International Finance Corporation Additionality in Middle-Income Countries : An Independent Evaluation April 17, 2022

Additionality is a core feature of private sector development finance institutions (DFIs). It is the unique contribution that a DFI or a multilateral/ bilateral bank brings to a private investment project that is not offered by commercial sources of finance. The key idea is that the investment project should add value without crowding out private sector activity. Identifying and articulating project additionality is particularly important in middle- income countries (MICs) since financial markets in MICs are more developed, and private investment far exceeds official development assistance. This evaluation report examines the relevance and effectiveness of IFC's approach to additionality in MICs and seeks to explain the factors that contribute to or constrain its realization. While the evaluation focuses on IFC's additionality on the level of the project, it also applies the lens of country and sector context to draw additional learning. Thus, it considers whether additionality can occur beyond the level of a single project-for example, at the country and sector level. Both at the project level and beyond the project, the evaluation derives lessons and offers recommendations on how IFC can further strengthen its additionality