How to Measure Value for Money in DFID Business Environment and Investment Climate Reform Initiatives Delivered by the International Finance Corporation

As part of its efforts to support wealth creation, the UK supports developing countries to improve their business climate, with the overall aim of attracting the levels and kinds of investment required to boost growth. The responsibility for this area of work rests with DFID’s Private Sector Department and the Investment Climate Team.

Sensitivity to the principle of Value for Money (VfM) is a key concern in DFID’s work, and one which informs programme design and implementation modalities, including work that is delivered through partner agencies.

The IFC is a core partner in supporting DFID’s wealth creation agenda. Since 2004, DFID has channelled £371 million[1] into IFC Trust Funds and related vehicles, for the benefit of DFID’s priority countries. The IFC has also added value by leveraging knowledge products (e.g. the annual Doing Business Reports), by providing technical and finance expertise, and by exercising its convening powers at country level. In turn, DFID has used its considerable development expertise and acknowledged leadership in defining results-oriented frameworks in order to move the IFC towards better articulating its results in poorer countries and in fragile and conflicted states.

At present, DFID has active investment climate / business environment reform implementation arrangements with the IFC in at least five countries: Bangladesh, Kenya, Afghanistan, Pakistan and Burma. Other DFID Country Offices (COs) like Ghana have also identified an interest in ramping up work in this area, based on country demand. As DFID seeks to deepen its investment climate and business environment reform work and COs start to draft new Operational Plans and Business Cases for the coming year, the need for sound evidence on investment climate and business environment metrics has become critical.

As it seeks to deepen its investment climate and business environment reform (BER) work in developing countries and fragile states, DFID is placing strong emphasis internally on the development and strengthening of analysis on Value for Money, in particular where these programmes are implemented through the IFC and other partners.  As a recent (2013) DCED report confirms, evidence on VfM in business environment reform programmes is very limited[2].

Country Offices are particularly keen to learn how to assess VfM in DFID’s current BER programmes, especially those that are delivered with the IFC. The Investment Climate Team has agreed to oversee research on reviewing what is known within DFID on VfM for BER programmes, which will be delivered through the newly launched Business Environment Reform Facility (BERF).

Researchers commissioned through BERF will produce a Learning Note[3] capturing evidence on what works in VfM for DFID’s BER programmes using IFC channels, and what is not working or needs improvement. This work will also identify evidence gaps which require further research and analysis. It is expected that the Learning Note will be around 15 pages in total.

[1] IFC. February 2015. IFC and the United Kingdom: Partners in Private Sector Development

[2] Tarnutzer and Sarwar. 2013. Added value of using the DCED Standard in Bangladesh from a donor’s perspective

[3] BERF Learning Notes are short pieces of analysis (15-20 pages) which promote learning and the exchange of knowledge about BE reform across DFID. Learning Notes look at technical reform issues, based on comprehensive literature search and summarises the experience of BE reform programmes, explaining different approaches, practical implementation challenges and what did or did not work in a particular context. There is a particular emphasis on Political Economy, Gender, FCAS, Environment and Climate Change.