Today ICAI published a performance review, drafted by Agulhas, of CDC’s investments in low-income and fragile states.
CDC is the primary vehicle through which DFID invests development capital and plays a key role within DFID’s Economic Development Strategy. It aims to “support the building of businesses throughout Africa and South Asia, to create jobs and make a lasting difference to people’s lives in some of the world’s poorest places”.
CDC invests capital in businesses either directly (by investing equity or providing loans and other debt finance) or indirectly (by investing through commercial funds), through a structured process of investment selection and portfolio management seeking to generate both positive development impacts and a financial return. Financial returns are then recycled into new investments.
ICAI found that CDC has made progress in redirecting investment to low-income and fragile states, but has not done enough to secure or monitor development gains, to improve evaluation or to apply learning. It is implementing ambitious plans to address these concerns, but these are mostly at an early stage. We have therefore awarded CDC an amber-red score overall.
ICAI made the following recommendations:
- CDC should incorporate a broader range of development impact criteria and indicators into its assessment of investment opportunities.
- CDC should take a more active role in the management of its investments.
- CDC should strengthen the monitoring and evaluation of the development impact of its investments and the learning from this.
- CDC should work more closely and systematically with DFID and other development partners to inform its geographic and sectoral priorities and build synergies with other UK aid programmes.
- In the presentation of its strategy and reporting to stakeholders, CDC should communicate better its approach to balancing financial risk with development impact opportunity.
- DFID’s business cases for future capital commitments to CDC should be based on stronger evidence of achieved development impact and clear progress on expanding their in-country presence.