THE RISE OF

DEVELOPMENT
FINANCE
INSTITUTIONS
A DEVEX PRO SPECIAL REPORT

Development finance institutions have an increasingly high profile as the

industry focuses on how private finance can be leveraged to achieve the SDGs.
Devex digs into the data to see where DFIs are investing and track the trends.

FA L L 2 0 1 9
TABLE OF CONTENTS
LETTER FROM THE JOURNALIST 3
IN BRIEF: Profiling 17 of the world’s DFIs 4
ANALYSIS 9
What does the data tell us about DFIs? 9
Development finance institutions grapple with their growing role 13
What happens when a DFI project goes wrong? 19
Belgian DFI doubling in size, aims to stay focused on SMEs 25
FinDev Canada turns 1, seeks to be impact-led 27
Q&A: Swedfund CEO on expansion plans, investment priorities 31
Swiss DFI focused on job creation, but struggling to mobilize
private capital 35
The changing face of KfW 37
IN DEPTH: OPIC and the U.S. DFC 41
Exclusive: New US DFC will be ‘proactive, forward-leaning
and strategic’ says new CEO 42
Failure to launch: Why congressional budget drama delayed US DFC 45
Report outlines how new DFC and USAID will work together 47
A new US development finance agency takes flight 50
IN DEPTH: CDC Group — the U.K. DFI 53
Q&A: Nick O’Donohoe on impact investing, CDC in India,
and a riskier portfolio 54
Is CDC doing enough to ‘make tackling poverty its top priority’? 57
In response to critical report, CDC lays out changes in its work 60
WEBINAR: A deeper look at European DFIs 62
 3 LETTER FROM THE JOURNALIST
LETTER FROM
THE JOURNALIST
Canada launched a development finance
institution in 2018. The United States is poised to
open a revamped DFI. The United Kingdom has
dramatically increased the CDC Group’s capital.
A growing focus on the role of the private
sector and private finance in addressing global
development challenges, particularly following
the adoption of the Sustainable Development
Goals and the Addis Ababa Action Agenda on
financing for development, has led to the rise in
prominence of DFIs.
Today there are even more DFIs, and these
institutions have gained prominence and garnered
more resources from their governments. The
numbers help paint a picture here: In the five year
period between 2012 and 2017, the amount of
money DFIs managed increased by about 57%,
according to data gathered by Devex.
As traditional aid funds stagnate, the growth in
the amount of money DFIs are managing has
sparked increased scrutiny of the institutions,
amid growing concerns that DFI funding is not
achieving desired impacts.
Questions remain about the role DFIs play,
particularly in underserved countries that are
facing the greatest challenges. In a September
policy paper, Charles Kenny at the Center for
Global Development argues that it is doubtful DFIs
can deliver or truly accelerate impact. Among
the challenges: Private investment in the SDGs
remains low in the lowest-income countries,
it is difficult to measure when an investment
is attracting additional dollars that otherwise
wouldn’t have been invested, and it has proven a
struggle to improve deal flow, he wrote.
DFI leaders are aware of many of the challenges
and report grappling with a series of issues,
including how to increase investment in low-
income countries, how to ensure collaboration
rather than competition, and how to effectively
mobilize private capital rather than crowd it out.
Devex has collected and analyzed data on
bilateral DFIs to help paint a picture of where and
how DFIs are investing. We lay out some of the
challenges facing the newly prominent set
of actors.
ADVA SALDINGER
Associate Editor, Devex
 4 DFI PROFILES

BELGIAN INVESTMENT COMPANY FOR

DEVELOPING COUNTRIES (BIO)
FOUNDED: 2001 LEADER: Luuk Zonneveld, CEO

$18 million OWNERSHIP

AMOUNT TOTAL

PROJECT
BIGGEST
2017

for Montecristi Solar FV SAS

INVESTED PORTFOLIO to support construction and
Wholly owned by the
operation of a 58-megawatt
$193.4 million $856.3 million photovoltaic solar plant in the Belgian government
Dominican Republic.

INVESTMENT TYPES: BIO’s mission supports private sector development in emerging

• Equity: Equity or quasi-equity stakes for new companies or
companies wishing to expand activities or their financial base.
• Capacity building: Grants are provided to support feasibility
studies and technical assistance programs.
• Guarantees: BIO facilitates the mobilization of resources from
markets within the framework of the 17 Sustainable Development
Goals, with a specific focus on poverty; gender equality; energy;
sustainable economic growth and employment; resilient
infrastructure; sustainable industrialization; and innovation. Priority
sectors for BIO are financial institutions, investment companies and

These profiles use 2017 data — the most recently-collected data when Devex analyzed the numbers in 2018.
private sector actors by guaranteeing obligations on their behalf. funds, enterprises, and infrastructure projects with a focus on least
• Loans: Medium and long-term loans between 3-10 years are developed countries, low-income countries, and lower-middle income
provided at fixed and variable rates. countries.

BELGIAN CORPORATION FOR

INTERNATIONAL INVESTMENT (BMI-SBI)
FOUNDED: 1971 LEADER: Gert Van Melkebeke, CEO

$6 million OWNERSHIP
AMOUNT TOTAL
PROJECT
BIGGEST
2017

for Manuchar Group, a Belgian-based

INVESTED PORTFOLIO commodities trading and logistics BMI-SBI is a limited
company, to enhance the storage
$9.6 million $44.4 million facilities of two of its agri-food company, with 66% of its
subsidiaries in Brazil and Vietnam. capital held by the Belgian
government through the
INVESTMENT TYPES: BMI-SBI provides medium- and long-term co-financing to business Belgian Federal Holding
• Equity: Direct equity or quasi- ventures made by Belgian private companies abroad, supporting and Investment Company
equity stakes for 5-10 years. projects of general economic interest to Belgium and the host country, and the National Bank of
• Loans: Long-term loans while respecting the principles of sustainable development and social Belgium, and 34% held by
between 5-10 years provided at corporate responsibility. BMI-SBI does not invest in startups, and instead banking institutions and
fixed and variable rates. focuses its investments in agriculture; biotechnology; chemicals and other private companies.
materials; communication; electronics; energy; environment; food;
industrial automation; products and services; manufacturing; medical;
nanotechnology; space; and transportation.

CDC GROUP
FOUNDED: 1948 LEADER: Nick O’Donohoe, CEO

$200 million OWNERSHIP

AMOUNT TOTAL
PROJECT
BIGGEST
2017

to Credit Facility for Access to Medicines, or CFAM

INVESTED PORTFOLIO Limited. An innovative social finance company
Wholly owned by the U.K.
government, its sole shareholder
committed to expanding and accelerating access
is the Department for International
$1.4 billion $5.3 billion to life-saving medicines, vaccines, and diagnostics
Development.
in Africa and South Asia.

INVESTMENT TYPES: CDC supports the building of businesses throughout Africa

• Debt: Provided to businesses and projects as project finance,
corporate lending, trade finance, or lending to financial institutions.
• Direct equity: Investments between $10-150 million in businesses in
priority sectors.
• Intermediated equity: Investments between $5-150 million in
investment funds in priority sectors and countries.
• Guarantees.
and South Asia. CDC focuses on investing in countries where
the private sector is weak, jobs are scarce, and the investment
climate is difficult. Priority sectors are financial services;
infrastructure; health; manufacturing; food and agriculture;
construction and real estate; and education.
 5 DFI PROFILES

COMPAÑÍA ESPAÑOLA DE FINANCIACIÓN DEL DESARROLLO

(SPANISH DEVELOPMENT FINANCE INSTITUTION, COFIDES)
FOUNDED: 1988 LEADER: José Luis Curbelo, chairman and CEO

$20.4 million OWNERSHIP

AMOUNT TOTAL

PROJECT
BIGGEST
2017

to Ramondin, a wine and

INVESTED PORTFOLIO spirits-related manufacturing
COFIDES is a limited
company, to strengthen its
$260.4 million $1.1 billion position in Chile. liability company with
53% owned by the
Spanish government
INVESTMENT TYPES: COFIDES’ mission is to contribute to and 47% by the
• Equity: Direct or indirect investments in the form of capital- the internationalization of companies four largest Spanish
interest, capital-limited, capital at-open-price to individual and the Spanish economy and promote commercial banking
companies. the economic and social development groups.
• Loans: Loans granted either to a project company abroad or to of low- and middle-income countries.
a Spanish investor. The terms are related to the expected return Focal sectors are agri-food, energy,

These profiles use 2017 data — the most recently-collected data when Devex analyzed the numbers in 2018.
period for the project, normally between 3-10 years with a grace environment, infrastructure, financial
period during the first years of the project. COFIDES provides sector, telecommunications, transport,
senior and junior loans. pharmaceuticals, and services.

