DFC is pleased to announce the completion of an independent assessment of DFC’s 

Portfolio for Impact and Innovation (PI2) portfolio across the dimensions of financial risk, 

return, and development impact. DFC’s PI2 program targets investments in small, earlystage businesses -- many operating in highly volatile markets -- with the goal of scaling 

innovative solutions to global development challenges. These investment decisions 

require that DFC balance relatively higher financial risks and possibly lower financial 

returns with the potential for significant development impact. 

DFC commissioned Dalberg Advisers (Dalberg) to conduct the assessment. Dalberg 

evaluated 23 PI2 projects using DFC’s Impact Quotient (IQ) framework to measure each 

project’s development impact results. Dalberg utilized DFC’s internal risk assessments 

and budgetary reserve allocations as indicators of financial risk and calculated each

project’s Internal Rate of Return (IRR) to measure financial returns. The evaluated 

portfolio represented about 20 percent of the commitment amount of DFC’s total PI2 

portfolio at the time of the analysis and spanned four major sectors—funds, health and 

agriculture, small business support, and energy—across Africa, Asia, and Latin 

America. 

The evaluation concluded that the assessed PI2 portfolio has achieved significant 

developmental impact while earning small, but positive, financial returns, 

notwithstanding elevated operational and market risk. The risk profile of the projects in 

the portfolio tended to increase over time due to volatile political environments, 

unproven business models, the effects of COVID-19, and challenges with fast growth. 

These risks required DFC to provide the necessary financial support to enable these

projects to overcome financial hurdles over the project’s life. Even with these risks, over 

half (57%) of the evaluated portfolio received development IQ ratings of ‘Highly 

Impactful’ or ‘Exceptionally Impactful’, the two highest IQ tiers. 

The study also gleaned some important lessons and recommendations that will help 

inform how DFC can more strategically and effectively use its expertise and financial 

tools to catalyze capital in high-risk, highly developmental projects. As part of its 

Agency-wide realignment, DFC is establishing an Office of Catalytic Investments that 

will build on the successes and lessons learned from the PI2 program.

This unit will consider several of the recommendations from the Dalberg study in its 

strategic plan, such as: 

• Focusing on investment opportunities that fit the PI2 profile of innovative, earlystage companies that have high development impact potential.

• Expanding DFC’s support for transactions that may be higher risk, but highly 

catalytic and impactful. 

• Developing appropriately tailored screening, investment approval and monitoring 

processes that cater to the unique needs of these types of companies. 
• Creating and scaling flexible financial tools and de-risking mechanisms 

necessary to catalyze investment and set these companies up for future success.

• Partnering with local intermediaries and funds that have an aligned strategy that 

are well positioned to identify and support growing companies. 

• Developing platforms to better communicate learnings both within DFC and 

externally.

The sample size of the assessed portfolio was small (representing only about 20 

percent of the overall PI2 portfolio). As such, DFC is considering several process 

improvements that were recommended in the study that will enable the Agency to 

conduct broader assessments of the financial and impact performance of the PI2 

portfolio as well as other portfolios in the future. Specifically, DFC will be considering:

• Implementing ex-post IQ scoring at the time a project is about to exit DFC’s 

portfolio, including an assessment of the likelihood of sustained positive impacts

after exit. 

• Leveraging lessons learned from PI2 to support higher risk, catalytic transactions 

across DFC’s portfolios.

• Further developing tools and dashboards to enable portfolio-level analysis of 

financial performance, impact performance, and financial risk. 

• Developing tools to better articulate and track financial and non-financial 

additionality.

DFC Management appreciates the hard work by Dalberg and DFC staff that went into 

this study. The lessons learned will enable DFC to continue improving its effectiveness 

in catalyzing capital that results in positive development outcomes.

Elizabeth Boggs Davidsen

Vice President, Office of Development Policy

U.S. International Development Finance Corporation