Where there are specific PSD objectives for investment projects, at least one relevant PSD indicator should be systematically tracked in the DOTS
IFC Investment Services 1. Gaps in monitoring private sector development impacts in DOTS for Investment projects.
- PSD such as improved competition, demonstration effects of a business model, or host country sectoral transformations - is a rationale for many IFC investments. However, in the investment projects' DOTS, only a few indicators track PSD and about 46 percent of projects sampled had no such indicator. In the sample, only 28 percent of evaluated projects had DOTS indicators that were directly relevant to the expected PSD outcomes such as demonstration effects or increased competition that are critical for IFC's development mandate. There is a need for systematic reflection of expected PSD effects of IFC investment interventions, including causal chains to link IFC's activities to outcomes and indicators.
Agree: PSD is the most challenging area for which to articulate outcomes. IFC is already making several efforts to improve the tracking and monitoring of PSD indicators, including:
- Over the last six months, IFC undertook a demonstrations effect study - a study designed to help us better understand the factors associated with greater levels of demonstration effects - with the intention of feeding that learning back into strategy and project design.
- IFC renewed efforts to harmonize indicators for investment projects with others DFIs in FY12. This opportunity will allow us to identify and apply the best PSD indicators.
- Manufacturing, Agribusiness and Services (MAS) Industry Group has revamped all mandatory indicators in FY12, including PSD indicators for each sub-sector.
IFC agrees that a better articulated PSD impact is needed -- e.g. the channels by which the PSD outcomes transmit to recipients beyond IFC's clients. Over FY14-FY15, IFC will work to clarify definitions and causal links for staff. We will also work with operational departments to map and increase the use of PSD indicators for projects with clear PSD objectives
Action 1.1: Develop a proposal for the next generation IS monitoring system that is more client centric and more relevant to IFCâs evolving business.
Indicator: A proposal for the next generation IS monitoring system.
Baseline: Existing results measurement framework.
Timeline: FY15.
Action 1.2: Capture some PSD effects more systematically in the evaluative approaches that may be used for investments.
Indicator: A fact sheet of evaluative approaches will be developed for IFC investments for use by Industry Departments.
Baseline: Stocktaking underway at the WBG and IFC level on use of such approaches.
Timeline: FY15.
There was no management update for 2017. As IFC introduced the Anticipated Impact Measurement and Monitoring (AIMM) system starting FY18, the projects' objectives related to the Private Sector Development areas (such as competition, integration, resilience, sustainability and inclusiveness) are expected to be articulated clearer than before. The AIMM system is also expected to be integrated into the IFC's tracking system. Because of this new development, IEG considers IFC made progress on realizing this BROE recommendation. (See Board Briefings on AIMM)
As mentioned in the management comment, IFC made progress in standardizing and harmonizing PSD indicators among MDBs. In the FY16 IFC Annual Report, External Assurance Provider (E&Y) commented about the weakness of the PDF indicators for reflecting project's development outcome, by stating "the scope of indicators to assess the Private Sector Development (PSD) performance area of DOTS should better reflect the impact on final beneficiaries over the life cycle of the projects." Based on this remaining weakness, IEG considers that management action related to this recommendation is not yet fully complete.
(1) IFC has revised, standardized, and clarified definitions for all standard and non-standard DOTS indicators for IFC's investments in each sector. As of FY15 streamlining of DOTS indicators is complete.
(2) Development impact unit also carried out an analysis of PSD indicators application in DOTs to identify a set of most relevant indicators used by the industry departments. The analysis helped enhance the DOTs guidance on application of PSD indicators and rating.
(3) IFC has completed several sector level evaluations in areas of SME Finance, Manufacturing & Agriculture, and infrastructure. In addition, IFC undertook an internal review of the Expanded Project Supervision Report (XPSR) program to understand its use, associated costs, and the quality of learning.
(4) Finally, IFC worked with 25 development financial institutions to develop 11 additional qualitative indicators and methodologies for measuring private sector development impact. These indicators, along with 27 others already in use, are being fully implemented across development finance institutions. IFC also initiated a similar exercise with 28 donor partners to harmonize indicators for private sector development in advisory services. A set of indicators has been developed and published by DCED.
The attached document is IFC's annual update report to CODE, presenting our progress in enhancing IFC results frameworks.
IEG agrees that the introduction of new XPSR template with more specific guidance on PSD assessment.
As a part of streamlining of monitoring system, PSD indicators were introduced based on harmonized ones with other IFIs However, industry-specific standard indicator may not be relevant to the project's PSD objectives.
1.1 As part of the next generation of IS monitoring system, we have streamlined the number of indicators following an exercise that looked into what clients report as well as relevant information that we tracked as part of our supervision process. This includes also the PSD indicators for each industry. Additionally, we have also implemented several of the indicators that we have harmonized with other 25 IFIs in 2013 which will contribute to reduce the client reporting costs when there are co-investments among IFIs. In addition, we streamlined and automated the XPSR template with more guidance to investment officers on the PSD impact. (Completed)
1.2 PSD indicators are being finalized together with other IFIs (25 institutions). The Group has in principle agreed on a small set of indicators, which have been vetted internally and is now negotiating the legal aspects of the implementation (Amendment of 2013 Memorandum). (Near Completion)
IEG acknowledges management's action for revising the IFC's Results Measurement Framework. IEG acknowledges that important reforms are in process. IFC has not yet established that approach will include at least one relevant PSD indicator that to be systematically tracked in the monitoring system, where there are specific PSD objectives for investment projects. It is too early to assess full implementation of the management action and this is the first MAR update for BROE recommendations. Thus, IEG rates as "Medium".
In July 2014, Development Impact Department presented a proposal of improvements to IFC's Results Measurement Framework to CODE. The changes aim to enable IFC to focus on adding value to operations and clients as well as to maximize the contributions to the WBG goals. The improvements will be at corporate, country, program and transaction level. At the transaction level, where the changes are in line with IEG's recommendation on narrowing the PSD gap, IFC will further harmonize a second set of indicators focused on PSD impact with other IFIs.
PSD indicators are being developed in conjunction with other IFIs. The consultant hired by the 25 DFIs has begun work. Once the harmonized PSD indicators are agreed upon, IFC will issue a tip sheet for use by Industry Departments.