DEUTSCHE INVESTITIONS- UND ENTWICKLUNGSGESELLSCHAFT (DEG)

LEADERS: Christiane Laibach, Monika Beck, and
FOUNDED: 1962 Philipp Kreutz (DEG management board)

$48 million OWNERSHIP

AMOUNT TOTAL
PROJECT
BIGGEST
2017

to support Ituverava in
INVESTED PORTFOLIO constructing and operating a
Wholly owned
254 megawatt solar PV plant
$1.9 billion $9.9 billion in Brazil. subsidiary of KfW.

INVESTMENT TYPES: DEG provides long-term financing to private-sector companies operating

• Equity: Equity and quasi-equity investments. in LMICs. DEG supports companies focused on industry; agriculture and
• Loans: Long-term loans with a term between 4-18 years. services; energy, transport, utilities, and telecommunications sectors; and
Interest rates can be fixed or variable. financial institutions and funds supporting SMEs. DEG only provides financing
in emerging markets and LMICs.

FMO ENTREPRENEURIAL DEVELOPMENT BANK

(THE NETHERLANDS DEVELOPMENT FINANCE COMPANY)
FOUNDED: 1970 LEADER: Peter van Mierlo, CEO

$50 million OWNERSHIP

AMOUNT TOTAL
PROJECT
BIGGEST
2017

to support Ecobank Transnational Incorporated

INVESTED PORTFOLIO to provide funding to subsidiaries across its
Public-private
network in 36 African countries. At least 75% of
$ 2.3 billion $11 billion the loan facility will be directed to SMEs across partnership: 51%
various sectors of the economy.
of shares held
by the Dutch
INVESTMENT TYPES: FMO finances Dutch businesses that government, 42%
• Loans and syndications: Direct medium and long-term loans develop projects or initiate business by commercial
at both fixed and variable interest rates, with a repayment grace activities in emerging markets. Its mission Dutch banks, and
period where needed. is to empower entrepreneurs to build a 7% by trade unions,
• Private equity: Equity directly or indirectly through funds, or better world. FMO invests in businesses, companies, and
co-investment with partners. projects, and financial institutions by individuals.
• Guarantees: To support companies in accessing international providing capital, knowledge, and networks
markets and participating in global trading. to support sustainable growth. FMO
• Capacity development: Facilitating the transfer of knowledge focuses on financial institutions, energy
and skills through a capacity development program. and agribusiness, and food and water.
 6 DFI PROFILES

FINDEV CANADA
FOUNDED: 2017 LEADER: Paul Lamontagne, managing director

2017 AMOUNT INVESTED: N/A — the new agency made its

first investments in 2018.
OWNERSHIP: Wholly-owned subsidiary of Export
Development Canada.

INVESTMENT TYPES:
• Loans: To support a company’s operations or expansion plans.
• Guarantees: Guarantees to a company’s bank for a loan to support the company’s
operations or expansion plans.
• Structured and project financing: Provided to develop projects that demonstrate social
and economic benefits for the host country.
• Equity: Flexible long-term private equity growth capital to high-potential companies.
FinDev Canada aims to create jobs, promote women’s economic
empowerment, and mitigate climate change by supporting
businesses in developing markets. By supporting local private
sector activity it hopes to contribute to sustainable development.
FinDev’s geographic focus is Latin America and the Caribbean, and
sub-Saharan Africa.

INVESTMENT FUND FOR DEVELOPING COUNTRIES (IFU)

These profiles use 2017 data — the most recently-collected data when Devex analyzed the numbers in 2018.
FOUNDED: 1967 LEADER: Torben Huss, CEO

$19.2 million OWNERSHIP

AMOUNT TOTAL
2017

PROJECT
BIGGEST

to support Nordic Power

INVESTED PORTFOLIO Partners in developing a
Wholly-owned by the
solar photovoltaic park
$176.6 million $1.5 billion in Brazil. Danish government.

INVESTMENT TYPES:
• Equity: Long-term equity investments for terms of 5-7 years.
• Guarantees.
• Mezzanine financing and subordinated loans: Loans with a long-term
duration of 5-7 years, subordinated to other loan financing.
• Senior loans: Long-term loans over 5-7 years secured by mortgage or
other indemnity. Interest rates are market-oriented.
IFU offers risk capital and advice to companies wishing to set up business in
LMICs and emerging markets. Investments are made on commercial terms in
the form of equity, loans, and guarantees. Its purpose is to promote economic
and social development in the investment countries, with a focus on viable
and sustainable companies with an ongoing positive development impact. The
geographic focus is on developing countries and emerging markets in Africa,
Asia, Latin America, and parts of Europe.

FINNFUND
FOUNDED: 1980 LEADER: Jaakko Kangasniemi, CEO

AMOUNT TOTAL $20 million OWNERSHIP

PROJECT
BIGGEST
2017

Finnish government owns

INVESTED PORTFOLIO investment in Wärtsilä Oyj and
Methax to develop a power 94.1%, Finnvera 5.8%, and
$241.4 million $472 million plant for Argentina. the Confederation of Finnish
Industries 0.1%.

INVESTMENT TYPES: Finnfund invests in responsible businesses in LMICs, with a special emphasis on renewable energy, sustainable
• Equity and quasi-equity. forestry, sustainable agriculture, and financial institutions. Finnfund offers businesses equity, long-term investment
• Loans: Long-term loans, mezzanine financing, and expertise on how to invest in developing markets and expects investees to operate in a
profitable, environmentally, and socially responsible manner to deliver measurable development impact.
investment loans.

NORFUND
FOUNDED: 1997 LEADER: Tellef Thorleifsson, CEO

AMOUNT TOTAL $33.5 million OWNERSHIP

PROJECT
2017

BIGGEST

to support Yoma Strategic Holdings

INVESTED PORTFOLIO Ltd to establish distributed
Wholly owned on behalf of the
Norwegian government by the
generation micropower plants and
$182.8 million $2.5 billion mini grids in Myanmar.
Ministry of Foreign Affairs.

INVESTMENT TYPES: Norfund invests in countries where it can have the greatest
• Equity and quasi-equity: $4 million and above, the fund takes maximum 35% impact, including countries where the private sector is weak and
ownership share. access to capital is scarce, such as in sub-Saharan Africa and
• Guarantees. some countries in Southeast Asia and Central America. Priority
• Loans: Norfund normally offers loans to companies in which it has already sectors for investment are clean energy, financial institutions,
and food and agribusiness.
invested equity.
 7 DFI PROFILES

OESTERREICHISCHE ENTWICKLUNGSBANK
(DEVELOPMENT BANK OF AUSTRIA, OEEB)
FOUNDED: 1988 LEADER: Sabine Gaber and Michael Wancata, members of the executive board
• In November 2017, OeEB signed a $30 million
AMOUNT TOTAL OWNERSHIP
2017

PROJECT
BIGGEST
loan agreement with TBC Bank Group PLC for the
INVESTED PORTFOLIO financing of Georgian micro and SMEs.
• In October 2017, OeEB signed a long-term credit Wholly-owned
$307.5 million $1.3 billion line of $30 million to Yes Bank Limited for the subsidiary of
financing of wind and solar power projects in India.
Oesterreichische
Kontrollbank AG
INVESTMENT TYPES: OeEB’s strategic priorities align with the Austrian (OeKB), a financial
• Business advisory services: Funding to support the Development Cooperation and take into account and information
preparation and analysis of an OeEB financed project and Austrian foreign policy and economic interests. service provider for
project implementation. Investments are assessed against development the Austrian export
• Equity: Investments in private equity funds or equity effectiveness and environmental, social, and sector and the
investments directly in companies. economic sustainability with a focus on Austrian domestic capital

• Guarantees.
• Loans: Long-term loans and risk subparticipations, and
refinancing lines for financial institutions with a specific loan
purpose, such as financing of small hydroelectric power plants.
These profiles use 2017 data — the most recently-collected data when Devex analyzed the numbers in 2018.
investment in least developed countries. Priority market.
sectors for OeEB are private sector development,
SME financing, creating jobs, renewable energy,
and resource efficiency.

