Chapter 3: Monitoring for Development Effectiveness

Monitoring Sovereign Guaranteed Operations

Once projects are approved, the IDB continuously collects data on the extent of progress, achievement of results, and disbursements of allocated funds. This process uses the Progress Monitoring Report (PMR), an instrument in the Bank’s Development Effectiveness Framework (DEF).

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The PMR enables the IDB to monitor its public operations—internally known as sovereign guaranteed operations—from the earliest project stage. This instrument opens up a myriad of opportunities for project team leaders and government counterparts to make opportune and informed decisions about the project as it proceeds. Through the PMR the Bank also learns about what works (and what doesn’t) in implementation.

The new PMR methodology

The IDB has focused in recent years on improving how it monitors project implementation. In 2013, the Bank revamped the PMR methodology to better capture the different dimensions of a project’s performance. This allows the Bank to better understand how different factors affect project execution. The new methodology, described below, was implemented in 2014.

In order to understand some of the changes in the methodology, it is useful to understand the cycle of an IDB project. The operational life cycle of a project has three stages (Figure 3.1). The first stage starts with the approval of the operation by the Board of Executive Directors and runs to the start of disbursements, which requires the legal or administrative approval by the beneficiary country and the fulfillment of the clauses for first disbursement. Box 3.1 presents some of the main benefits of monitoring the performance of projects in this early stage of execution.

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Box 3.1

The sooner we monitor, the better the results

Project and management specialists have identified many benefits to monitoring operations early in the operational life cycle, even before the first disbursement of a project takes place. A number of early monitoring methodologies and tools have been created to respond to concrete needs during this operational stage.

If an operation takes longer than anticipated to reach eligibility to begin disbursements, this delay can have repercussions on execution because assumptions made at the time of approval may have changed in the interim. Early detection of possible delays gives project teams the opportunity to mitigate their effects and make any changes necessary to ensure effective project implementation later on.

The IDB’s new Progress Monitoring Report system tracks how long it takes a project to move from approval to eligibility for disbursement, then compares the length of that period with the average duration of that stage in other projects in the same country. Delays in comparison with the benchmark can signal potential problems with project design, or changes in the borrower’s priorities, legal framework, or political context.

In some cases, reaching eligibility may take a long time, affecting the design and the context under which the operation will be executed. Therefore, once a project is eligible for disbursements—the second stage of the operational life cycle—project teams can modify and update the operational plan from the design phase to take into account the actual context of the operation and risk management factors, thus facilitating timely and realistic project implementation. While these changes are valid, the new monitoring system keeps a record of all the adjustments made to the original operational plan prior to eligibility. Furthermore, the system also logs all changes made to the operational plan after eligibility is reached and requires teams to clearly justify the reasons for any adjustments.

Having mechanisms in place to measure project performance from inception to closure enables the IDB and its partners to ensure that projects are off to a good start—and it stands to reason that starting well increases the chances of finishing well.

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The second stage starts when the project becomes eligible for its first disbursement and continues until 95 percent of project funds have been disbursed by the Bank. The third stage then begins and lasts until the operation completes.

The previous methodology only monitored projects during the second and third cycles. The new one begins monitoring with the IDB’s Board of Executive Director’s approval. This is crucial, because in many cases the lapse between approval and the initial disbursement of funds is lengthy, which may be due to correctable delays.

The dimensions of project performance are measured through a set of indicators tailored to each execution stage; some of the indicators are used only for tracking purposes, while others are used for rating project performance in three categories: satisfactory, alert, and problem. Projects are classified into each category depending on how well they match their execution and financial plans.

In addition to including a wider time span to monitor, the new PMR methodology also classifies project performance more accurately because it uses better indicators, and also has an improved quality control and validation process that incorporates in its assessment relevant parties associated with the project–including team leaders, division chiefs, chiefs of operations, and country representatives.

The previous system only used indicators for projects in the execution stage. The revamped methodology provides additional elements for managers to learn about problems during implementation, understand their causes, and make more informed decisions.

