Although it seems that the potential for better work quality and knowledge derived from M&E to improve equity returns can be high, it would actually take just a small fraction of marginal improvement to compensate for M&E expenditures. Indeed, IFC’s outstanding equity investments were $9.774 billion at the end of FY2012. If we assume modest improvement of SAS work quality in just 1 percent of this total equity amount from “partly unsatisfactory” to “satisfactory,” the possible equity return can be enhanced by $36 million.4 In other words, regarding efficiency, current IFC level of M&E expenditure could be more than compensated by achieving modest improvement in work quality as a result of M&E-generated lessons and information. Moreover, as indicated, these financial benefits for IFC represent just a fraction of the overall development benefits that greater effectiveness of IFC operations can entail for all relevant stakeholders.
Notes 1. Using the XPSR sample (70 XPSRs from 2008–11), a dummy variable of 0 was assigned for projects with either completely missing lessons section, lessons without specific actionable item (only portfolio description of past projects), not mentioning issues which were pointed out in the XPSR and/or EvNote, or very limited statements in the lessons section (that is, discussed only about sponsor selection issues). A dummy of 1 was assigned for all others. A regression against SAS work quality success (1 = Satisfactory or Excellent, 0 = Partly Satisfactory or Unsatisfactory) as the dependent variable. The result was statistically significant at 5 percent, indicating correlation between high SAS work quality and documenting lessons in the Project Data Sheet— Early Review document. SASWQ versus lessons is statistically significant. 2. Based on IFC budget numbers by activities. 3. Similarly, in the past, IEG estimated that the aggregated equity return was 16.4 percent for project with high work quality, while the return was -6.0 percent for those with low work quality (IEG 2006). 4. Based on the XPSR results by equity investment amount, SAS work quality rating distribution was: 20 percent “excellent”, 54 percent “satisfactory”, 22 percent “partly unsatisfactory” and 5 percent “unsatisfactory.” The rate or return were as shown in figure 4.1, with FR = 4 percent. With IFC’s outstanding equity investment amount as of end of FY12 ($9,774 million), estimated rate of return was 2.4 percent. If we assume “partly unsatisfactory” as 21 percent and “satisfactory” as 55 percent, then the rate of return became 2.8 percent. One percent represented about $36 million, which can be compared to the total M&E spending of $14 million.
References IEG (Independent Evaluation Group). 2006. “Risk Intensity and Project Outcomes.” IFC Evaluation Brief 7, World Bank, Washington, DC. Mayne, J. 2012.”Contribution Analysis: Coming of Age.” Evaluation July 2012 18(3): 270– 80.
Effectiveness and Efficiency of Monitoring and Evaluation Systems
83