OVERSEAS PRIVATE INVESTMENT CORPORATION (OPIC)

FOUNDED: 1971 LEADER: David Bohigian, acting president and CEO

• $250 million to support Noble Energy Inc.

AMOUNT TOTAL OWNERSHIP
PROJECT
BIGGEST
2017

with the development of Leviathan gas field

INVESTED PORTFOLIO offshore in Israel.
Wholly-owned by the
• $250 million to support Noble Energy Inc.
$3.8 billion $23.2 billion with the supply of natural gas sales to Jordan U.S. government.
from the Leviathan gas field offshore in Israel.

INVESTMENT TYPES: OPIC’s mission is to mobilize private capital to help address

• Financing: Direct loans and guarantees up to $350 million for
tenors as long as 20 years to projects that are unable to raise
sufficient commercial financing.
• Investment funds: Support for emerging market private equity
investment funds that invest in new and expanding emerging
market companies.
• Political risk insurance: Coverage of up to $350 million
against losses resulting from currency inconvertibility,
expropriation, regulatory risk, political violence, and breach of
contract, when private political risk insurance is not available.
critical development challenges and advance U.S. foreign policy
and national security priorities. OPIC helps U.S. businesses gain
footholds in emerging markets, catalyzing revenues, jobs, and growth
opportunities both at home and abroad. OPIC achieves its mission by
providing investors with financing, political risk insurance, and support
for private equity investment funds when commercial funding cannot
be obtained elsewhere. In 2018, legislation was passed to create
the U.S. Development Finance Corporation, a new agency that will
replace OPIC. It focuses on a number of key development sectors to
achieve this.

PROPARCO
FOUNDED: 1977 LEADER: Grégory Clemente, CEO

$156 million OWNERSHIP

AMOUNT TOTAL
2017

PROJECT
BIGGEST

loan to support the Mobilise Your City

INVESTED PORTFOLIO program in India, a program that seeks to
Owned by
support 100 cities engaged in sustainable
$1.3 billion $5.5 billion urban mobility planning to reduce the Agence
greenhouse gas emissions worldwide.
Française de
Développement
INVESTMENT TYPES: PROPARCO’s operations contribute to building sustainable economic and private
• Equity and quasi-equity investments. growth, job creation, the provision of essential goods and services, shareholders
• Guarantees: Guarantee of solvency poverty reduction, and climate change. It focuses a number of on key from developed
or liquidity. development sectors to achieve this: infrastructure, especially renewable countries and
• Loans: Proparco offers loans between energy; agriculture and agro-industry; finance; health; and education. developing
$3.6-120 million to companies and In addition to financing, PROPARCO assists its clients in managing the nations.
financial institutions for up to 20 years. impacts of its activity for sustainable development.
 8 DFI PROFILES

SWISS INVESTMENT FUND FOR EMERGING MARKETS (SIFEM)

FOUNDED: 2005 LEADER: Jörg Frieden, chairman of the board

AMOUNT TOTAL
• $12 million invested to support Indosurya Inti
OWNERSHIP

PROJECT
BIGGEST
2017

Finance to provide financial solutions for SMEs and

INVESTED PORTFOLIO individuals in Indonesia. Private limited company
• $12 million to support Banco Improsa’s lending to wholly owned by the
$87.4 million $757.1 million. MSME clients and contribute to broad-based and Swiss government.
long-term private sector growth in Costa Rica.

INVESTMENT TYPES: SIFEM promotes long-term, sustainable, and broad-based

• Loans: Available to local banks, leasing companies, microfinancing
companies, and other financial institutions. Financing is generally granted
on a long-term basis and based on market conditions.
• Risk capital funds: SIFEM takes long-term equity capital positions in
funds that acquire an interest in local SMEs and fast-growing businesses,
support their growth, and then sell their shareholdings at a profit.
growth in emerging markets and developing economies by
providing financial support to commercially viable SMEs and
other fast-growing enterprises to create secure and permanent
jobs and reduce poverty. SIFEM aims to generate sustainable,
long-term development effects in local communities, as well as
provide investors with positive financial returns over time.

These profiles use 2017 data — the most recently-collected data when Devex analyzed the numbers in 2018.
SIMEST
FOUNDED: 1991 LEADER: Alessandra Ricci, CEO

AMOUNT INVESTED TOTAL PORTFOLIO

2017 $180.2 million $1.2 billion
OWNERSHIP: 76% controlled by the Cassa depositi e prestiti Group through SACE.
Minority shareholders include Italian banks and industrial associations.

INVESTMENT TYPES:
• Equity investments: Includes investment in non-EU companies and interest rate
subsidies, investment by venture capital funds, and investment in EU companies.
• EU funds: Co-investment that blends EU funds for development cooperation.
• Export credit support: Support exports of capital goods.
• Soft loans: Subsidized financing to widen the presence of Italian companies in foreign
markets.
Together with SACE, SIMEST forms the export and
internationalization hub of the CDP Group, which offers the entire
range of financial instruments to support Italian companies
interested in competing and expanding internationally. SIMEST
supports companies in their growth over the entire international
expansion lifecycle, from the initial assessment of new markets
to the expansion through direct investments.

SOCIEDADE PARA O FINANCIAMENTO DO DESENVOLVIMENTO

(PORTUGUESE DEVELOPMENT FINANCE INSTITUTION, SOFID)
FOUNDED: 2007 LEADER: Marta Mariz, CEO

AMOUNT INVESTED TOTAL PORTFOLIO OWNERSHIP: Limited liability company owned by the Portuguese government
2017 $2.4 million $12 million
(59.99%), four large Portuguese banks (each holding 10%) and the Portuguese
Association for Economic Development and Cooperation (0.01%).

INVESTMENT TYPES:
SOFID focuses specifically on investments in Africa, Asia, and Latin America and the Caribbean. SOFID is
• Guarantees mostly involved in the manufacturing, infrastructure, tourism, and financial sectors.
• Loans

SWISS INVESTMENT FUND FOR EMERGING MARKETS (SWEDFUND)

FOUNDED: 1979 LEADER: Maria Håkansson, CEO

$15 million OWNERSHIP

AMOUNT TOTAL
PROJECT
BIGGEST
2017

for Cambodia’s largest

INVESTED PORTFOLIO microfinance company, Prasac Limited liability company wholly
Microfinance Institution Ltd., owned by the Swedish government.
$98.6 million $560.1 million to on-lend to the country’s
microbusinesses and SMEs.

INVESTMENT TYPES: Swedfund’s mission is to finance and develop sustainable businesses in the world’s underserved
• Equity countries by encouraging private players to risk investment. It plays a vital role in Sweden’s contribution
• Funds to development cooperation through a focus in the world’s most disadvantaged countries in sub-Saharan
• Loans Africa and Asia. Sector focuses are finance, manufacturing, services, and energy.
 9 ANALYSIS
What does the data tell us
about DFIs?
By Lisa Cornish | 19 March 2019
Data on bilateral development finance institutions
can provide a high-level overview of what they
are doing and where they are working, but
not necessarily why they are choosing the
investments they are making.
Each DFI has its own parameters to define
regions and financial instruments, and these are
not always shared publicly — making it difficult
to compare their work or in even fully understand
it. Despite the challenges, there are still insights
to be gained from looking at where DFIs are
operating and who they are supporting.
To support greater insights into DFIs and their
objectives, Devex has collated more than 3,000
investments publicly accessible from 17 DFIs
made between 2012-2017. High-level time series
data has been collected on 16 — excluding
FinDev Canada which was founded in 2017 —
and profile information is available for all. These
profile and investment details are provided in our
new DFI tableau interactive.
The data shows that DFIs have been increasing
their investments since 2012, with a focus on
financial inclusion and least developed countries.
It shows a growing commitment to SME
development, energy projects, and environmental
initiatives. But it also shows diversity in DFIs’
objectives — from development first to economic
expansion first.
HEADLINE FIGURES
Between 2012-2017, new commitments made by
the 16 DFIs analyzed in detail have increased in
value by 43%, totaling $12.5 billion in 2017. The
total value of portfolios has also risen across the
same period of time — up 59% to a total of $65.2
billion in 2017. Profits at DFIs are also on the rise
— the median profit for DFIs increased from $13
million in 2012 to $17 million in 2017.
 10 ANALYSIS

