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The Global Campaign for Aid and Development Transparency

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Home / Our Work / DFI Transparency Initiative / FAQs

FAQs

Below we have set out to answer the most frequently asked questions about the DFI Transparency Index:

Publish What You Fund has conducted the Aid Transparency Index for 10 years. Over this period, seven multilateral development finance institutions (DFIs) have been included in the Aid Transparency Index. While some DFIs have performed well, particularly in terms of their sovereign operations, they have raised the issue that their business models are markedly different from “traditional” aid agencies and as such they struggle to meet some of the transparency criteria set out in the index. In particular, the non-sovereign operations of DFIs differ substantially from “traditional” aid operations. As such, we identified the need for a product that is more tailored to assessing the transparency of their business models.

One key difference between the Aid Transparency Index and the DFI Transparency Index is the extent to which they assess the quality of publication in the International Aid Transparency Initiative (IATI) Standard. The Aid Transparency Index is significantly focused on publication in the IATI Standard, as this is accepted as the global standard for aid data. Recognising that there are elements of IATI publication that are not relevant to DFIs, and that there are important aspects of DFI activity that cannot currently be published to the IATI Standard, we have adopted a more nuanced approach to assessing DFI transparency. Where possible, the indicators of the DFI Transparency Index are aligned to the IATI Standard and publication to the Standard is incentivised. However, we include numerous indicators that do not specify publication to the Standard.

We recognise that for DFIs included in both the Aid Transparency Index and the DFI Transparency Index the current arrangement may not seem ideal. We have sought to reduce the burden of this arrangement by aligning the indexes to the greatest degree possible, while retaining their individual significance and the logics behind their use. We will continue to assess the relationship between the two indexes over 2022.

Both the DFI Transparency Tool and the DFI Transparency Index have been developed as part of Publish What You Fund’s DFI Transparency Initiative. The initiative is a multi-stakeholder research and advocacy project that aims to improve the transparency of DFIs. We have been researching the current state of DFI transparency and opportunities for improvement since November 2019. The initiative identified the need for a sustainable product that would facilitate and encourage enduring change over time.

The DFI Transparency Tool has two functions. First, it is intended to provide granular guidance to DFIs about the types of information that a range of stakeholders value and that should therefore be disclosed, based on their obligations as publicly owned entities that manage and disburse public money. Second, it forms the basis of future and ongoing assessments of the transparency of DFIs (the DFI Transparency Index).

The DFI Transparency Index will measure, assess, and rank the transparency of leading DFIs against a set of indicators, which were informed by the research behind the DFI Transparency Tool.

Currently, the DFI Transparency Index is part of a pilot phase, which we hope to continue after the DFI Transparency Initiative comes to an end in January 2023. Our intention is to continue running the index on a two-year cycle, recognising that it can take significant amounts of time for DFIs to change practice and policies. However, future indexes are dependent on securing further funding for this undertaking.

Our criteria for determining which DFIs feature in the index is based on the primary mandates of the institutions, their size, the geographic scope of their work, and their suitability for assessment according to current reporting practices. We have developed separate selection criteria for multilateral and bilateral DFIs due to their vastly difference sizes and varying mandates. Our selection has been guided by data from the Finance in Common PDB Database.[1] The criteria are as follows:

Multilateral DFIs (Sovereign and Non-Sovereign)

  1. Institutions must have a primary focus on investing in activities with a development objective. Trade finance institutions, including export import banks, are excluded from the assessment.
  2. Institutions must have a total asset size over US $15 billion. For DFIs that operate separate institutions under a group, then total group assets may be considered.
  3. Institutions must work internationally.
  4. Institutions must demonstrate a fundamental commitment to transparency through the maintenance of a database or list of active investments.

Bilateral DFIs

  1. Institutions must have a primary focus on investing in private sector activities with a development objective. Trade finance institutions, including export import banks, are excluded from the assessment.
  2. Institutions must have a total asset size over US$500 million.
  3. Institutions must work internationally.
  4. Institutions must demonstrate a fundamental commitment to transparency through the maintenance of a database or list of active investments.

