Market effects in development finance’s impact assessment

Abstract

Development finance institutions and international financial institutions are increasingly being asked to deliver ‘market-level impact’ through their operations. This paper explores how these institutions consider market effects in their impact assessment systems. We present the two dominant conceptualisations of market effects, narrow and broad, with the various channels used for their realisation. We discuss how these views intersect with those on market distortions and concessionality and outline how impact assessment systems handle market effects in practice. We conclude by arguing that institutions should be more considerate of broad market effects in their impact assessments.