The Dutch FMO is one DFI that is expanding

GEOGRAPHIC INSIGHTS
rapidly, with new commitments in 2017 that
The detailed investment data collated for 15 DFIs
supported 48 markets — a big growth from
with publicly accessible data — neither BMI-SBI
the 23 supported in 2012. FMO’s annual
nor SIMEST have detailed public information —
commitments has increased from $1.7 billion in
shows that the geographic and sector priorities
2012 to $2.3 billion in 2017 in support of these
for bilateral DFIs can vary greatly. This means
new markets, with the total portfolio valued at
generalizations on priority regions and sector
just under $11 billion. During the same period,
priorities for bilateral DFIs can vary greatly,
Denmark’s IFU has grown from the ninth largest
making generalizations on priority regions and
bilateral DFI, with a portfolio worth $569 million,
sectors potentially problematic.
to the seventh largest, with a portfolio valued at
By region, BIO, CDC, Finnfund, Norfund, SOFID,
$1.5 billion. Its annual commitments have more
and Swedfund have more than one-third of their
than tripled in this time.
portfolios focused in sub-Saharan Africa.

These numbers show the growth of DFIs, but

CDC delivers this through multiregional
also raise questions about where they are
investments in Africa, which have increased from
investing and whether their growth is achieving
$170 million in 2012 to more than $440 million
development impact.
in 2017. For some African nations, this may
have been at the expense of country-focused
According to the 2017 data, the geographic focus
projects. New commitments for Nigeria have
of the portfolio for these DFIs was sub-Saharan
been declining since 2012 when a $36 million
Africa (23.9%). This was followed by closely
commitment was made. In 2017, CDC made no
by Latin America and the Caribbean (23.4%),
new commitments specific to Nigeria.
South Asia (15.1%), and other and multicountry
fourth (13.1%). DFIs invested about 30.8% of their
Since 2012, the most consistent recipient of
funding in 2017 in finance, 28.9% in industry
funding from Norfund is Africa, with a primary
projects, and 11.3% in energy projects.
focus on supporting the development of food
and agribusiness markets. This includes mango
These numbers are heavily influenced by the
markets for export to South Africa and rapid wheat
dominance of OPIC in the data. OPIC accounted
production. The focus of opportunities in Africa is
for 36% of the combined portfolio of the
expanding for Norfund, 2017 saw $12.5 million
bilateral DFIs analyzed in 2017 and 30% of new
committed for two hydro-energy projects in the
commitments. As a result, the geographic and
region supporting responsAbility Renewable
sector focus reflects the political priorities of the
Energy Holding and New Africa Power.
United States and its private sector.
And for PROPARCO, new investments are
While there is a focus on supporting least
focused on the Republic of the Congo and
developed countries, only 29 of the 47 countries
Benin — although India and Jordan are also top
classified as LDCs received direct support from
recipients of PROPARCO funding.
DFIs in 2017 — not including additional countries
that may have been supported by multicountry
Southeast Asia is also a growing focus in the
initiatives. Topping the priority LDC countries for
objective of supporting developing economies.
investment in 2017 were Guinea, Benin, Senegal,
Bangladesh, and Cambodia.
 11 ANALYSIS

SIFEM, for example, is increasing its contribution
to SME development — its focus sector in 2017
— through new investments in Cambodia worth
$8.4 million. In 2012, there was no SME-related
investment for the year.
SECTOR INSIGHTS
DFIs’ priority sectors have been another area of
transition since 2012.
In 2017, PROPARCO committed $488 million
for new investments in water and sanitation
projects — its largest focus sector. In comparison,
banking and finance initiatives — a focus for
most DFIs — accounted for just $2.4 million
of PROPARCO’s new investments. It is a large
transformation in focus for the DFI, which in 2012
was focusing new investment in transportation —
$777 million to be precise.

OPIC’s focus on Latin America and the Caribbean DATA LANDSCAPE

is a region that has seen DFI sectoral shifts. In
2012, commitments in the region were focused
on Peru — through solar power investments. But
the regional focus has since shifted. By 2014, SME
investment saw OPIC focus on investments in Brazil
and Chile. By 2017, it shifted again, with Colombia
the focus of a low-income mortgage portfolio.
To improve transparency, some DFIs — including
OPIC, PROPARCO, and CDC — are taking steps
forward to provide data through open platforms
or standards. Others, such as BMI-SBI and
COFIDES, continue to make accessing data a

