The IFI Working Group on Indicator Harmonization
The broad range of structures, mandates and shareholders of DFIs working with the private sector means that there are many different systems used to track development results. The shared clients of these DFIs therefore often endure an unintended burden deriving from the DFIs’ different reporting requirements, including similar indicators (with different definitions) meant to capture the same data.
Efforts to mitigate this burden began in 2008, and progress accelerated 4 years later when over 20 DFIs formed a Working Group on Indicator Harmonization that agreed to benchmark indicators for private sector investment operations and seek examples of best practice for shared adoption. Over 400 indicators used by the DFIs involved in the effort were reviewed while the Working Group grew to include 25 DFIs.
A first set of 27 indicators was agreed in the form of an MoU, signed in October 2013. It mandates that (I) if a DFI tracks development results, it will use the harmonized definitions and units of measurement; and (ii) if it has a results tracking system in place that already features indicators that are the same as the harmonized ones, it will replace them accordingly. There is no obligation, however, to start tracking and using the harmonized indicators if a DFI does not wish to track the development outcomes they capture.
Why harmonized indicators matter
Many DFIs share the same clients or invest in the same industries, yet require clients to report their activities based on different sets of criteria.
The Harmonized Indicators for Private Sector Operations standardize these criteria and reduce the administrative burden of shared clients, allowing them to focus on what matters most: delivering results on the ground.
Supporting the private sector
Many private sector entities receive financing from multiple DFIs. As a result, they are often required to report on their activities multiple times, but with different criteria that depends on the reporting requirements of each DFI involved.
These clients carry an added administrative burden that can be reduced by harmonizing the definitions of at least some of these indicators.
Better Data for Smarter Investments
Shared standard indicators will provide development institutions with an aggregate data set to help facilitate collaboration and learning among development practitioners and institutions, and help DFIs to better understand the impact of their investments.
A memorandum of understanding (MoU)
The harmonized indicators initiative yielded a memorandum of understanding (MoU), signed in October 2013 in Washington, D.C., during the Private Sector Round table that takes place annually at the IMF-World Bank Annual Meetings, and an Addendum to the MoU, signed in the fall 2015.
The MoU, as amended by the Addendum, harmonizes the definitions of 38 indicators for private sector operations.