Cities are engines for growth and progress: KfW presents the 15th Evaluation Report on effectiveness of Financial Cooperation

• Success rate at 77%: nearly four out of five projects are successful
• More than three quarters of projects in Africa are successful
• Growing relevance of small and medium-sized cities in sustainable development

“For greater impact in smaller towns and cities”. This is the title of the 15th biennial Evaluation Report on the effectiveness of Financial Cooperation (FC) with developing countries and emerging economies, published today by KfW. The impact of the 181 projects supported on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ) with a total volume of EUR 2.8 billion (including around EUR 2.3 billion from BMZ funds) was assessed in 2017/2018 by KfW's independent FC Evaluation Unit. Within the sample, which is representative of the total portfolio of completed projects, around 77% of projects were classified as successful.

The 15th Evaluation Report focuses on “Intermediary cities: between the metropolis and the hinterland” and shows that the potential of regional and local centres as building blocks in sustainable economic, environmental and social development has been underestimated to date. Support for medium-sized cities in developing countries and emerging economies is becoming even more relevant because, according to forecasts, this type of city – and not megacities – will have to absorb most people as the trend towards urbanisation and rural exodus continues unabated – especially in Asia and Africa.

It is now clear: cities are engines of growth and progress if the opportunities presented by agglomeration are exploited. However, rapidly growing cities also carry the risk of impoverishment. “The consequences of the urbanisation process in Asia and Africa in the next 15 to 20 years, which will outpace the rate of urbanisation in 'old' Europe, will affect us all,” said Dr Joachim Nagel, Member of KfW Group's Executive Board.

The clear focus of KfW's commitment in sub-Saharan Africa is also reflected in the evaluation. Slightly more than three quarters of all projects are successful there, with an average rating of exactly 3. KfW also successfully promoted peace in the conflict region of Casamance in Senegal (rating of 2). Pioneering work was carried out in this region. Social and economic infrastructure was rebuilt with sensitivity to the conflict, resulting in a high level of satisfaction among the population. Asia performed particularly well, with 91% of all projects rated as successful.

In the healthcare sector, one focus was eradicating polio in Nigeria and India, which yielded good results. In the agricultural sector, a project in India that was given a rare rating of 1 stands out thanks to its broad impact: the approach, which secured livelihoods for families even without seasonal labour migration, was adopted in other regions of the country. The equally rare rating of 5 was assigned to a project in Guinea. The project in the transport sector failed because the supported infrastructure was not completed due to the insolvency of the construction company, among other things. In the case of environmental and nature conservation programmes, the political framework has proven vital for the successful implementation of cooperation, as shown by a project in the Amazon region of Bolivia (rating 4) in which nature conservation lost out to economic interests.

“Evaluations are a very effective learning tool. We give feedback to the bank and see how the designs of follow-up projects are constantly adapted and brought into sharper focus. Modern methodological approaches – such as the use of satellite imagery – are particularly important in fragile contexts,” said Dr Eva Terberger, head of KfW's Evaluation department.

Digitalisation is increasingly changing evaluation work. The volume of accessible data records, satellite imagery and open source information is growing rapidly. This makes additional perspectives and analyses possible, which KfW's FC Evaluation Department integrates into its work. Traditional evaluation approaches like “rapid appraisal”, which makes it possible to evaluate a large number of projects quickly and cost-effectively, are supplemented by new sources of information to enable even more reliable learning from evaluations.

The 15th Evaluation Report can be found at
www.kfw-entwicklungsbank.de/PDF/Download-Center/Dokumente-Evaluierung/15_Englisch.pdf

Information about KfW Development Bank can be found at
www.kfw-entwicklungsbank.de/International-financing/KfW-Entwicklungsbank/.