A growing sector of investment for Finnfund “The secretariat of

is ICT and telecommunications. Combined, OECD is in ongoing
commitments of $23 million were made to
support ICT and telecommunications technology discussions with
development in 2017 — categories not listed in members and their
new commitments in 2014.
DFIs to improve the
But the largest shift is the growing focus on quality, coverage, and
renewable energy.
comprehensiveness
For OeEB, energy infrastructure has been of the reported data.
among its priority sectors since 2012, with $140
million in commitments made in 2017. For DEG,
The provision of
India was also the single biggest country for reliable statistics
new commitments in 2017, with a $37 million
investment supporting ReNew Wind Energy
for analytical and
to build clean energy infrastructure one of their transparency
largest investments. And Swedfund saw a shift
from a focus on banking and financing to energy
purposes is in the
in 2017 through new commitments. heart of the OECD
There are others that stand alone in their focal
raison d’être.”
sectors. Tomas Hos, research officer at the
OECD Financing for Sustainable
Development division
 12
challenge. COFIDES has password-protected or
scanned-image annual reports that prevent data
scraping and analysis.
Additionally, inconsistent reporting standards
among DFIs limit the ability to accurately analyze
DFI data.
Since 1992, the Association of Bilateral
European Development Finance Institutions has
been supporting greater transparency among
European DFIs by providing aggregated data that
can be compared and contrasted.
The Organisation for Economic Co-operation and
Development has been another important player
in the DFI data space. In 2014 it began engaging
with DFIs through a workshop to discuss data
standards and improved reporting and produced
a basic visualisation of DFI operations to further
the discussion.
“[The visualization] was meant to incentivise
DFIs and their respective governments to
work on more comprehensive reporting to the
OECD,” Tomas Hos, research officer at the OECD
Financing for Sustainable Development division,
explained to Devex.
DFI reporting to OECD is currently ad hoc and there
is limited coverage of DFI activities in the OECD
statistical system for the recent years, Hos said.
ANALYSIS
“While some DFIs report in a very
comprehensive and detailed manner, others do
not report their activities to the OECD or report
only aggregate level data,” he added.
OECD’s focus in the space is in understanding
how much private finance is being leveraged
through these development finance activities.
The 2016 OECD survey “Amount Mobilised
from the Private Sector” provides detail on the
methodology used to collate preliminary data for
2012-2017. Looking beyond just bilateral DFIs
and into broader areas of ODA financing and
private sector support to report impact as a share
of private sector investment, it offers another way
of reporting the numbers.
OECD, aware that development finance alone
cannot support the delivery of the Sustainable
Development Goals, is one of the organizations
that will push for greater collaboration and
transparency on data initiatives.
“The secretariat of OECD is in ongoing
discussions with members and their DFIs
to improve the quality, coverage, and
comprehensiveness of the reported data,” Hos
said. “The provision of reliable statistics for
analytical and transparency purposes is in the
heart of the OECD raison d’être.”
 13
Development finance institutions
grapple with their growing role
By Adva Saldinger | 19 March 2019
WASHINGTON — Small agencies that work
alone, siloed off from the rest of a country’s
development work: That’s how development
finance institutions might have been described
just a decade ago. But DFIs have gained
prominence as the role of the private sector has
been accepted and because their work can be
put in direct service of meeting the Sustainable
Development Goals.
As the paradigm shifted from a focus on
social service support and grant-based official
development assistance to one more driven
by private sector development, countries have
turned to development finance institutions
to provide solutions to help create jobs, spur
economic development, and reduce poverty. As a
result, the number of institutions has proliferated.
The United Kingdom has directed a big influx of
capital toward its DFI, the CDC Group. Canada
created a DFI in 2018, and the U.S. Congress will
launch a new DFI this year with more capabilities
and double the investment capacity than its
current institution. Other countries, notably
Australia, are considering creating DFIs.
In 2017, bilateral DFIs were managing just over
$65 billion in assets, according to data gathered
by Devex, up from about $41 billion in 2012. That’s
a roughly 57% increase in a five-year period.
Growth is clear in Europe, according to the
Association of Bilateral European Development
Finance Institutions, or EDFI. There were about
seven active DFIs when the association for
ANALYSIS
European DFIs was founded some 25 years ago;
today there are 15. And the balance sheets of
those DFIs tripled between 2005-2015.
“They did things that were relevant for
development, but a number of them were
financial institutions living a quiet life without
any significant profile in any development policy
of their countries,” said Søren Andreasen, the
general manager at EDFI. “Many countries didn’t
have economic development or private sector
development policy as part of their aid strategy
and none had [a] policy on how DFIs fit into
private sector strategy.”
As DFI budgets grow and they play a more
prominent role in development, they are also
facing more scrutiny. DFI leaders are grappling
with how to increasingly invest in least developed
or low-income countries, how to ensure they
are collaborating rather than competing, and
how to effectively mobilize private capital rather
than crowd it out. Amid calls for them to be more
transparent, and to prove their investments are
achieving development results, they are also
working on new ways to measure their impact.
TAKING RISKS
In the past several years, a number of DFIs
moved to invest more in least developed or low-
income countries.
Deals in LDCs are difficult and complex. They
require taking more financial risk and more effort
and creativity, said Colin Buckley, chief operating
officer at CDC.
 14
Historically, DFIs have been hesitant to invest
in fragile states and risky settings where the
investment had less than an 80% probability
of success, even if it had the capacity for
transformative impact, Buckley said.
“One thing DFIs need to be more comfortable doing
is rolling the dice for transformative impact,” he said.
DFIs will not, and cannot, solely invest in the
poorest, riskiest places. In an effort to remain
profitable and balance their portfolios, they will
continue to make some investments that are
deemed safer, even as they look to invest more in
low-income countries.
But some experts believe that DFIs should be
taking more risk and doing more to crowd capital
into higher risk markets where private finance is
especially scarce.
“Some DFIs — I’d pick on IFC [the International
Finance Corp.] for sure here — are mostly not
in high-risk markets and not very engaged in
high-risk sectors and are mostly doing safe
projects,” said Todd Moss, the executive director
at the Energy for Growth Hub, a spin-off from the
Center for Global Development, where he is also
a visiting fellow.
Part of the problem has to do with incentives:
At some DFIs, investment teams are rewarded
based on the amount of money invested, rather
than on where it is invested or what its impact
will be. There is also often pressure on the
financial side, especially for DFIs that operate like
commercial banks and are trying to maintain AA
or AAA credit ratings.
“The scale and risk issues mean for these
agencies to succeed, they need to create internal
incentives for people to take risk and subsidize
upfront costs,” Moss said.
ANALYSIS
“One thing DFIs
need to be more
comfortable doing
is rolling the dice
for transformative
impact.”
Colin Buckley, chief operating
officer, CDC
As DFIs look to take on more risk in pursuit of
development impacts, they may also need to
reevaluate their targets for financial rate of return
and credit rating expectations — which in most
cases, haven’t changed, even as DFIs look to
work in riskier and potentially more impactful
geographies and sectors, said Alix Zwane, CEO at
the Global Innovation Fund.
“We may need new financing vehicles, special
purpose vehicles off balance sheets, where risk is
contained,” she said.
DFIs must also change their approach to how
they create projects; otherwise they may find
it difficult to deploy their capital, said San Bilal,
head of the economic transformation and
trade program at the think tank ECDPM. That
is because in low-income countries, there are
simply not enough projects that meet their
investment criteria.
“There is no such thing as a passive investor in a
fragile state,” Buckley said, adding that CDC has
found that it really needs to work alongside the
businesses it invests in and hire additional staff to
do so.
15 ANALYSIS

KFW
Germany
1948
CDC Group
United
Kingdom
WHEN COUNTRIES CREATED THEIR DFIs

DEG
1962 Germany

IFU 1967
Denmark
FMO
BMI-SBI 1970 Netherlands
Belgium
1971
OPIC
United States
Proparco
1977 France

Swedfund
1979 Sweden
Finnfund
Finland
1980

COFIDES
1988 Spain

SIMEST
Italy
1991

Norfund
1997 Norway

BIO
2001
Belgium

SIFEM
Switzerland 2005

2007 SOFID
Portugal
OeEB
Austria 2008

FinDev Canada
2018 Canada
 16
The European Fund for Sustainable
Development, which was launched last year, is
looking to provide technical assistance and has
project preparation units to make more projects
bankable. Bilal said more DFIs should consider
providing this kind of technical assistance for
better preparation or to support small- and
medium-sized enterprises.
Without more vehicles working to make projects
bankable, one of the dangers is that all DFIs are
looking at the same potential projects, sparking
concerns that limited public finance may crowd
out the private sector and not ultimately improve
the conditions, he said.
COMPETITION
The challenge of competition — both among DFIs
as they look to deploy their capital in markets with
limited options, and with private actors — could
have a negative effect on most of their missions to
improve development and reduce poverty. Rather
than competition, more cooperation is needed in
the sector, several experts told Devex.
While DFIs might be hesitant to talk about it, one
investor in Africa told Devex that in some sectors,
he’s seen DFIs come in and undercut commercial
investors in ways that can distort markets.
The investor said he believes that part of the cause
is competition among DFIs for deals. This pushes
loan pricing down and forces intermediaries
to raise blended capital funds and get highly
concessional financing from governments
and donors in order to be able to attract some
commercial capital at rates that they will accept.
As a result, in some industries, DFIs appear to
be preventing a natural progression to more
commercial capital over time, keeping them
locked in as sectors dependent on concessional
financing, he said.
ANALYSIS
“As public agencies,
they should be as
transparent as possible
— they don’t need to
release every detail
of every project,
but they should
release information
about activities ... as
maximally as possible.”
Todd Moss, executive director,
Energy for Growth Hub
Not all DFIs are investing in that way, the investor
noted. He pointed to a recent Overseas Private
Investment Corp. deal where OPIC made part
of its investment junior debt, a move that would
allow the fund to raise more commercial sources
of capital, which would need to be senior debt.
“I dont think they’re chasing out private capital
very often. The bigger problem is sometimes
crowding in other DFIs rather than truly private
capital,” Moss said, adding that it could be an
issue of immature markets that would change
over time.
Some, including Andreasen, said that they don’t
see competition as a problem, and instead often
see DFIs working together. About one-third of
individual investments that the European bilateral
DFIs make are done alongside other European
DFIs, he said.
“It’s fine to have debate and scrutiny in this
respect, but I don’t see a lot of specific evidence,”
Andreasen said.
 17
One place DFIs are playing a critical role, and are
working together, is in financing local banks in
Africa in the wake of restrictive regulations around
risk that have led many commercial banks to pull
out, he said.
Buckley said DFIs haven’t been very good
at coordination with one another or with aid
agencies. Often, transformative investments need
regulatory or institutional reform — and that is
where DFIs should work more closely with aid
agencies to address some of those challenges.
“I think people should demand more cooperation as
DFIs grow in prominence and capital,” Buckley said.
Transparency and measurement
As more funds are funneled through DFI
investment mechanisms, demand is growing for
better measurement and improved transparency.
“As public agencies, they should be as
transparent as possible — they don’t need to
release every detail of every project, but they
should release information about activities ... as
maximally as possible,” Moss said.
A DFI should release all information unless there
is a commercial reason not to, he said. It should
be transparent about systems for evaluating
development impact during and after it makes
investments, and the data should be made
available in easily accessible formats.
“DFIs need to be better at looking at outcomes
and impact and incorporating that kind of
consideration in decision-making,” said
Samantha Attridge, a senior research fellow at
the Overseas Development Institute.
DFIs already collect a lot of data on operations
and direct project effects, for example, on job
creation and tax creation and growth. But one of
ANALYSIS
the challenges is the need to better understand
indirect effects on the supply chain and the
broader economy, Attridge said.
For example, a project should not just measure
direct jobs but evaluate if the investment
displaced jobs and look at the quality of the jobs.
A power project should look at the affordability
of power when trying to determine benefits
of access, she said. And as those impacts are
counted, DFIs need to figure out how to ensure
that the benefits aren’t double counted in deals
with multiple investors, she said.
DFIs are investing a lot of time into establishing
frameworks to understand what development
impact is, and how to track transactions and their
impact, Andreasen said.
That measurement isn’t easy, but there are
models that DFIs can use, GIF’s Zwane said.
One option is to model the net present value of
social returns for a social return on investment
calculation akin to a calculation for a financial
return, she said.
For more innovative, early-stage projects, there
may not be enough information to determine a
credible social return on investment metric from
the start, which is a challenge that funds such as
GIF have faced. When it can’t calculate a social
return on investment at the beginning, it tries to
share information about how many people will
be impacted, the depth of impact, and what the
probability is of success, she said.
That work requires both money and staff time,
and while there may be a growing interest in
measuring impact, some DFIs haven’t fully
grappled with the implications for funding and
staffing an impact measurement structure,
Zwane said.
 18 ANALYSIS

