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1
Working session with the DFI experts on tracking and valorising DFIs’ operations in the post-2015 DAC statistical framework
Summary of main points discussed
The working session was structured in three sections, to discuss and advance work on:
1. the ongoing update of the DAC classification by financial instrument;
2. the measurement of the mobilisation effect of public development finance; and
3. the confidentiality criteria for statistical presentations on DFIs’ operations.
1. Towards a new classification of financial instruments in DAC statistics
The objective of this session was to inform and receive feedback from participants on the work
carried out by the OECD to update the current DAC classification by financial instruments. The
update is required to better reflect DFIs’ portfolios in DAC statistics and to allow the tracking of
financial instruments with the potential of mobilising additional resources from the private sector.
The update is also expected to bring greater clarity to the classification (e.g. remove non-financially-
relevant variables).
1.1. Comments from the DFI experts
Participants generally welcomed the update and the DAC’s willingness to better capture DFIs’
operations. More specifically, participants were invited to i) comment on the extent to which the
proposed new classification was consistent and comprehensive from a DFI perspective, and ii)
answer a number of technical questions that were still pending. Their comments and suggestions
included:
A new broad category for mezzanine finance / hybrid instruments could be included to facilitate the identification of investment products that combine the attributes of equity and debt.
The sub-category for blended loans should be removed to ensure that instruments are mutually exclusive. The DFI experts highlighted that blended loans combine at least two instruments and could therefore overlap with other items in the classification. However, they recognised the importance of separately identifying blended loans and suggested capturing this dimension through a flag.
The item “first-loss shares” introduces an “intention” dimension in the classification and creates an overlap with common equity, which is also first-loss. They suggested removing this category. The Secretariat highlighted that it is necessary to identify first-loss shares separately for ODA-eligibility purposes.
The subcategory “reinvested earnings” should be removed, since this does not correspond
to a financial instrument but rather refers to a sub-category of equity in the investee
companies’ balance sheet.
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The category “other securities” should be removed, as all possible residual items are covered by the specific categories.
The category “Guarantees” should be renamed to “Unfunded contingent liabilities” to broaden its scope and cover other contingent liabilities such as stock warrants, derivatives, stock options, etc. It was also suggested to remove the distinction between credit and investment guarantees to simplify reporting.
On a more general note, participants highlighted that a flow-based system such as that of the DAC does not allow to properly capturing the risk dimension involved in the financial instruments used by DFIs.
1.2. Incorporating the comments in the proposed classification
Based on comments/inputs received from participants, the list could be revised as follows:
From the previous version
The new one, including DFIs’ comments
Broad category Sub-category Broad category Sub-category
DEBT INSTRUMENTS
Loans Standard loan Subordinated loan, incl. loan component of mezzanine finance (NEW) Blended loan (NEW) Reimbursable grant (NEW)
Debt securities Conventional bonds Asset-backed securities (NEW) Other debt securities
Simplified: - “Blended loan” removed. - “Subordinated debt” moved to “Mezzanine finance instruments”.
DEBT INSTRUMENTS
Standard loan Reimbursable grant (NEW) Bonds Asset-backed securities (NEW) Other debt securities
New: - All instruments having both equity and debt characteristics.
MEZZANINE FINANCE
INSTRUMENTS
Subordinated loan (NEW) Preferred equity (NEW) Other hybrid instruments (NEW)
EQUITY AND INVESTMENT
SHARES
Equity and investment fund shares
Common equity (NEW) Preferred equity, incl. equity component of mezzanine finance (NEW) First-loss shares in structured investment fund (NEW) Other investment fund shares (NEW) Reinvested earnings
Simplified: - Preferred equity moved to “Mezzanine finance instruments”. -Reference to “first-loss shares” removed. - Structured and other investment funds renamed as “collective investment vehicles”.