To give just one example, team leaders are encouraged to describe findings and recommendations in an informative and comprehensive way, which also enhances the use of the PMR as a knowledge and learning tool. The new methodology is accompanied by a platform that invites teams to explain any changes in the project’s results matrix or provide recommendations for future interventions. Tracking such “qualitative” information about a project’s execution helps to better understand the circumstances—such as the reasons for delays in scheduling, cost overruns, or a lag in achieving results—that could affect performance and results. Combining such qualitative data with the quantitative indicator data allows for a more holistic approach, which in turn leads to improved accuracy for project classification (more detail in the section “Quantitative + Qualitative Analysis = Effective Project Monitoring”).

Classification of the IDB Portoflio

Classifying the IDB’s sovereign guaranteed projects into categories of satisfactory, alert, and problem helps project teams, executing agencies, and the Bank’s administration ensure that problems may be identified and actions taken so that specific development targets can be met. In addition, information on progress is vital to identify program strengths and weaknesses, learn from what was done well or not, make improvements, and develop skills along the way. Box 3.2 discusses an example of one of the Bank’s most important uses of PMR data, for portfolio performance reviews.

Box 3.2

How Do We Use the PMR?

One of the processes that best exemplifies how the IDB uses the performance monitoring information is the portfolio performance reviews that the Bank and partner countries conduct based on the classification of a project by the Progress Monitoring Report.

The reviews lead to actions and resource allocations designed to improve the performance of operations as well as meet project teams’ and executing agencies’ training needs. Particular attention is given to operations that have been systematically classified as being in alert or problem status.

The portfolio reviews also identify key performance factors at sector and country levels. At the sector level, reviews have found that the size and type of loans are key factors related to project performance. For example, projects in sectors that are both technically and politically complex are challenging.

Also, setting unrealistic deadlines for implementation affects execution, especially for interventions with a high degree of social sensitivity, for example in the case of projects that require involuntary resettlement. Moreover, changes in the program’s objective or expected results also influence the operation’s implementation. When such changes involve a wide reformulation of the operation, it is important to consider the possibility of designing a new intervention rather than adjusting an existing one. Finally, when more than one executing agency is involved in the loan, timely and defined coordination between them is a crucial factor for a satisfactory performance.

Key challenges at the country level related to project performance include institutional weaknesses in areas such as procurement policies and financial management. Also, the implementation of operations executed by subnational governments requires special effort by all actors involved to strengthen management. Furthermore, the implementation of small operations in large countries presents a major challenge to the natural inclination of giving more relevance to the execution of major interventions, neglecting those of a narrower scope. Another challenging factor at the country level is the cancellation of undisbursed balances, and the closing out of long-running projects that have systematically inadequate performance-levels.

Some of the interventions to correct these problems imply management actions by high-level IDB and government officials, while others involve providing management tools and resources to executing agencies, and still others require training project teams and counterpart staff in particular processes or procedures.

The nature of the corrective intervention will depend on the nature of the identified performance constraint. In the end, what matters is not the classification of project performance in itself, but the effective and timely actions taken to improve the performance of the operations in execution, thus increasing development effectiveness.

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Figure 3.2 shows that the introduction of the new PMR methodology has slightly modified the composition of the performance classification of sovereign guaranteed operations because projects are now grouped into three different stages, with a set of tailored indicators for each stage. In the 2014 classification exercise, which focused on project status through December 2013, 75 percent of operations had a satisfactory performance classification, 14 percent an alert classification, and 10 percent a problem classification.1

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For approved projects that have not yet reached eligibility (see Figure 3.1) and therefore cannot disburse, the classification is based on a comparison between the elapsed time from the approval date to the moment in which disbursements can start considering interim legal steps depending on the characteristics of the country. The comparison is made with the country´s benchmark determined by its own historical pattern. Of the projects in this first stage in 2013, 80 percent were classified as satisfactory, 8 percent as alert, and 12 percent as problem.