CDC has been working on a new development

framework and has a DFID-funded evaluation “The reason that’s
facility with an independent board that has important, the reason
allowed it to do more evaluations, test the
development impact thesis of its projects, and
that you need to have
help businesses adapt, Buckley said. In the that development
evaluations CDC is looking at everything, from impact clarity is that
lean data to 10-year longitudinal evaluations, he
said.
when we are clear about
why we are making
“The reason that’s important, the reason that you an investment, what
need to have that development impact clarity is
that when we are clear about why we are making
development impact we
an investment, what development impact we expect it to have, that
expect it to have, that allows us to navigate the allows us to navigate
troubled waters you inevitably run into in troubled
geographies,” he said. the troubled waters you
inevitably run into in
More cooperation on this issue in particular
could lead to better standardization or industry
troubled geographies.”
standards that could allow more DFIs to accept Colin Buckley, chief operating
more risk in exchange for higher social return, officer, CDC
Zwane said. And that data — the numbers
and the narrative — will help DFIs define
and communicate their evolving role in the
development landscape.

Vince Chadwick contributed reporting to this

article.
 19
What happens when a DFI
project goes wrong?
By Teresa Welsh | 26 March 2019
MEXICO
PANAMA
WASHINGTON — Development finance
institution projects, which are playing a growing
role in the global development landscape, seek
to improve the quality of life and economic
opportunities for host communities. But projects
meant to elevate and expand the role of the
private sector in development don’t always go
to plan — sometimes due to a lack of strong
safeguards or accountability mechanisms.
Devex digs into the data behind DFIs to bring you
emerging financing trends.
Here’s a look at four DFI-funded projects that
harmed host communities and how the lenders
took lessons from those projects to adapt the
way they scope, execute, and manage the work
they do across the globe to prevent projects from
having unintended consequences.
ANALYSIS
SENEGAL
LIBERIA
LIBERIA’S BUCHANAN
RENEWABLE ENERGY
Financed by: Overseas Private
Investment Corporation, U.S.
The project
OPIC approved more than $200 million in
loans to rejuvenate the rubber sector in Liberia
between 2008-2011. Rubber trees would be cut
down to be burned as wood chips and be used
as biofuel, creating sustainable energy while
rejuvenating family farms. Biomass company
Buchanan Renewables was to construct a power
plant where it would use the rubber trees to
generate energy.
 20
What happened
The project had an adverse impact on the
community it was supposed to be helping by
reviving the rubber sector. By cutting down their
rubber trees, the project destroyed the only
income source for many small family farmers
and failed to help them rebuild productive
farms. Buchanan was also monopolizing a key
raw material needed by charcoal producers, a
vulnerable population that relied on the same
trees for their production. The cost of charcoal, the
country’s most important fuel source, tripled in
the years after the Buchanan project.
There was also alleged rampant sexual abuse by
Buchanan staff, who the women said demanded
sex in exchange for access to wood for their
businesses. Charcoal producers had to travel
further to find trees they needed and deforested
more of the area. Those community members
who were working for the company said
Buchanan did not provide them with appropriate
safety training and protective equipment.
Employees suffered workplace injuries such
as being trapped under fallen trees and broken
limbs, and did not receive compensation or
needed medical treatment.
Drinking water was also contaminated, and
advocates say the communities still do not have
access to clean water.
What changed
Since Buchanan withdrew from the project
in 2013, the standard OPIC accountability
process was not available to the communities
that complained in 2014 about its lasting
impact. Despite this, advocacy organization
Accountability Counsel convinced OPIC to
review the project. The advocacy organization
participated in a review process with OPIC
between 2015-2017.
ANALYSIS
After the problems with the Liberia project, in
January 2017, OPIC revised its Environmental
and Social Policy Statement to include
stricter monitoring policies, according to OPIC
spokesperson Amanda Burke. Under its
2009 version of the statement, OPIC adopted
International Finance Corporation Performance
Standards as the benchmark for project
appraisals.
“For projects that pose a heightened risk of adverse
environmental, labor, social, or human rights
impacts, OPIC has supplemented the normal
monitoring procedures with enhanced monitoring
and reporting as the project progresses,” Burke said.
MEXICO’S CERRO DE ORO
HYDROELECTRIC PLANT
Financed by: Overseas Private
Investment Corporation, U.S.
The project
Cerro de Oro is a mini hydroelectric plant in
Oaxaca that aimed to produce electricity to be
sold to private businesses. The existing dam was
to be converted into a hydropower project after
the construction of a powerhouse, water intake
and conduction tunnel, tailrace channel, voltage
elevation substation, and transmission lines.
What happened
The project took place in an area where 20,000
indigenous people had been forcibly displaced
in the 1970s and 1980s to build the original dam
and were never compensated for their losses. The
community felt that they were again being taken
advantage of without proper consultation on how
they would be impacted by the hydroelectric dam.
 21 ANALYSIS

The outflow channel for water from the plant was “OPIC more regularly
directed into a creek with a natural spring that
was used as a water and cultural resource. Water engages additional
was contaminated by runoff from the project, and monitoring support
banks of creeks were deforested. This damaged
fishing areas needed for livelihood and nutrition during project
and destroyed ecosystems and indigenous construction and
infrastructure in the area.
operation through
After a complaint from the community and independent
assessments from the Mexican government
and the company involved, it was determined
engineers and
the site was not appropriate for a hydroelectric consultants.
dam and the project was stopped. According to
Accountability Counsel, most of the harm from
Continuing this more
the initial project has dissipated as trees have rigorous due diligence
grown back and the spring is being cared for.
and oversight gives
What changed OPIC a better chance
According to Stephanie Amoako, a policy
associate at Accountability Counsel, one of
to support projects so
the central complaints from the impacted they succeed.”
communities was that the negative social and
environmental impacts of the project were not Stephanie Amoako, policy associate,
sufficiently identified.
Accountability Counsel

Lessons learned from the Cerro de Oro Project

contributed to changes OPIC made in recent years
to develop and implement more rigorous and
stringent project review policies, OPIC’s Burke said.
“This includes increased focus on consultation
processes and deeper historical and social
consideration of a project’s local impact,” she
explained. “In addition, OPIC more regularly
engages additional monitoring support during
project construction and operation through
independent engineers and consultants.
Continuing this more rigorous due diligence and
oversight gives OPIC a better chance to support
projects so they succeed.”
OPIC now also requires its clients to have stronger
grievance mechanisms so people who feel they
have been harmed by a project can effectively
raise their concerns.
“If properly implemented, these measures
will help ensure that OPIC-supported projects
properly identify and assess human rights risks
for the protection of the communities affected by
these projects,” Amoako said.
Accountability Counsel said it had not received
any complaints about OPIC projects that were
approved since the new standards were adopted.
 22 ANALYSIS

community would be adversely impacted by the

flooding area of the dam.

