OREANDA-NEWS. KfW has published the 12th biannual evaluation report on Financial Cooperation (FC) with emerging and developing countries entitled “Fragile settings. Lasting impact”. KfW's independent Financial Cooperation Evaluation unit examined the impact of 129 projects which received total funding in excess of EUR 1 billion in 2011 and 2012 from KfW on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ). Around 80% of projects qualified as successful. Commenting on the report presented by Dr Eva Terberger, the head of the Evaluation unit, Dr Norbert Kloppenburg, member of the Executive Board of the KfW Group, stated: “The vast majority of our development projects either provided a long-term improvement in living standards in our partner countries or increased environmental and climate protection. This is encouraging news, particularly for our work in fragile countries: the evaluation report indicates that Financial Cooperation can create greater stability and better living standards even in these difficult environments.”

“We are of course delighted when a large proportion of evaluation inspections report positive findings, but that will not always be the case. Financial Cooperation is designed to promote investment where other investors refrain because of the particular risk exposure - poor infrastructure, political instability etc. Consequently there will always be a few failures and unsatisfactory outcomes. But we can learn from those failures, which is the primary role of the evaluation. We need to understand whether innovative approaches can achieve the stated objectives as well as whether project designs work in practice and how to improve them. As such, the work done by the Financial Cooperation Evaluation unit is a vital element in our quality assurance process,” according to Dr Kloppenburg.

Transparency has been a reality for over 20 years, a tradition continued in the current report, which sets out all the evaluation results. The report contains Financial Cooperation success stories, such as the creation of Albania's first sewage treatment plant, KfW's contribution to the currency exchange fund (TCX) - the first global fund for micro-loans in local currencies - and the construction of rural infrastructure in Bangladesh, which has boosted employment and income dramatically. The report also covers the disappointments, like the failed attempt to use private operators to supply water in south-eastern Europe. Our aim of creating a natural park where nature conservation was linked to increased revenue from tourism also proved unrealistic.

One chapter of the report is dedicated to the results achieved by projects in fragile countries, which have been evaluated as a group for the first time. Fragile national conditions did put success rates a statistically-significant 6 to 7 percentage points lower than in stable countries. However, in absolute terms, the results were surprisingly good. “One key to successful FC support is being sensitive to existing conflicts when selecting target groups,” Dr Terberger explains. “Broad-based support for refugees and host communities ensures social integration. In contrast, focussing on specific population groups can actually exacerbate tensions, rather than reducing conflict, which is not our aim.”

“Particularly in fragile countries, Financial Cooperation needs to offer greater stability and help our project partners to avoid further poverty and conflict. We have an incredibly important and very difficult role to play, but the lessons drawn from our evaluations are very helpful,” commented Dr Kloppenburg.