The true test for the good use of scarce development resources is the question of whether the development benefits can be
OPEC Fund Development Forum 2023
Alignment to donor/ financier priorities
The scarcity of development finance resources implies that development finance providers cannot provide support to any and all development projects. They therefore have to prioritize, with such priorities usually spelled out in their strategies and business plans. Factors influencing these decisions are: 1. E ff ectiveness This is achieved when an intervention’s development objectives are achieved. Since the development is fundamentally about improving people’s lives, development objectives should express what specific improvements the project is expected to bring about for the targeted beneficiaries. To understand whether a project is e ff ective, it is therefore not enough to know whether a financed activity or asset has been delivered. One must also understand whether the provision of these activities or assets has resulted in measurable improvements for the a ff ected populations. Quantitative indicators are therefore established not just for the products, or outputs, of each project, but also for the improvements from the perspective of the beneficiaries. A project financing the paving of formerly dirt roads, for example, would need to not only provide evidence on the kilometers of road paved by the project (the project output), but also measure improvements from the viewpoints of the road’s beneficiaries and other stakeholders, such as the travel time savings of road users, the increased number of days the road is passable, the reduced number of accidents if the road is made safer, reduced road maintenance costs, or other benefits depending on the specifics of each project. Some improvements can be measured relatively directly (such as the lower incidence of a specific illness because of a vaccination campaign), whereas some have to be measured by proxy (such as the avoidance of greenhouse gases, which is expected to lead to improved lives around the globe) due to issues in methodology or of attribution.
sustained over time.
Ulrike Haarsager, OPEC Fund, Head of Development E ff ectiveness
Hela Cheikhrouhou Vice President at the International Finance Corporation (IFC)
To be able to assess whether a project is successful or e ff ective, clear expectations for the future values of the indicators have to be set when designing the project – and such values should of course show a clear improvement over the current (or baseline) value for the project to be worthwhile undertaking. During and after project implementation, the indicators need to be measured to assess the extent to which their target values have been achieved. This serves to not only assess e ff ectiveness but also, in case of their non- or insu ffi cient achievement, to ask questions and learn about why the expected results have not materialized. Feeding these lessons back into the design of operations, to avoid or mitigate known pitfalls, allows development institutions to continually improve their e ff ectiveness. 2. E ffi ciency The e ffi cient use of development resources requires assessing to what extent development benefits are achieved at a reasonable cost or not. This assessment helps not only inform decisions about where to direct resources for maximum impact, but also provides information needed to avoid wasting resources on too-costly and therefore unsustainable projects. The tool used to assess e ffi ciency is most commonly called “economic analysis” and includes quantitative and/ or qualitative analysis of the costs and benefits accruing to all relevant project stakeholders, such as beneficiaries, the government, private sector actors, the environment, and other a ff ected parties. Ideally, this analysis is quantified to
“Level the environmental playing field” OFQ : How can we ramp up blended finance and other creative finance mechanisms to attract more private sector investment? Hela Cheikhrouhou: The world of blended finance is very diverse. It includes first-loss insurance policies, which are a powerful way of absorbing the real or perceived risks that stop private investors, whether local or international, from coming in at scale. In countries where foreign currency reserves are low, first-loss policies are a particularly e ff ective way of absorbing currency risk to crowd in private investors. Another way to encourage the private sector is to level the environmental playing field. There’s currently no uniform price on carbon to incentivize action, but market- based mechanisms can make the economics of a climate friendly investment as good as the economics of less environmentally friendly solutions, especially where they fill viability gaps.
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