For projects that are disbursing (the second stage in Figure 3.1), the PMR uses the Earned Value Method (EVM) technique to classify execution performance by comparing the planned values of a project with the actual values achieved (earned value) and the actual costs. In short, what this methodology does is detect whether projects are delayed in their execution or running overcosts in comparison to their initial execution plan and to yearly updated ones. In 2013, 71 percent (321) of projects that had disbursed less than 95 percent of their allocated resources were classified as satisfactory, 17 percent (78 projects) as alert, and 11 percent (52 projects) as problem.

In terms of projects that had disbursed more than 95 percent of their allocated resources (the third stage in Figure 3.1) in 2013, 92 percent (78 projects) were classified as having a satisfactory performance, 6 percent (5 projects) as alert, and 1 percent (1 project) as problem.

What are some of the characteristics of operations whose performance is classified as being in either alert or problem status? Box 3.3 presents findings and recommendations from operations classified as either alert or problem. These are valuable lessons not only to redirect projects facing difficulties, but also to design future operations.

Box 3.3

Findings + Recommendations from Projects in Alert and Problem Status

A complex execution timeline and plan, and an executing agency with little experience with IDB projects, can lead to delays, particularly at the beginning of operations. Recommendations include providing technical assistance and using diverse resources to comply with conditions that must be met prior to execution, thus bolstering project start-up.

Designing an overly optimistic plan at project inception generally results in less progress in implementation than what was planned. The recommendation here is to agree on a realistic execution plan with the executing agency.

Higher-than-budgeted costs can lead to changes in the project’s Results Matrix targets or to delays in securing increases in counterpart funds. The recommendation is to improve the planning of expected cost of the intervention, as well as the mechanisms for the monitoring of counterpart resources in order to ensure that results are met.

Administrative and legal problems related to the signing of loan contracts, delays in reaching the disbursement stage, and changes to the Results Matrix prior to the disbursement stage, can pose problems that can then spill into the implementation stage. The principal recommendation in these cases is to anticipate these issues in the project design stage and incorporate them into the execution plan.

Other factors affecting execution include changes in project administration and/or executing agency priorities, and an undiagnosed lack of capacity in less experienced executing agencies to plan and manage projects. This can lead to institutional limitations in planning, monitoring, and controlling project execution, invariably affecting decision-making and the ability to reach targets.

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Quantitative + Qualitative Analysis = Effective Project Monitoring

At the IDB, monitoring is more than simply comparing what is implemented against what was planned. The qualitative data reported is useful in all stages of the project´s life cycle and is just as important as quantitative data for annual re-planning exercises, mid-term evaluations, and assessments of overall project achievements.

Qualitative information about a project’s execution provides the details and context that are key to understanding circumstances that could affect performance and results. The Bank monitors qualitative input about overall project management in six areas: (1) technical-sectoral, (2) organizational, (3) fiduciary, (4) public processes/actors, (5) laws and policies, and (6) other issues.

Monitoring qualitative information is also crucial to understanding the reasons behind schedule delays, cost overruns, or any lag in the achievement of results. Mapping the most recurrent reasons for delays or bottlenecks in implementation is helpful in formulating portfolio management strategies at both the individual project level and at the level of the whole portfolio of IDB projects.

In other cases, qualitative information may be pertinent to either reinforcing or driving a change in a project’s performance classification, which had been previously based primarily on quantitative data. This is because qualitative information can sometimes explain certain elements of a project that are otherwise not captured through quantitative data.

In sum, the combination of quantitative and qualitative data to evaluate project performance allows for a profound understanding of the operation. This in turn improves the accuracy of the project’s classification and facilitates more effective allocation of resources during supervision. Boxes 3.4, 3.5, and 3.6 feature projects in The Bahamas, Guyana and Uruguay that show how the PMR information has been crucial in getting projects back on track.

Box 3.4

THE BAHAMAS – Water + Sewerage Corporation (WSC) Support Program

The WSC Support Program: New Providence Water Supply and Sanitation Systems Upgrade” aims to improve the efficiency and quality of service provision of potable water, address immediate problems of sanitation in New Providence, and support the development of the Water and Sewerage Corporation of the Bahamas (WSC), a wholly owned Government organization, entrusted with managing, maintaining, distributing and developing the water resources of The Bahamas.

