DFC is committed to supporting projects that deliver impactful benefits to people across developing countries. To better evaluate the development potential of a project, the agency designed Impact Quotient (IQ), a modernized tool that measures impact throughout the life of the project. As part of these efforts, DFC has also implemented a “LabIQ” that analyzes data on expected and actual impact to further calibrate the tool and guide future investment decisions.
Why was IQ developed?
IQ supports DFC in its mission to finance solutions to the most critical challenges facing the developing world today. DFC uses IQ to:
- Inform decisions to support projects
- Track development impact of projects over time
- Report development outcomes to key stakeholders
- Use findings to inform future projects and maximize impact
The creation of a modernized development impact measurement tool is directed by the Better Utilization of Investments Leading to Development (BUILD) Act of 2018, which created DFC.
How is IQ administered?
A team of DFC economists and environmental and social policy analysts implement IQ to provide an objective and systematic assessment of potential and current projects. This team also analyzes data on expected and actual impact to further calibrate the tool and guide future investment decisions.
How are projects evaluated?
IQ enables DFC to classify projects into three categories: highly developmental, developmental, and indeterminate.
Projects are evaluated across three key indicators:
- Growth: contributes to economic growth through infrastructure improvements, contribution to local income, trade benefits to the local economy, and job creation
- Inclusion: advances inclusion by providing products or services, diversified workforces, and inclusive supply chains that benefit underrepresented groups including low-income populations, smallholder farmers, young adults, women and women-owned enterprises, people with disabilities, indigenous peoples, refugees, and ethnic or religious minorities
- Innovation: supports innovation through the advancement of new products or services, the use of innovative financial structures to mobilize private capital, knowledge or technology transfer, and environmental sustainability
Evaluations are adjusted to account for potential negative environmental, social, or development risks.
Call for Comments
DFC consulted more than 50 stakeholders, including investors, development finance institutions, and partners in the U.S. Government, in the development of IQ as the agency works to continuously improve the tool.
- Developing DFC’s New Development Performance Measurement System: IQ Indicators and Metrics
- What is IQ?: Outline of DFC’s IQ Process
The Operating Principles for Impact Management provide a framework to guide investors on the integration of impact considerations throughout the investment lifecycle. As a founding signatory to the principles, DFC publicly discloses, on an annual basis, the alignment of DFC's impact measurement framework, Impact Quotient (IQ), with the principles and, at regular intervals, arranges for independent verification of this alignment.