SPECIAL FEATURE
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the extent possible in the form of a cost-benefit analysis which produces measures (such as the economic rate of return, the cost-benefit ratio and the net present value of the project’s net economic benefits) that can be compared across projects. Too-low values of these measures can flag potential threats to project e ff ectiveness and sustainability, and an analysis that separates these cost-benefit flows by stakeholder groups can furthermore help identify winners and losers, and therefore project risks. As some benefits are di ffi cult to credibly quantify, economic analysis can also take the shape of cost-e ff ectiveness analysis (where only costs of di ff erent options are compared) or a qualitative discussion of all relevant costs and benefits and their likely magnitude. For projects with the private sector an assessment of e ffi ciency also
requires the assessment of the purely financial returns, as too-low financial returns can jeopardize private sector interest in, and continued support to the project. On the other hand, very high private sector returns can call into question why development finance is needed, as commercial sources could be expected to fund ventures of such clear profitability. 3. Impact In the development world, impact is understood as those e ff ects that development is ultimately about, but which are often di ffi cult to attribute to single development interventions.
It is not enough to know whether a financed activity or asset has been delivered. One must also understand whether it has resulted in measurable improvements for the a ff ected populations.
Take household income for example, which is a measure that is considered to be one of the main determinants of people’s quality of life.
Ulrike Haarsager, OPEC Fund, Head of Development E ff ectiveness
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