The $49 million project’s main component, which represents 60 percent of the loan resources, aims to reduce non-revenue water (NRW). In other words, water that is “lost” before it reaches the customer, either through leaks (physical losses) in the distribution network or through theft or metering inaccuracies (apparent losses). The corresponding indicator: Volume of NRW expressed as a daily average volume in Million Imperial Gallon (MIGd) was intended to decrease from the baseline of 5.5 MIGd to 2.5 MIGd over the life of the Project.

This PMR indicator is perhaps the most important in the project’s results matrix, and also the basis for the Performance Based Contract (PBC) financed by the IDB Loan. Under this PBC modality, the Contractor is paid for its services through a formula that is based on its outputs (70%) and results (30%). This contractual arrangement, which is only possible through project monitoring, allows for an alignment of interest between the Contractor and the WSC, and has proved a valuable mechanism. To date, the NRW is already below its established final target.

This confirms the importance of this indicator; NRW reduction is indeed a major contributor to the sustainability of WSC, not only in financial terms, but also its technical and environmental sustainability.

Reduction of NRW is an important contribution that improves the quality and sustainability of water services. The majority of IDB’s loans in this sector are advancing the objective of reducing non-revenue water. The modality of a performance-based-contract is not commonly used in the industry, nor in the majority of the Bank’s projects. The IDB is preparing a case study relating to such contracts, based on its work with WSC in Bahamas, and of the National Water Commission (NWC), the equivalent of WSC in Jamaica.

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Box 3.5

GUYANA – Micro and Small Enterprise Development and Building Alternative Livelihoods Program

It was through IDB’s monitoring of the progress of Guyana’s Micro and Small Enterprise Development program that the Bank realized there was a need to revise the project’s original approach to enhance its success. The project aims to support the Government’s strategy of reducing carbon emissions by re-orienting the economy toward a low carbon path via the creation of the necessary incentives for its beneficiaries to invest in the Low Carbon Sectors (LCS). Its focus is on facilitating job creation via Micro and Small Enterprises (MSE) in identified low carbon sectors; targeting them by enhancing access to credit and to business development training.

The corresponding result indicator—Jobs created in the low carbon sectors with resources from the program—depends on the project’s outputs, specifically those related with the MSEs that could benefit from the use of the different tools provided by the program: (1) credit guarantee fund, (3) interest payment support facility, and a (3) low carbon grant scheme to assist with seed capital for the start-up or expansion of businesses.

Monitoring the program revealed the demand for guarantees was mostly stemming from Medium Enterprises (MEs), rather than Micro and Small Enterprises (MSEs) as originally thought. Monitoring also identified the need to allow new financial intermediaries to participate in order to increase the dissemination of the program.

These findings led to corrective actions in redirecting the program: (1) indicators were revised to reflect a lower demand by micro and small enterprises resulting in lower jobs-creation targets; (2) guarantees have been mostly extended to medium enterprises instead of micro and small enterprises as originally thought and their coverage has been extended to 5 years. Project execution will benefit from a revamped approach that better serves the actual beneficiaries, while preserving and pursuing its development objectives.

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Box 3.6

URUGUAY – Program to Support Global Export Services

The exports of services generated $200 billion in 2013 and Uruguayans have the potential to take full advantage of this lucrative industry for three reasons. First, Uruguay has excellent infrastructure for developing this sector, including several free trade zones devoted exclusively to the export of global services. Second, the country has adequate human capital, and a favorable climate for business, security, and transparency in Latin America. And third, Uruguay’s cultural similarities and compatible time zone with the United States offer a clear comparative advantage for serving the world’s lead market in the global services sector.

The IDB-financed Program to Support Global Export Services (GES) in Uruguay aims to contribute to the development of the country’s GES market. Specifically the Program is seeking to increase foreign direct investment, exports, and the level of employment in this sector.

The quantitative information provided by the Progress Monitoring Report (PMR) was useful in identifying two delays and deviations in the achieved outputs during project implementation, which later turned into improvements.