Further details of the DFIs included in the DFI Transparency Index are provided in the methodology.

[1] Xu, Jiajun, Régis Marodon, Xinshun Ru, Xiaomeng Ren, and Xinyue Wu. 2021. “What are Public Development Banks and Development Financing Institutions? Qualification Criteria, Stylized Facts and Development Trends.” China Economic Quarterly International, volume 1, issue 4: 271-294.

The DFI Transparency Index assesses the transparency of DFI lending to financial intermediaries (including funds, banks, and non-bank financial institutions) as well as a subset of financial intermediary sub-investments. At the level of the financial intermediary, DFI investments are treated in the same way as DFI direct investments in other sectors and, as such, the same level of transparency is expected. Reflecting this, DFI investments in financial intermediaries may be included in the samples of projects that we will analyse.

We limit our assessment of financial intermediary sub-investments to a sub-set of total on-lending activity. This is in recognition of the fact that a significant proportion of financial intermediary on-lending targets relatively low risk sectors, including MSME financing and housing finance. With this in mind, we limit our assessment to the disclosure of sub-investments of funds (such as private equity funds) and high risk and/or large on lending activities. We define high risk and/or large as Category A (or equivalent) sub-investments and sub-investments that are larger than the thresholds established by the Equator Principles. The Equator Principles represent an internationally recognised standard for the identification of high-risk financing.

The DFI Transparency Index will assess both sovereign and non-sovereign lending by DFIs. In the case of sovereign lending, this will be limited to leading multilateral DFIs, while assessment of non-sovereign lending will include both multilateral and bilateral DFIs. For multilateral DFIs that conduct both sovereign and non-sovereign activities we will assess each separately.

While we are assessing both forms of lending, our analysis and ranking will separate sovereign and non-sovereign lending. This is a result of our recognition that the two types of lending involve significantly different business models and, as such, necessitate the disclosure of different types of information. As the DFI Transparency Tool varies across the two types of lending, and the DFI Transparency Index includes different indicators in line with the tool, it is necessary to weigh the constituent indicators differently. With this in mind, we will conduct two rankings.

We will be completing the DFI Transparency Index throughout 2022. Our proposed plan of work is as follows:

November 2021 to April 2022

Methodology Development: DFI inclusion criteria and selection for Index, sampling approach, data collection and analysis process, scoring approach, and determination of indicator weightings. We conducted consultations on the methodology in March and made necessary edits during April.

April 2022

Database Building: extracting data from DFI investment lists and databases to identify investments for a set period of time (stipulated in the methodology) from which our samples will be selected at random. The process will exclude investments which do not qualify for assessment based on level of country income and investment size.

May to June 2022

Data Collection and Analysis – First Round: assessment of DFIs’ organisation and project-level disclosure from first sample of fifteen projects. Data will be recorded in a dedicated workbook and supporting document and analysed according to the scoring approach set out in the methodology. This round of analysis will not contribute to the final score of DFIs in the index; it is intended to give DFIs an indication of their performance and to identify areas for improvement before the next round of sampling.

The list of DFIs to be included and the methodology will be finalised and made public in May 2022.

July 2022

DFI Review: first round scores will be sent directly to DFIs in July to give them an opportunity to understand our assessment of their performance and provide feedback on our findings. DFIs will be provided with a granular analysis of their results including their workbooks and a supporting document. DFI feedback will be considered prior to the second round of data collection and analysis.

Independent Review: first round scores will simultaneously be sent to independent reviewers who will review our assessment of DFI transparency. Reviewers will be asked to provide feedback which will be incorporated into the second round of data collection and analysis.

August to September 2022

Data Collection and Analysis – Second Round: assessment of DFI’s organisation and project level disclosure from second sample of fifteen projects. Data will be recorded in a dedicated workbook and supporting document and analysed according to the scoring approach set out in the methodology. This round of analysis will be the only round that contributes to index scores.

October to December 2022

Report Production: DFIs included in the Index will be ranked according to performance and results will be presented in a public report alongside detailed analysis of the assessments.

Late 2022/Early 2023

Launch of report: the Index report will be launched at a public event no later than January 2023.

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