evaluation system to support accountability and learning. IFC established, in 2008, a structured approach to self-evaluating and validating its performance in delivering advisory services.4 IFC’s self-evaluation system encompasses client and sector development projects that are client facing and designed to achieve development outcomes and potentially impacts. However, IFC’s self-evaluation system excludes advisory services that are intended solely to produce output-level results (such as client diagnostics) and limited-scope engagements where IFC cost-shares specific activities with a counterpart to support the early stages of project identification or preparation. Additionally, non-client-facing activities, primarily internal efforts such as market or sector diagnostics, knowledge generation, and product development, which aim to improve IFC’s understanding and product offerings, are also excluded.

IFC’s project-level self-evaluation system and IEG’s complementary validation work have grown and evolved with IFC’s advisory services portfolio over the years and have included a strong collaboration between IFC and IEG. The self-evaluation and validation system has been used to evaluate advisory services projects systematically for more than 15 years, providing extensive experience that can highlight the challenges and limitations that arise in self-evaluation systems and also inform best practices and approaches to dealing with such challenges.

This paper reflects on the methodological challenges of evaluating advisory services projects, especially assessing their effectiveness and the quality of the advisory work completed in the project setting. It proposes ways to address these challenges, ultimately aiming to enhance organizational learning. The paper also provides in-depth insights into the significant institutional arrangements needed for conducting this type of self-assessment and independent validation.

The paper first describes commonly used capacity development typologies encompassing IFC’s advisory services and relevant evaluation frameworks in the development sphere. Next, it presents IFC’s self-evaluation system for advisory services and the independent validation performed, the system’s evolution, and the roles operational and IEG teams play in it. Finally, it discusses challenges in self-evaluation and validation, reflecting on IEG’s lessons from our implementation experience.