First, the PMR indicator related to commercial missions, fairs and events supported was lower than planned, and when analyzing the reasons behind the lower-than-expected demand it became apparent that a new instrument had to be designed. Consequently, “ProTIC” was developed, a pilot tool to support small and medium export enterprises in the information and technology sector to increase their internationalization.

Secondly, the number of students attending the program-supported job-training institutions, known as “Finishing School Programs”, was lower than expected. To understand why, an intermediate evaluation of progress is being conducted. Preliminary findings show that the instrument was adequate but lacked proper dissemination. Based on its results, an aggressive dissemination campaign will be launched to improve uptake.

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Recommendations on Mitigating Challenges to Project Execution

Through the Progress Monitoring Report, the IDB can identify the main factors affecting project execution, and proactively address them with project teams and executing agencies. With this knowledge, the IDB has acquired lessons on how to best prepare and manage projects during supervision and mitigate challenges common to implementation.

In recent years, the participation of specialists in the country offices in the design of operations has increased significantly. Their knowledge of the country context and experience is beneficial for project execution. This is particularly helpful in avoiding the inclusion of project components that are difficult to implement or of dubious feasibility given the inherent country context. Therefore, participation of specialists in the country offices should continue to be encouraged in the preparation of all our interventions.

Another important aspect the IDB should consider is the time assigned to project preparation. When time is not ample enough for the elaboration of an adequate conceptual design, project teams may incur in costly additional work. Sometimes they are forced to make additional sectoral diagnoses as well as other technical and institutional assessments to provide more conceptual inputs and empirical evidence.

Moreover, the Bank should be aware that, particularly for innovative projects, abstract concepts as captured in a project proposal may not be sufficient for understanding a specific area of intervention. In the early stages of design, it is important to identify and analyze similar projects financed in other countries, thus enhancing the understanding of the components that will be funded by IDB and their expected results.

In the first stage of execution, the operational component most likely to affect delivery times for project results is bidding and contractual procedures. Technical support is thus crucial to facilitate the reviewing of bids and responding to objections and appeals. Face-to-face meetings with executing agencies are also helpful in clearly establishing rules, agreements, and quality standards. Prudential financial planning that takes into account the complexity and potential time-lags associated with bidding is also recommended.

Several issues that often influence project execution relate to the executing agency, including its capacity to manage administrative and organizational matters, coordinate with other actors, as well as plan and monitor the project.

The executing agency’s capacity to manage administrative and organizational matters can affect the schedule for project implementation. The most common recommendation to address this issue is assigning more time and resources to institutional training and to documenting and promoting best practices. In some cases, such training has started before large investment operations even begin. Other recommendations to build capacity include organizing ad hoc workshops to find solutions to administrative problems and reduce the timeframes for internal procedures; restructuring the executing agency; and paying close attention to project staff funding needs.

Where executing agencies manage pilot projects or subprojects within the same operation, efforts have been made to reduce complexity by minimizing the number of simultaneous initiatives and investing in a robust and strong executing agency. Outsourcing of subproject management processes, on the other hand, has not proven to be a viable solution.

The executing agency’s ability to coordinate with other actors also affects project implementation. Institutionalizing collaborative mechanisms to save time and resources during the implementation stage has had positive results. When there are several entities involved in implementation, designating one agency with the leadership role early on is considered critical to project success.

Also, the capacity of the executing agency in planning and monitoring should be carefully considered during the design of the operation. This allows for integrating an institutional-strengthening component early-on during project design should a weakness be identified. In turn, this facilitates execution.

Finally, there are legislative, regulatory or permit, and initial design issues during the design or pre-eligibility operational stage. Political support and the need to execute subprojects in synch with the larger operation of which they form a part are important. Project teams have also pointed to the key role of stakeholders in approving and maintaining the operation’s framework, and then the subsequent importance of continuing to coordinate with them to ensure ongoing political support for the project.

A comprehensive, clear, and specific intervention design allows a better understanding of what the operation is expected to deliver and achieve in a certain period of time. Furthermore, the execution of the intervention accompanied with rigorous quantitative and qualitative monitoring is crucial for gaining empirical evidence on the effectiveness of our interventions and providing lessons for the design of future projects.