According to FMO, all landowners were paid fair

PANAMA’S BARRO market value for their land used to construct the
BLANCO HYDROELECTRIC dam. Some landowners who owned the property
PLANT where the reservoir was to be built did not want to
Financed by: DEG, Germany, and FMO, sell, and their land was acquired under eminent
Netherlands
domain in accordance with Panamanian law.
DEG told Devex that an external investigation
discovered that legitimacy of leaders from
The project
the indigenous community that had signed
Barro Blanco is a hydroelectric power project in
an agreement about the project “was being
Panama run by a developer known as Genisa. It
challenged by certain representatives from the
includes a 55-meter-high dam and a reservoir on
indigenous community.”
the Tabasara river that lies less than a mile from
the Pan-American highway. The $28 million
Genisa and the Panamanian government
project was designed to generate 140,000 MWh
worked to compensate people for economic
of reliable electricity annually, which equals more
losses experienced as a result of the dam, but
than 1.5% of Panama’s total energy consumption.
some members of the Ngäbe-Buglé declined to
participate in a settlement. FMO said it has no
It was intended to supply electricity to 64,000
control over land compensation.
citizens, reducing the amount of oil the country
imported. It was also designed to create local
“The decision on how communities should
employment.
be compensated is made by the government
of Panama who have set up a process to
Barro Blanco was originally registered as part of the
determine this,” said Paul Hartogsveld, senior
Clean Development Mechanism, the United Nations
communications adviser at FMO.
system to offset carbon. CDM projects do not have
a complaint mechanism nor standards to protect
“FMO and our client are not party to this process
human rights. After objections about the project,
so are not able to directly influence, but we are
Panama withdrew Barro Blanco from CDM in 2016.
closely monitoring this and we find it important that
the communities are paid as soon as possible.”
What happened
The Barro Blanco project raised red flags for
What changed
human rights advocates before it even began,
Prior to Barro Blanco, FMO did not have a
according to Anna van Ojik from Both ENDS, a
complaint mechanism where communities who
Dutch advocacy organization. That organization
felt they were experiencing adverse impacts
became engaged on the case in 2010, before
from a bank-financed project could have their
construction on the dam had even begun. The
grievances addressed. At the time, FMO was
Comarca Ngäbe-Buglé, an indigenous group
using the International Finance Corporation’s
located downstream from the dam, argued their
 23
Performance Standards that were issued
in 2006, but it now complies with the IFC’s
guidelines updated in 2012.
According to DEG, Barro Blanco was the first
project that used its Independent Complaints
Mechanism that gives any party “who believe
to be adversely affected by a project financed
or planned by DEG the right to be heard and the
right to complain.”
Hartogsveld said that after the complaint was
filed, “it became clear from the conclusions
from the panel that FMO should have taken the
concerns of certain representatives from the
indigenous community more seriously.” As a
result, the bank issued an updated Sustainability
Policy in 2017 that has “more intensive due
diligence requirements for high-risk projects that
have significant impact on local stakeholders.”
DEG said it now “strives for a more elaborate
formal opinion from experts with defined
expertise in indigenous peoples’ rights and the
local legal context, on the matter of the formal
representative structures in indigenous areas and
will structurally consider the recommendation for
future investments.”
According to DEG, it and FMO initiated a review
of the Independent Complaints Mechanism in
2016 based on feedback from both banks, civil
society organizations, and other parties, as well
as lessons they learned after processing the first
round of complaints.
ANALYSIS
SENEGAL’S SENDOU
COAL POWER PLANT
Financed by: FMO, Netherlands
The project
Sendou is a 125 MW coal power plant near the
town of Bargny, a traditional fishing community
on the coast near Dakar. It was designed to be
the country’s most modern substation, which
would contribute to a more stable power grid.
The project aimed to improve access to electricity
in Senegal, where FMO projected that the plant
would increase the country’s supply by 30%
and help reduce frequent energy shortages and
blackouts.
Sendou was intended to supply baseload
capacity for the system, which would then allow
for future growth of sustainable energy including
solar and wind power. To be built on 29 hectares
of land, it was also meant to replace some of the
country’s dependency on heavy fuel oil, which is
more expensive and emits more pollution.
The plant was also designed to generate local
employment, particularly for youth, during both
construction and operation.
What happened
Senegal has a strong civil society that was vocal
about concerns that the coal plant adversely
impacted air quality and marine life, violated land
rights, disregarded cultural issues, and caused
economic displacement. Community advocates
felt they had not been properly consulted on the
potential disruptions the project would cause.
 24
The community surrounding the coal plant
had already been experiencing several
environmental changes, including coastline
erosion and depletion of fish supply and the
nearby construction of a toll road. The plant’s
construction in that location, the oversight panel
concluded, limited the community’s ability to
escape these other adverse factors and continue
living as they always had.
In May 2016, two Senegalese NGOs filed
complaints through the formal mechanism at
FMO. A second complaint was filed by in July of
that year, and the two were treated as one by the
oversight board because they raised the same
core issues with Sendou.
Their accountability study found that FMO
declined to do adequate baseline studies
to determine impact on air and marine life
quality, how land claims would impact the
local community, and establishing necessary
socioeconomic data that would allow for
measurement of the coal plant’s impact on local
employment.
What changed
Like with Barro Blanco, the experience at Sendou
contributed to the changes FMO made to its
policies.
“Several key Environmental & Social (E&S) items,
especially community engagement, should have
ANALYSIS
been considered more carefully and contextual
risk should have been better analyzed. FMO
has incorporated the lessons learned from this
and other projects into our policies with the
purpose of improving our appraisal of E&S risks
and impacts,” FMO wrote in a response to a
compliance review report.
“The Human Rights position statement explicitly
mentions that FMO will strengthen its approach to
verifying broad community support. Furthermore,
FMO has implemented the practice of publicly
disclosing the high E&S risk transactions before
contracting.”
These new policies will help ensure FMO is
adequately aware of the entire local reality before
a project begins, Hartogsveld said.
“By integrating human rights into our due
diligence and investment process, FMO has
widened its stakeholder engagement network,
thus gaining more eyes and ears on the ground
where our investments are,” Hartogsveld said.
“This enables us to better understand the context
in which the project is set.”
FMO now discloses all of its transactions before
contracting, and employs 35 environmental and
social officers. The bank no longer invests in coal
projects and said it intends to continue growing its
green portfolio.
 25
Belgian DFI doubling in size, aims
to stay focused on SMEs
By Adva Saldinger | 30 September 2019
BIO CEO Luuk Zonneveld. Photo by: Rikolto / CC BY-NC-ND
WASHINGTON — Belgium’s development
finance institution, the Belgian Investment
Company for Developing Countries, or BIO, is in
the process of doubling its investments, in part as
a response to the growing role of private capital in
addressing development challenges.
The agency will soon have a total of $1 billion in
investments, and as it grows in size, BIO is trying
to maintain its focus on supporting small- and
medium-sized enterprises in least-developed
countries, BIO CEO Luuk Zonneveld, told Devex
in an interview.
Zonneveld said he has seen a shift in the past
five years in the “recognition and appreciation”
of development finance as a key part of social
and economic development. Even though many
DFIs existed for years before the adoption of
the Sustainable Development Goals and the
2015 Addis Ababa financing summit, they were
“all of a sudden catapulted to the forefront of
ANALYSIS
BIO
BELGIUM
attention,” he said. The SDGs and the Addis
Ababa Agreement placed greater emphasis on
the role of the private sector and private capital in
achieving development aims than before.
The result is not only that the Belgian
government, a BIO shareholder, decided to
increase BIO’s capital, but that the organization is
regularly being asked to participate in fora and is
leading task forces in the political arena, he said.
“It all indicates a strong interest and a bigger
role of investment in general in what the world is
trying to achieve,” Zonneveld said.
BIO is focused on supporting SMEs, investing
both directly and indirectly through funds, with
an emphasis on businesses in low- and lower-
middle-income countries. About 80% of BIO’s
lending is in least-developed countries and post-
conflict states, and it typically invests between $1
