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Measuring Development

Measuring the development impact of our work is critical to understanding the extent to which we are in line with our strategy and mission. Understanding the impact in turn helps drive FMO’s strategy and decision-making. Our tool comprises three main components: ex-ante development effectiveness assessments (EDIS/DII), a set of monitoring indicators (quantitative indicators, or QIs) and a system to evaluate project development and investment outcomes. We also assess the extent to which FMO is additional, or fills a financing gap, in each transaction it finances. We measure our ‘additionality’ along three dimensions. The first relates to the nature of the product we offer; that is, the extent to which tenor, currency and product risk are accepted by FMO and not by commercial banks. The remaining two dimensions relate to FMO’s acceptance of country and client risks that are not generally accepted by commercial parties. This systematic approach allows FMO to track progress and outcomes of our investments and incorporate lessons learned into future investments – it is fundamental to FMO’s accountability to stakeholders.

It should be noted that FMO often invests with other investors. In these cases development impact cannot be attributed wholly to FMO.

Quantitative Indicators (QIs)

Beyond making financial returns in investments, FMO aims to show development results through for example increased employment, access to finance and contribution to Government revenues. FMO currently reports on a broad level, addressing the non-financial outcomes of our investments as well. However, a more holistic methodology that filters out other contributors to a project’s failure or success has yet to be developed.

As FMO is active in many sectors, we monitor developments using a set of sector-specific QIs that have been selected by the (E)DFIs[1]. These QIs measure our clients’ direct development reach in terms of: number of jobs, net contributions to government revenue (taxes minus subsidies), access to finance (microenterprises and SMEs) and electricity connections. We aggregate and report these QIs on a portfolio level, irrespective of FMO’s investment size at the client level. We therefore interpret reported QIs as indicators of FMO’s development impact. Furthermore research[2] based on three EDFI energy infrastructure investments in sub-Saharan African indicated a potential multiplier effect.

[1] A number of QI definitions are standardized (and limitations are common) among the EDFIs. EDFI reports on these indicators in an aggregated level.

Beyond KPIs

We published the QIs for the first time in our 2010 Annual Report, but refrained from doing so in 2011. An important factor to consider is the incomparability of yearly QI figures: portfolios change, companies repay their loans or are exited and new companies enter the books. Comparing overall figures could thus possibly lead to incorrect conclusions. We therefore decided to postpone publishing our QIs until this issue has been addressed. We also found some issues with the accountability, and therefore the quality, of the data. In 2012 we improved the processes of gathering sound QI data in order to increase the quality of our reporting. Yet, we still note that our clients’ non-financial figures are not currently reconcilable to audited financial statements.

Development Reach by FMO Clients

The reported QIs provide a snapshot of the portfolio but are not used as KPIs. The portfolio we report on shifts year by year. We have noticed that the dynamic nature of our investment portfolio can lead to volatility in the reported data, for example in cases where a few very large clients contribute substantially to the reported data or where a new facility is registered. We therefore publish a snapshot of the QIs for the full year 2012. For clarity to the reader, these limitations should be taken into consideration while interpreting the QI data.

The 2012 figures

The 2012 financial year QIs (Development Reach by FMO clients) measure the number of persons reached by FMO’s clients and the euro benefit to stakeholders regardless of FMO’s investment size (no attribution). These are indicative of FMO’s development impact. The 2012 QI data is based on 437 clients for whom we received complete QI information out of 543 clients (an 80% coverage ratio) − after certain exclusions[1] of FMO’s portfolio, missing data are not extrapolated. The 2012 data reflects our clients’ 2011 data. QIs are currently not targets within FMO.

In the future FMO would like to be able to report more comprehensively on our own impact. Indeed, our newly defined strategy is centered on doubling impact by 2020. In 2013 we plan to put in place the processes that will enable us to target and report on impact (attributable to FMO) in the future. This will be an iterative learning process, and we welcome the challenges that lie ahead of us.

[1] Sixty-six (66) where FMO either provided with grants or clients who are 100% provisioned/impaired, facility ended are currently excluded. Where we have exposures on both a holding and subsidiaries, we collect QIs at the holding level to avoid double counting. 

Portfolio-wide performance indicators

Portfolio-wide performance indicators 2Portfolio FY2012 1
Number of employees – all sectors (*mln) 31.26
Microfinance loans
Volume (*€mln)20,204
Number (*mln)23.63
SME loans 4 
Volume (*€mln)35,720
Number (*mln)0.92
Customers reached with services 
Number of electricity connections (*mln) 56.71
Payments to governments 
Contribution to government revenues (*€mln) 6746.71
FY2012 QIs is not compared with previous years QIs because: FY2012 is based on a changed portfolio of FMO.
It should be noted that FMO often invests with other investors. In these cases development impact cannot be attributed wholly to FMO.
Portfolio reach figures consist of YE 2011 jobs provided by 437 clients: financial institutions (including private equity funds through investees) and companies/projects who have reported complete QIs in FY2012.
Portfolio reach figures represent YE2011 microfinance and SME outstanding loan portfolio of FMO financial institution clients. Data is based on 153 clients that have reported complete information as of FY2012. Microfinance loans are outstanding loans between “€0-€10,000”; SME loans are outstanding loans between “€10,001-€1million”.
FMO helps to increase access to energy by financing energy projects. In FY2012, 72 FMO’s investment clients were reported to have provided for (estimated) 6.71 mln electricity connections (this is the number of customers served). This figure is automatically derived in our scorecard application as: Client’s installed generation capacity in MW/Total installed capacity in the country MW * number of electricity connections in the country. It gives an approximation of how much electricity connections the project that FMO financed contributes to the host countries’ number of electricity connections. Underlying reasoning is that MW is translated into customers/households served). The MW installed and number of electricity connections in the country is obtained from different sources such as host countries’ distribution company, project’s consultants, market studies, World Bank publications and country energy strategy papers and in few cases estimates which is inputted into the scorecard for the calculation.
In FY2012, €746,71 mln was contributed in the form of taxes and other payments to the government by 170 FMO’s investment clients (excluding financial institutions and private equity funds) for which we received completed QIs, subsidies received are deducted where applicable. This number includes three financial sector clients for whom we have registered as ‘companies’ in our internal scorecard application.

Development reach by FMO Sectors

Financial Sector
Financial Institution: 
Number of employees (x1,000) 353.56
Microfinance loans 
Volume (*€mln)20,204
Number (*mln)23.63
SME loans 
Volume (*€mln)35,720
Number (*mln)0.92
Private Equity Fund:
Employment at investees (x1,000)715.29
Number of investees903
Amount invested at investees (*€mln)4,811
Access to Energy
Employment (x1,000)14.66
Number of electricity connections (*mln)6.71
Contribution to government revenues (*€mln)74.31
Employment (x1,000)61.21
Contribution to government revenues (*€mln)111.83
Others - Diversified Sector
Employment (x1,000)106.81
Contribution to government revenues (*€mln)533.31