Monitoring Non-Sovereign Guaranteed Operations

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As discussed in Chapter 2, non-sovereign guaranteed (NSG) operations2 receive development effectiveness project scores at approval, and these project scores are updated annually, after project disbursement, as a result of the monitoring exercise of projects’ development results. In 2014, the 112 Structured Corporate Finance (SCF) and Opportunities for the Majority (OMJ) projects3 had an average updated score of 7.7 (refer to Figure 3.3). Boxes 3.7 to 3.10 provide a closer look into how NSG projects have benefited from supervision.

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Box 3.7

ECUADOR – Quiport: From One of the Most Dangerous Airports to One of the Best

The IDB provided long-term financing that has enhanced the safety of air travel to the capital city of Ecuador and benefited the country’s main export. The old Mariscal Sucre Airport (MSA) in Quito suffered from a number of constraints due to its location. Located at an elevation of 8,700 feet (2,850 meters) with mountains on three sides and a city surrounding it, it forced a steep angle of approach navigating around the mountains onto a runway with diminished aircraft performance due to low outside pressure. MSA was considered one of the most dangerous airports in Latin America. The conditions described meant more flights were needed to carry passengers or cargo. In addition, the terminal was overcrowded. Consequently, MSA was not in compliance with International Civil Aviation Organization (ICAO) standards.

The IDB financing enabled the construction and commercial operation of the New Quito International Airport (NQIA) which began operating in February 2013. Construction generated more than US$1 billion of economic activity, requiring 20 million hours of labor and 500,000 hours of specialized training.

NQIA airport is located in the outskirts of Quito, at a lower altitude, and has longer runways than the old airport. In turn, this allows for bigger planes, ultimately bringing more passengers and cargo into and out of the region, expected to increase economic activity by up to US$200 million annually while relieving Quito’s residents from the noise and pollution of the old airport. In the two years since it opened, the export of roses, Ecuador’s main export, is substantially more efficient and has led Iberia to establish the first transatlantic flight route without layover between Europe and Quito.

Currently, as NQIA is pursuing the ambitious goal of becoming a zero-emissions airport, the IDB is providing technical assistance to establish the feasibility of solar panels to power at least part of the airport, and will undertake a shared value appraisal to include the local communities into the airport’s waste management program and supply chain.

Guided by project monitoring, NQIA was able to adopt an Environmental and Social Management Plan, a Health and Safety Plan, and is contributing to sustainable economic development, regional trade, and the quality and efficiency of transportation. Furthermore, NQIA has established a number of corporate social responsibility (CSR) programs including job skills training for local communities, a recycling program, a new water pipeline that provides reliable potable water for 120,000 people close to the airport and scholarships for vulnerable children.

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Box 3.8

BRAZIL – Infrastructure Investment Fund (Infrabrasil)

In June 2004, the IDB promoted the creation of InfraBrasil to promote private equity (PE) funds as a vehicle to fund new infrastructure projects with long term equity capital. Given that fiscal constraints limited the public sector’s ability to significantly boost investments in the sector, mobilizing private resources was necessary to contribute to successfully narrowing the country’s infrastructure gap.

The IDB’s role in supervision of the portfolio provided investor confidence and was catalytic to investment mobilization. With the support of an anchor $70mm loan from the Bank, InfraBrasil was able to raise an additional estimated US$ 500 million from local pension funds.

InfraBrasil was originally structured with a focus on the energy, transportation, and water and sanitation sectors. The IDB took an active role in supervising the Fund, promoting changes to its target market once it became clear that the country had a pressing need to increase and diversify its energy matrix. The IDB adapted the original structure of the fund to allow for a higher share of the resources to be invested in the energy sector.

InfraBrasil invested in a portfolio of 17 projects through a combination of equity and debt instruments. In the energy sector, InfraBrasil’s investments supported an increase in the country’s generation capacity by nearly 800 MW. Among others, in the water and sanitation sector, the Fund’s investments supported: the first sanitation Public-Private Partnership (PPP) at the municipal level, providing 200,000 people in Rio de Janeiro with access to sewerage services. In the transportation sector, InfraBrasil’s support to two toll road concessions enabled improvements on over 700 km of roads in Sao Paulo.

