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Insights on Efficiency

Competing against Ourselves to Be Better at What We Do

The efficiency with which a multilateral development organization like the IDB works is typically measured through indicators capturing time and cost to deliver products and services.

The efficiency indicators included in the CRF 2012–2015 aim to measure key business processes (such as country strategy approval, project approval, and loan disbursements), which involve a multitude of internal and external actors (and factors). For this reason, caution should be exercised in interpreting final indicator status data, particularly in the case of indicators related to process cycle-time and cost-efficiency (see Box 1.1 in Chapter 1 and Box 4.4).

A closer look at indicators 4.5.6, 4.5.8 and 4.5.9 (in Figure D5), where the Bank fell short of meeting three of its five cycle-time targets is in order.

The indicator on the time to deliver country strategies (Indicator 4.5.6) ended the period at 14.6 months, significantly above its target of 6 months. However, given the collaborative nature of the country strategy development process (which has an average duration of 10 months), the target of 6 months proved unrealistic.

Similarly, the cycle time of SG loan disbursements (Indicator 4.5.8) provides yet another example of the limitations of these indicators, as performance is dependent not only upon Bank action, but also each project’s executing agency. In addition, a number of external factors affect a country’s need for loan disbursements, including current economic conditions, or shifting priorities affecting the demand for Bank financing for a given project, or access to counterpart funds.

Finally, although the time to prepare NSG loan operations (Indicator 4.5.9) decreased throughout the period, it ended slightly above 7 months in 2015, which is still above the target of 6 months.

The Bank’s private sector windows successfully reduced the time it takes to make first disbursements for NSG loan operations, ending the period at 5 days, well below the target of 10 days (Indicator 4.5.10). Also, the time to prepare SG loans reached 5.8 months in 2015 (Indicator 4.5.7), well below the target of 8 months.

The above cycle-time indicators should be interpreted with caution. Particularly, these indicators capture either loan preparation or loan disbursement cycle times, and as such have failed to measure efficiency more comprehensively in terms of the entire project cycle. In this sense, speeding up the project cycle might mean in some cases devoting more time to project design, to reduce the probability that problems arise during execution.

Figure D.5
Operational Effectiveness and Efficiency Indicators: Efficiency

Turning to cost efficiency, indicators 4.5.3 and 4.5.4 should also be interpreted with caution. More specifically, the denominator in both indicators is a function of the demand for IDB lending, which – as with indicator 4.5.8 – is also determined by a number of factors outside the Bank’s control.

The administrative cost per million dollars of loans approved ended the period at US$41,336 (Indicator 4.5.3), significantly exceeding the target of $34,000. The Bank’s budget (the numerator) remained flat in real terms from 2014 to 2015.The increase in the indicator was driven by the lower volume of approvals (the denominator) in 2015, which went from almost $14 billion in 2013 and 2014 to $11.3 billion in 2015.

The administrative costs associated with every million dollars disbursed decreased significantly over this period, achieving the target of below $45,000 (Indicator 4.5.4). The portion of the Bank’s administrative budget spent on activities directly associated with its operational work ended the period at 66 percent in 2015, thus not achieving the target of 68 percent (Indicator 4.5.5) by two percentage points.

Also notably, in line with its commitment to mobilize additional funding to support development efforts, the Bank exceeded its target for co-financing (Indicator 4.5.1). During 2012-2015, the Bank mobilized a total of $14.8 billion in additional resources. The Bank’s Partnership Reports provide detailed information as to the importance these mobilized resources have had in promoting economic and social progress throughout the Region, and may be accessed at www.iadb.org/Partnerships.