EQUITY AND SHARES IN
COLLECTIVE INVESTMENT
VEHICLES
Common equity Shares in collective investment vehicles (NEW) Reinvested earnings
OTHER SECURITIES
Other (including financial derivatives)
Suppressed
GUARANTEES
Guarantees Loan guarantee Equity guarantee Other guarantee
Simplified: - Category renamed to potentially cover other unfunded contingent liabilities - All guarantee schemes grouped under same item.
GUARANTEES AND OTHER UNFUNDED
CONTINGENT LIABILITIES
Guarantees/insurance (NEW)
TO
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2. Measuring the mobilisation effect of development finance
The preliminary results of the survey on mobilisation and the findings from the survey on guarantees
carried out by the OECD were presented. The main objective of both surveys was to assess the
feasibility to measure the amounts mobilised by specific financial instruments in an international
statistical system.
2.1. Comments from the DFI experts
Discussion focused on possible options and specific issues that needed to be addressed while
developing a common methodology to measure the amounts mobilised, in particular: data
availability, scope of measurement, additionality/causality, attribution, and point of measurement.
Data availability
Data on amounts mobilised, while not systematically collected, are often available in project
documentation.
Data on the face value of a loan guaranteed by an institution, on the total amount of private
investments in a syndicated operation, and on private investments in investment funds are
mostly available. Data on total project costs are more difficult to get – and to use - as the
definition of a “project” is often vague, with no clear boundaries applied to it within the
institutions.
Changes in DFI’s statistical systems are possible, but take time and effort.
Scope
Measurement should be limited to the mobilisation/leverage effect and should not aim to
capture public institutions’ catalytic role.
A common definition for “public” and “private” would be needed to clearly define the scope
of measurement.
Institutions that included the amounts mobilised from public sources in their calculations
argued that excluding these amounts would result in an underestimation of the real
mobilisation effect. They agreed however that their inclusion would result in double-
counting in an international statistical system such as that of the DAC.
Additionality/causality
Precise and commonly agreed definitions and assumptions are key to ensure that reporting
is coherent across institutions.
The estimation of amounts mobilised seems feasible only when these amounts can be
derived from concrete figures attached to the financial instrument in use by DFIs. Assessing
causality/additionality from the total project cost is difficult due to the need of subjective
judgements (e.g. if a DFI purchases shares in an equity fund, is the “project” the equity fund
or the investments that the equity fund makes during its life?).
Assessing additionality/causality is relatively more straightforward for institutions providing
fee-based financial services to mobilise funds for projects (e.g. IFC). This is because the
payment of the fee by the client is a proof of causality, as it represents a formal recognition
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that the institution charging the fee has mobilised the funds (see IFC core mobilization
methodology).
A concern was that reporting to the DAC should not be contradictory with what DFIs report
in their institutional communication.
Attribution
Pro-rata attribution is simple. However, such an approach has the potential to
underestimate the mobilisation impact of non-monetary exchanges, as it would not capture
a DFI being more active in the project than others.
Pro-rata attribution does not work for syndicated loans. Amounts mobilised from the
private sector in a syndicated loan should be attributed to the arranger of the syndication.
Such an approach is a better reflection of reality, as the arranger has a proven more active
role. It would also make reporting easier as the arranger – who has the data on total
amounts mobilised – would be the only public institution to report.
Point of measurement
Better to use data on commitments and to avoid using data on Board approvals, as it may
take time to commit the funds after they are approved by the institution’s Board.
Data on commitments are more readily available than data on disbursements. Getting to
measure amounts mobilised on disbursements would be interesting whenever data allow.
The measurement of amounts mobilised may need to be limited to private resources
committed during the year of the public investment in the case of open-ended projects.
Trying to include private investments in subsequent years may result in complex calculations
for this type of projects.
Measurement options by instrument
The table below summarises possible options discussed to measure the amounts mobilised by
financial instrument.
