Measuring and monitoring impact: A conversation with Margaret Kuhlow of OPIC’s Office of Investment Policy
As the U.S. Government’s development finance institution, OPIC is focused on supporting projects that deliver real and measurable benefits in their host countries. The Agency is also mandated by Congress to hold all of its projects to high environmental, social, human rights, economic and developmental standards. This work of measuring every potential project’s developmental impact, and monitoring active projects is carried out by OPIC’s Office of Investment Policy (OIP). In this interview, Margaret Kuhlow, Vice President of OIP, explains the work that she and her colleagues do.
What is the role of the Office of Investment Policy?
OIP promotes sustainable economic development across OPIC’s portfolio. We work to ensure that OPIC-supported projects are environmentally and socially sustainable, that they respect human and workers rights, and that they have a positive impact on the ground in the countries in which we operate. We also make sure there is no harm to the U.S. economy from the projects that OPIC supports.
The other major activity for which the department is responsible is project monitoring. We monitor project compliance with OPIC’s environmental, social, worker rights, and U.S. Effects policies. We also monitor the actual developmental impact of our investments by comparing our initial metrics and projections made when we committed support to these projects against the actual developmental impacts realized in project implementation.
How does the office measure the developmental impact of a project?
OPIC started measuring the impact of its investments virtually from the beginning of its existence. We have always looked at the number of jobs our projects create, local tax revenues generated, and any additional procurement of goods and services that result from these projects, for example.
During the last 10 years, we have developed an analytical tool to measure these types of impacts more systematically. There are two main kinds of metrics. The first helps to measure the impact of projects that help financial intermediaries such as banks that provide microfinance loans in a community. The second measures the impacts of more physical investments – anything from infrastructure to manufacturing and services. These tools measure things like whether a project will bring a new product to market or how many direct jobs the project will add.
Last year, we went through an extensive review of our development impact measurement tool. We looked at our experience with the data we gather. We also looked at how other organizations like OPIC measure developmental impact, and we examined how the private sector measures the impacts of projects they support in emerging markets. The result was a revision of our measurement tool to make it less complicated for our clients by reducing the number of individual indicators, and more closely aligning our measurements with those of other developmental finance institutions like the International Finance Corporation, for example.
What potential effects could these development projects have on the U.S. and how does OPIC measure these?
The first thing we look at are the potential positive benefits to the U.S. economy. When projects that OPIC supports buy goods or services from the United States, it has a positive impact on U.S. job creation. So, we measure the increase in U.S. exports and the related jobs at home that will come from the projects we support. We also work to ensure that that the projects that we support don’t take any jobs away from the U.S.
Can you describe one of OPIC’s projects that has had the most positive developmental impact?
One great example is Healthpoint Global Services in India. In 2012, OPIC committed a $3.5 million loan to Healthpoint to support the construction of a water treatment facility, which will provide drinking water to some 400 communities that have limited access to safe drinking water in India’s Punjab state. It’s always exciting to be able to find a way to provide access to critical services in a way that is also financially self-sustaining.
Can you talk about one of your trips to an OPIC project site and the developmental benefits you’ve seen?
My most recent trip was to Kenya, as a part of an interdisciplinary team from OPIC, charged with looking at microfinance institutions that we are supporting. We were interested in seeing how these institutions were performing both financially and in terms of developmental impact.
We talked to the CEOs and operational heads of the banks to see how their portfolios have grown since OPIC has been working with them. We also met with their clients to see how they are doing. I find that meeting the entrepreneurs we support either directly or indirectly through financing to banks, is very inspiring. It is always interesting to see how in these very difficult business environments they can find a way to make their business work. They are creating jobs, and these new jobs empower people, giving them income and financial independence.
I think at OPIC we do a really good job of not only making sure we are working with quality clients with quality investment ideas, but we also monitor these investments. I think the combination of that careful selection and rigorous monitoring is what gives us such a rich portfolio.
You can read other recent interviews with OPIC Executive Staff Members on The OPIC Blog including this conversation with Lynn Tabernacki, Managing Director of Renewable and Clean Energy Programs and this discussion with Judith Pryor, Vice President of the Office of External Affairs.