NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

U.S. International Development Finance Corporation (DFC) today announced Impact Quotient (IQ)—a modernized tool for measuring the development impact of projects supported by the agency. The new tool will help DFC maximize its global impact by enabling the agency to more effectively evaluate potential investments and monitor current projects.

“IQ is a state-of-the-art tool that allows DFC to measure our progress in fulfilling our development mandate,” said DFC Chief Executive Officer Adam Boehler. “I am extremely proud of the DFC team for its hard work in developing IQ. I also want to thank the many stakeholders that provided input along the way. I look forward to working with our stakeholders to continue refining and improving IQ.”

DFC consulted more than 50 stakeholders representing investors, think tanks, the development community, and U.S. Government counterparts to develop IQ and continues to solicit feedback as the agency works to continuously improve the tool. Interested parties can learn more about IQ and submit feedback. As part of these efforts, DFC will also implement a “LabIQ” that analyzes data on expected and actual impact to further calibrate the tool and guide future investment decisions.

The new tool assesses potential projects at the time of their initial screening on expected positive and negative impacts, both intended and unintended. IQ evaluates projects against metrics across three key pillars:

Growth: contributes to economic growth through infrastructure improvements, contribution to local income, trade benefits to the local economy, and job creation

Inclusion: advances inclusion by providing products or services, diversified workforces, and inclusive supply chains that benefit underrepresented groups including low-income populations, smallholder farmers, young adults, women and women-owned enterprises, people with disabilities, indigenous peoples, refugees, and ethnic or religious minorities

Innovation: supports innovation through the advancement of new products or services, the use of innovative financial structures to mobilize private capital, knowledge or technology transfer, and environmental sustainability

Additionally, IQ will closely examine country context to prioritize projects that address the most critical development challenges facing the host country. The tool is also closely aligned with the W-GDP 2X Women’s Initiative and measures whether and how a project supports women. DFC will monitor projects under IQ throughout their lifecycle to evaluate progress in achieving expected development impact.

IQ will be used by a team of DFC economists and social and environmental policy analysts in consultation with the agency’s Chief Development Officer. As part of the IQ evaluation, this team will also seek to identify opportunities to leverage DFC’s new technical assistance and feasibility study tools to maximize expected development outcomes.

The new tool is structured to align with the Operating Principles for Impact Measurement, a framework initiated by the International Finance Corporation (IFC) and developed in consultation with leading impact investors—including DFC—to ensure that impact considerations are purposefully integrated throughout the investment lifecycle.

IQ replaces the development matrix used by the Overseas Private Investment Corporation (OPIC), DFC’s predecessor agency. The creation of a modernized development impact measurement tool is directed by the Better Utilization of Investments Leading to Development (BUILD) Act of 2018, which created DFC.

Photo courtesy of Myriams-Foto.