Instrument Characteristics of possible measurement option
Guarantee
Amount mobilised defined as: the full nominal value of the instrument to which the guarantee relates, regardless of the share of this value covered by the guarantee (e.g. face value of the loan being guaranteed).
Scope: guarantees on loans or investments from the private sector
Causality: Assumption that the private investor would not have invested without the public guarantee
Attribution: to the public guarantor (pro-rata if co-guarantors)
Point of measurement: guarantee issuance
Report by: public guarantor
Data needs: the full nominal value of the instrument guaranteed, additional information on co-guarantors if applicable
Syndicated
Loan
Amount mobilised defined as: private resources in syndication
Scope: syndication with both public and private lenders
Causality: assumption is that the private sector would not have provided the loan without the public sector being the arranger of the syndication
Attribution: to the arranger
Point of measurement: Commitments, and disbursements when available.
Report by: arranger
Data needs: total amount of private resources in syndication
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Instrument Characteristics of possible measurement option
Share in
collective investment
vehicles
Amount mobilised defined as: private resources in fund
Scope: Funds with both public and private investors
Causality: Assumption that private investors would not have invested in the fund without the participation of the public investor(s)
Attribution: TBD
Point of estimation: TBD
Report by: all public investors investing in the fund.
Data needs: TBD
3. Confidentiality criteria for statistical presentations on DFIs’ operations
The Secretariat briefed participants on the current treatment of data to comply with confidentiality
rules in DAC statistics and the problems that it raises. Different confidentiality rules apply according
to the type of donor and flow. The DAC discloses data as reported (and potentially filtered) by the
provider for multilateral institutions, while it applies a confidentiality filter for bilateral Other
Official Flows (OOF) - with data aggregations by year, donor agency, sector, etc. - ensuring that at
least three transactions are covered by each aggregate. Such a treatment poses some problems: on
the one hand, data quality and coverage issues are partly due to confidentiality constraints; and on
the other hand it leads to loss of information and poor analytical value of published data.
3.1. Comments from the DFI experts
Most bilateral DFIs are subject to country-specific legislation regarding what information
could be made public. These legal requirements constrain individual DFIs in different ways
and cannot be changed under DFIs’ own authority.
While there is a wide recognition that confidentiality constraints are indeed influencing DFIs’
reporting on their operations, specific constraints relate to the nature of the required
information. For a number of DFIs, confidential information is linked to the project titles,
company names or anything that would allow the identification of a specific activity
(especially for small DFIs as the total number of projects in a country might be limited). By
contrast, other DFIs already fully disclose commitment information on their website, while
any detailed/disaggregated information on reflows (e.g. repayments, revenues, losses and
profits) is confidential as it is linked to information on project evaluation. Participants
mentioned that the Secretariat could benefit from work already carried out by IATI to
identify confidential information and problematic data fields for DFIs.
Experts from bilateral DFIs mentioned that they can report at the activity level provided that
a filter is applied before publication. Multilateral DFIs would instead need to filter/aggregate
data themselves before reporting to the DAC in order to comply with their internal
confidentiality policies related to non-sovereign operations.
Semi-aggregate figures by country and sector would constitute for DFIs an acceptable
minimum level of aggregation in DAC statistical publications.
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Participants
Shanti Bobin Vice-Chair of the Working Party on Development
Finance Statistics (WP-STAT), Treasury, France – Chair of the
working session
Andreas Berkhoff European Investment Bank
Colin Buckley CDC Group
Randy Caruso OECD Environment Directorate
Carmen Colla KfW
Elizabeth Davis International Financial Corporation
Margaret Kulhow Overseas Private Investment Corporation
Ola Nafstad Norfund
Marie Sennequier Agence Française de Développement
Philip Sieber-Gasser Swiss Investment Fund for Emerging Markets
Bernard Ziller European Investment Bank
From the Secretariat:
Julia Benn, Mariana Mirabile, Guillaume Pottier, Cécile Sangaré, Claudia Schmerler and Giovanni
Semeraro.