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IFC's Approach to Engaging Clients for Increased Development Impact

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View this brief overview of the findings of IEG's evaluation, which assesses how the IFC has implemented its strategic approach to client engagement since the early 2000s, and its effects on IFC's clients and the development impact of its operations.

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IFC's Approach to Engaging Clients for Increased Development Impact

  1. 1. IFC’s Approach to Engaging Clients for Increased Development Impact Hiroyuki Hatashima Stephan Wegner May 22, 2018 Independent Evaluation Group
  2. 2. 2 Main takeaways Engaging with clients is a relevant response to IFC’s changing operating environment IFC has only partially implemented its elements of the client engagement approach Projects with strategic clients are associated with better development results – driven by client quality Key objectives of the client approach have not been achieved: quality and volume of investments including in priority areas; business efficiency goals Highly relevant to development needs but little systematic attention. 1. Relevant adaptation 2. Partial implementation 3. Impact 4. Quality and growth 5. Upstream initiatives
  3. 3. Today’s presentation │ Context and scope of the evaluation │ How well has IFC implemented its strategic approach to client engagement? │ Main findings 3Independent Evaluation Group │ Recommendations
  4. 4. │ Context and Scope of the Evaluation
  5. 5. IFC introduced strategic engagement with clients as a priority in the early 2000s  Transform IFC from a transaction-focused to a relationship-based organization  Work with strategic clients to increase IFC’s and clients’ development impact and business efficiency The evaluation assesses how effective IFC has been in its approaches to client engagement
  6. 6. IEG reviewed three types of client engagement 6Independent Evaluation Group 1. Client-focused partnerships (e.g., long-term partnerships with AKFED, ECOM) 2. Upstream and programmatic interventions (e.g., InfraVentures, Lighting Africa) 3. Country-focused engagements (e.g., joint implementation plans: Myanmar power sector)
  7. 7. │ How well has IFC implemented its strategic approach?
  8. 8. Partial implementation of approach means goal of transforming IFC not achieved 8Independent Evaluation Group • IFC’s evolving approach was comprehensive in design and relevant to supporting increased development impact • IFC has become more client oriented over the past decade • But it only partially implemented the approach to client engagement (e.g., client segmentation) • Thus, the goal of transforming IFC to a client-focused institution has not been achieved.
  9. 9. Repeat clients account for a significant share of IFC’s business volume IFC MIS, FY04-16
  10. 10. Most IFIs and the private sector have a strong focus on clients 10Independent Evaluation Group Comparators • Implement client engagement approaches to differing degrees • Differentiate between strategic clients and sources of repeat business • Deploy a tier structure for clients with more varied treatment in terms of access to senior staff, resources and product offerings • Commercial banks reflect substantial client differentiation, including in pricing and special conditions. However, some practices may be at odds with IFC’s development mandate
  11. 11. │ Main findings
  12. 12. • IFC’s approach is a relevant and timely adaptation to a changing world with more players in the private sector development space • Although only partially implemented, the approach has made IFC more client- oriented, with tangible effects on IFC’s behavior and performance Client engagement is a relevant adaptation to a changing world
  13. 13. Repeatclientsandlong- termpartnersperform morestrongly BetteroutcomesinIFC strategicpriorities (IDA,FCS) Therefore,afuller implementationofthe clientapproachcould yieldenhancedresults IFC projects with strategic clients are associated with better development results Countries
  14. 14. Thesuperior performanceisduetoa selectioneffect (ratherthanlearningon thepartoftheclient). Thiseffectisbasedon clientqualityand strategicfit,combined withIFC’sfinancialand nonfinancial additionality 14Independent Evaluation Group Better performance is due to a selection effect rather than learning SEQUENCE
  15. 15. • No sustained increase in business volume • Deteriorating portfolio quality • Strategic clients did not drive growth in priority areas (IDA, FCS) • Limited ability to influence clients’ capacities and development orientation Key objectives of the client engagement approach have not been achieved 0.59 2.94 1.01 2.52 - 1.00 2.00 3.00 4.00 5.00 6.00 2004-6 2014-16 US$billion One off Repeat 0.25 1.24 - 1.00 2.00 3.00 4.00 5.00 6.00 2004-6 2014-16 FCS Long-term Partnership Business volume in IDA countries Business volume in FCS countries 0.05 0.31 - 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 0.16 1.02 0.40 0.41 - 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 2004-6 2014-16
  16. 16. Client engagement approach has had limited effect on business efficiency Lack of progress on: • Response times • Streamlining procedures • Client satisfaction IFC Average 395
  17. 17. Client relationships have a lifecycle IFC’s role evolves during client relationships, but little evidence of incremental additionality in repeat projects • Additionality is the key motivator for clients’ engagement with IFC • While additionality was stronger with strategic clients -- little evidence of incremental additionality in repeat projects
  18. 18.  Highly relevant to client needs  … but with mixed results  Not mainstreamed within IFC  Interventions are complex, resource intensive, and higher risk -- indicating challenges in operationalizing IFC 3.0 and the creating markets agenda  Internal factors constrain mainstreaming (incentives, culture, ad hoc nature of initiatives, resources, cross cutting teams, organizational silos) IFC has undertaken numerous upstream initiatives-- but little systematic attention
  19. 19. There is a “missing middle”between policy reforms and country diagnostics, and identifyingand developing projects Country-level interventions provide a platform for upstream client engagement but are at early stages • Joint Implementation Plans have potential to address binding constraints and increase investments in high-risk environments • Too early to assess effectiveness – no evidence of shift in IFC’s portfolio • Key enablers: strong relationships in the field to adapt projects to country contexts; alignment of incentives and resources for collaborative engagements • Key challenge: political and security environments and low human and institutional capacities in JIP countries
  20. 20. │ Recommendations
  21. 21. Systematic approach IFC needs to systematically implement the strategic approach to client engagement focusing on areas where implementation has lagged Client management Upstream Engagement IFC needs to strengthen client relationship management to improve the pipeline of new strategic clients IFC needs to enhance its capacity for upstream engagement on projects in order to increase the number and quality of strategic clients. This means focusing on management commitment, accountability, and incentives
  22. 22. Thank you! Visit http://ieg.worldbankgroup.org

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