# **2.4 Measuring the Public Policy Performance of SFIs**

Since SFIs are established with a mandate to address a market failure, aside from evaluating the financial performance as other financial institutions, it is crucial to evaluate how well the SFIs fulfill this public policy mandate. In other words, it is important to evaluate the value added of SFIs compared with a case that they were not present. This feedback is useful not only to track the long-term impact of the SFI’s activities on the market, but also to align future strategies with government policies.

However, quantifying the contribution of an SFI in addressing these market failures can be a challenge. Most of SFIs analyzed have not incorporated this type of evaluation in their performance measures, there are only few institutions that are in the process of developing a number of indicators/proxies to measure their special contribution dictated by their mandate.

We found that SFIs are using different benchmarks to evaluate their contribution. While DBSA or Finnvera plc compares their achievements against predetermined (but arbitrary) targets, BDC compares its results with industry benchmarks and compares its SME clients’ performance with the performance of SMEs that received financing from other banks. While measuring policy performance against some predetermined target does not help to understand whether the SFI provides any value added, comparing performance with a sample of individuals / companies that did not receive the support of the SFI provides more insightful information about the contribution of the SFI.

BDC has created a number of indicators to examine their value added in the financial market. These include “business creation,” which compares the start-up authorizations BDC fostered compared with the market benchmarks; “business survival”, which compares how many BDC supported start-ups survived two years and five years compared with the industry benchmark. Finally, BDC uses a “business growth” indicator to evaluate how BDC clients perceive their pace of business growth compared to the SME market in general. These indicators seem to provide more comprehensive conclusions about the SFIs contribution and impact than more typical indicators used by other banks, such as the number of new authorizations or volume for loans, grants or equity originated by the bank.

In 2008, BDC commissioned Statistics Canada to conduct an assessment of the impact of BDC financing and consulting services on Canadian businesses. Statistics Canada measured the impact quantitatively by comparing BDC clients’ performance to a group of non-BDC clients using four indicators: revenue growth, employment, business survival and profits growth between years 2000-2005. The results show that BDC clients achieved better results in terms of revenue growth, employment growth, and business survival than non-BDC clients. In addition, the report shows that the BDC clients’ performance has further improved compared to non-BDC clients with every passing year after their decision to become BDC clients. Also, clients that used both BDC’s financing and consulting services achieved even better results than the ones that used just 20