- January 2, 2011
In this literature review, experts from Nathan Associates London Ltd discuss how some development finance institutions (DFIs) and multilateral development banks (MDBs) define and measure the impact of their investments by answering the following questions:
- How do agencies define and measure development impact?
- Are tax payments and jobs reliable gauges of impact?
- Is investment in some sectors more likely to have an impact?
- Do certain types of investment have more impact than others?
- Do DFI and MDB operations encourage technology transfer, faster technology adoption, or other productivity gains?
- Does financing start-ups and micro-enterprises have more or less impact than investing in big enterprises?
- Does investment by DFIs encourage adoption of higher standards for worker safety and health and for the environment? If so, what type of investment is most effective?
- Does investment by DFIs in poorer countries make their financial markets more efficient?
- Do DFIs and MDBs crowd out and/or crowd in investment?
- What is the best way to evaluate the impact of DFIs and MDBs?
As financial intermediaries, DFIs and MDBs are expected to earn a reasonable financial return on investment that can be used for further investment. This is in contrast to development agencies that provide grants.
This review was done on behalf of the UK’s Department for International Development (DFID), which is intent on radically increasing the impact of its DFI-the CDC Group Llc-on development.