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Box 3.9

CHILE – Banco BICE: Access2services Facility

In its effort to promote key strategic social sectors through the provision of private sector sustainable financing, IDB partnered with Banco Industrial y de Comercio Exterior (Banco BICE) to increase access to finance in health, education, and environmentally-sustainable projects in Chile. In order to effectively monitor the implementation of the Facility, IDB, in consultation with Grupo Educativo, a Chile-based consultancy specialized in health and education, helped Banco BICE define a series of indicators that are aligned with the industry’s international standards for impact investment.1

In addition to IDB’s support to strengthen the project’s screening and monitoring the provision of long-term financing allowed Banco BICE to enter into the health and education sectors, and to further develop its portfolio of environmentally friendly projects. The IDB contributed to enhance BICE’s banking practices and credit process by promoting the adoption of a new systematic approach for sustainable lending in line with IDB’s Green Lines Eligibility Guidelines. The IDB also encouraged Banco BICE to improve its environmental and social (E&S) practices for compliance with international standards, ensuring that proper E&S due diligence, monitoring and reporting is required for all sub-loans in the portfolio.

These actions played an instrumental role in the expansion of BICE’s green portfolio and the development of new credit lines for social impact investments. Since the approval of the Facility, BICE has more than tripled its sustainable portfolio in terms of number of financed transactions from 8 to 26 projects as of the end of June 2014. These results more than surpass the target of 13 green transactions by 2015. Regarding the financing of social impact investments, Banco BICE supported the construction of four new financially sustainable health clinics in low and middle income municipalities, benefiting about 900,000 patients.

  1. The IRIS standard of the Global Impact Investment Network (GIIN).return

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Box 3.10

BRAZIL – Banco Gerador: Banorte Todo Día

The quarterly monitoring report of the IDB’s Opportunities for the Majority Sector (OMJ) to a US$5-million-loan to Banco Gerador (BG) allowed the project to adjust the business model and reach the target population.

Back in 2011, BG was seeking to increase its reach to the largely unbanked population in remote areas of Northeast Brazil. OMJ’s loan aimed at supporting BG’s efforts to implement the Banorte Todo Día project, an innovative business model initially focused on creating partnerships with local distributors to identify the best “Mercadinhos” (small shops) in need of credit lines.

The project’s goal was to set up BG’s point-of-sales (POS) devices to offer banking services to the low income population surrounding them. The Mercadinhos, in turn, would be able to increase clientele, as costumers could use BG’s financing for purchases.

In practice, this incentive for the Mercadinhos to promote BG’s cards and its accompanying banking services was not enough and the financial product did not take off. As OMJ ran its quarterly monitoring report, results were far below targets. Soon enough, it was agreed that other channels would be used to strengthen the Banorte Todo Día program and reach the same target population.

Therefore, BG decided to use its network of correspondent banks called “Rede Banorte” to offer the product “Banorte Amigo”, a credit line specifically targeted at informal businesses located in the neighborhood of these correspondent banks. Such a streamlined structure, coupled with the community knowledge of the correspondent banks, diminishes transaction costs and credit risks, which are difficult to grasp in such an informal setting. As the Banorte Todo Día project proceeds, OMJ will continue to monitor its results closely, ensuring that the unbanked population’s financial needs are fulfilled.

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  1. These percentages are cumulative and independent of the project’s implementation stage. Less than 1 percent (five operations) of total Bank operations have not been assigned a performance rating. They are not rated because they had not programmed physical or financial progress in 2013.return

  2. Refers to projects by the Structured Corporate Finance Division and the Opportunities for the Majority Sector.return

  3. As discussed in Chapter 2, SCF projects are large-scale projects, and OMJ projects provide opportunities for the base of the pyramid. The results presented here cover those regular (non TFFP) projects which were approved after 2008 when the ex-ante DEM was first applied, excluding relatively new projects where PSRs have not been provided yet.return