Measuring and monitoring impact: Five ways development impacts lives (Part Three in a series)
Some benefits of an investment in a developing country are obvious. A new power plant, for example, provides a reliable source of electricity to people who may have been living without. But the benefits do not stop there. The same project will most likely create jobs and generate tax revenue for the host country, result in the procurement of local goods and services, and – if it uses a renewable resource to generate power – do so in a way that minimizes environmental impact.
OPIC seeks to support projects it determines to have a high developmental impact based on five categories. Below is a more detailed look at these categories and the way different projects support them.
1. Development can create jobs, many which provide training and enhance the skill sets in the local labor pool.
Example: OPIC agreed this past year to provide $250 million in financing to support construction of a major medical complex in Malaysia in partnership with the Johns Hopkins University and others. While the project will significantly increase the quality and availability of healthcare with the creation of a new medical school, together with a 600 bed teaching hospital and research center, it is expected to create more than 2,600 local jobs. Approximately 95 percent of those jobs will be professional or technical.
2. Development can introduce new products, services, business practices or production processes into the host country.
Example: OPIC has provided financing to the Medical Credit Fund (MCF), which is working to expand access to healthcare finance in sub-Saharan Africa. MCF provides loans to small and medium-sized private healthcare providers in multiple African countries to strengthen and upgrade their operations. MCF’s model includes ongoing provision of technical assistance in business planning and financial management. It also ensures that each borrower develops a relationship with a local bank, with the bank taking an increasing share of risk in follow-on loans. This project has many innovative features, perhaps the most important of which is helping to establish a new model for gradually integrating small and medium-sized businesses into the local financial system.
3. Development can bring many macro-economic benefits to the host country, often in the form of additional tax revenue and procurement of local goods and services.
Example: OPIC is helping finance a biomass power project in Tanzania that will generate electricity from bamboo and other agricultural products in one of the world’s most underserved electricity markets. In addition to the benefit of increasing the supply of electricity in rural parts of the country that are not connected to the main grid, this project will result in an estimated $1.3 million in local procurement of bamboo, corn stalks and palm residues. The government of Tanzania is also expected to receive an estimated $416,000 from duties and taxes related to the project.
4. Development can have a specific “reach” by ensuring benefits target those with the greatest need.
Example: OPIC is supporting increased financing to small and medium businesses through its commitment to loan up to $400 million to Brazil’s Banco Itau Unibanco S.A. for SME on-lending. This project will target underserved populations in Brazil, specifically women-owned businesses and clients located in Brazil’s rural northeast and will support an estimated 5,000 loans ranging from $1,000 to $2 million. Similarly, an OPIC commitment to provide $45 million in financing to FINCA Microfinance to help increase availability of financial services such as savings accounts and home loans across 21 developing countries where rates of financial inclusion are low, is expected to support some 60,000 loans of an average size of $751.
5. Finally, development can bring environmental and community benefits. OPIC, which has in recent years increasingly focused on investing in renewable resources such as wind and solar power and in sustainable agriculture, strives to support projects that support the planet. The recent investment in the biomass project in Tanzania is just one example of this focus. Many OPIC investments also support environmental and community improvements beyond the direct scope of the projects themselves.
Example: An OPIC loan to Grama Vidiyal Microfinance Ltd. will support expanded lending to entrepreneurs – primarily women – in India with loans of a few hundred dollars to an estimated 10,000 borrowers. Grama will complement its loans with comprehensive technical assistance to borrowers in the areas of debt management, business management, and environmental sustainability. It will also help borrowers obtain treatment for eye problems in collaboration with a local eye hospital.