million and $10 million, Zonneveld said.
 26
Many DFIs are being pushed to do more work
in LDCs, and there are a few factors that enable
BIO to invest in lower-income, more challenging
environments.
One factor is deal size, as BIO lends smaller
amounts than some other DFIs. What also gives
BIO more flexibility than other DFIs is that it
doesn’t have high return expectations, enabling
it to take greater risk. BIO’s net level return in the
last five years is about 2.5%, which is acceptable
in part because it is linked to market interest
on 10-year state bonds which currently have
negative interest rates, Zonneveld said.
BIO provides technical assistance alongside
its investments when necessary, but in any
technical assistance project, the client or borrower
is required to contribute as well. Often that
means they are bearing 50% of the costs of the
assistance, though that could drop to as low as
15% depending on the need, Zonneveld said.
“We have a very hands-on approach when we
do investment analysis within our framework,”
he said, adding that those relationships and deep
knowledge of the situation in countries such as
the Democratic Republic of the Congo — where
BIO has its biggest portfolio — helps the agency
be aware what is happening and actively manage
investments.
“If you look at technical assistance it’s less about
the amount of money but the time we spend with
clients to do these different types of projects,” he
said.
The challenge for BIO today is not to change
its basic focus on supporting SMEs in least
developed countries and post-conflict states,
despite having significantly more capital to
deploy, Zonneveld said.
ANALYSIS
“In general the
DFI industry is
adolescent in the
way it works, it will
benefit from further
steps to increase
efficiency and
cooperation.”
Luuk Zonneveld, BIO CEO
“The question rather is will we be able to develop
sufficient internal resources to continue to take
this approach despite the fact assets are growing
so strongly,” he said.
As a relatively small DFI, BIO does partner and
co-invest with other larger DFIs, in part because
those deals require less staff time and allow
the team to spend more time on the direct
investments it makes, Zonneveld said. And while
efforts have been made through the Association
of European Development Finance Institutions,
EDFI, to work on standards and procedures that
have allowed the agency to be more effective
and cost-efficient, there is a “dire need for us to
harmonize much more.”
Harmonizing development impact indicators and
reporting will make things easier for BIO because
it will be able to consolidate some of its metrics,
which Zonneveld said would be a “major step
forward.”
“In general the DFI industry is adolescent in the
way it works, it will benefit from further steps to
increase efficiency and cooperation,” he said.
 27
FinDev Canada turns 1, seeks to
be impact-led
By Adva Saldinger | 06 April 2019
Photo by: FinDev Canada
WASHINGTON — A year ago FinDev Canada
consisted of Managing Director Paul Lamontagne
and one other employee, working out of a WeWork
in Montreal. But the Canadian development finance
institution recently marked its first birthday in a
proper office with about 15 staff.
FinDev spent the year in startup mode, working
to build Canada’s capacity to work directly with
the private sector for the first time. It has learned
from others, created a development impact
framework, and made its first two investments.
FinDev Canada is an independently governed
subsidiary of Export Development Canada,
with Global Affairs Canada as its shareholder.
Much of its initial work involved figuring out how
to coordinate with its parent agency to share
services to remain lean, and with its shareholder
to advance Canada’s feminist international
assistance policy.
In an interview with Devex, Lamontagne said
ANALYSIS
FINDEV
CANADA
FinDev Canada aims to be an impact-led “DFI of
the future,” defined by six key factors: clear core
alignment with the Sustainable Development
Goals; an impact-first orientation; an innovative
culture that embraces technology, digital, data
and is able to fail; being a risk taker by investing in
least developed countries; scaling quickly through
partnerships; and mobilizing private capital.
BUILDING AN INSTITUTION
FinDev got a big assist from EDC to get off the
ground. The young agency was able to tap into
EDC’s operations — from its research team, to
staff around the world, to human resources, and
finance capabilities — as it started up. That made
it easier for it to focus on building its autonomous
deal origination and asset management operation
and just buy the other services from its parent.
The agency spent its early months focused on
hiring key staff and building out a development
impact framework.
 28
“I felt very strongly
that at the start,
we would set
ourselves up more
like an impact player
than a development
financier.”
Paul Lamontagne, managing director
of FinDev
“I felt very strongly that at the start, we would
set ourselves up more like an impact player than
a development financier, and therefore that we
would spend lots of time on our theory of change
so we understood what actions we wanted to
take, the outputs we were looking for, and the
long-term impact that we wanted, because we
felt that this would lead to a far more strategic
outcome and a more sustainable development
model,” said Lamontagne.
That development impact framework, which
went through several rounds of stakeholder
engagement, is now a tool FinDev Canada uses
as it evaluates each potential transaction. The
tool allows investment officers to score projects
based on gender, climate, and local economic
development — including factors such as job
creation.
In building the new institution, FinDev wanted
to learn from the successes and shortcomings
of other DFIs, as well as international finance
institutions and multilateral development banks.
So it spent time with peers collecting insights
about what has and has not worked, aligning
ANALYSIS
itself “with what we saw as like-minded actors in
the market,” Lamontagne said.
The result, in part, was four memorandums of
understanding signed last year with the British
DFI CDC Group, the Dutch DFI FMO, the African
Development Bank, and the Finish DFI FinnFund.
Those agreements are designed to share best
practices, and more are likely in the year ahead.
As Lamontagne was looking at potential models
for FinDev, he felt the Nordic DFIs, most of
which have portfolios of about $1 billion, were
most aligned with Canada’s “social democratic
approach to development” and were about the
size he envisioned the organization would be in
about five years.
FinDev also helped launch the G-7 2X Challenge,
a commitment made last year among the G-7
DFIs to mobilize $3 billion for gender lens
investing, which Lamontagne counts as one of
his agency’s first milestones. The gender lens
investing work has been informed by others’
efforts, including those of Overseas Private
Investment Corp., whose own 2X initiative
launched ahead of the G-7’s, as well as the
Swedish feminist international assistance policies
and Swedfund’s work.
The institution also created an enterprise risk
management framework and a risk appetite
statement. Through that process, it identified
some 30 countries — a mix of developing,
middle income, and upper middle income — that
it would invest in. The goal, Lamontagne said, is
to create a portfolio that is “being bold, yet being
sustainable,” though exactly what that means, or
how its investments will be distributed, remains to
be seen.
FinDev’s five-year corporate plan for 2019-
2023 — which included the development impact
 29
framework, the risk appetite statement, and more
— was submitted to the government and will
eventually be made public.
While building its systems, FinDev Canada also
made two investments, one alongside the CDC
Group in M-KOPA, the Kenya-based off-grid solar
provider, and a second alongside FMO in Climate
Investor One, a climate fund.
THE YEAR AHEAD
While learning from other DFIs, FinDev also
wants to set itself apart from them.
Lamontagne said he noticed that a minority of
DFIs are doing a lot of equity investments, and
he believes DFIs should be doing a lot more of
them. He’s not alone in the belief that there is a
need for more equity investment; the U.S. will
have that capability for the first time when its new
Development Finance Corporation launches,
but sourcing deals in low-income countries has
proved to be difficult for some DFIs.
“By saying within
the next five years
we won’t reach
break even, we’re
giving ourselves as
much opportunity
as we can to go to
places that take time
to get a return on
your investment.”
Paul Lamontagne, managing director
of FinDev
ANALYSIS
“You need to gear your organization and
capacitate it differently. The skill set of doing debt,
senior debt, or unsecured debt is different than
the skill set of doing equity investments,” he said.
“So clearly if we want to be different and address
gaps in the market as far as bilaterals, we need
to be able to do a lot more equity than we might
have originally envisaged, because there are still
far too few that lead with equity.”
Over time Lamontagne would like FinDev to build
a pipeline and robust equity portfolio, but that will
require that the organization have a longer term
timeline, with deals lasting five to 10 years, if not
longer, he said. That’s difficult if an organization is
pressed to cover its costs in two to three years.
Lamontagne said FinDev is not under big
time constraints to prove its profitability. The
agency may have up to 10 years to prove its
sustainability, and it may make deals at a slower
rate than other DFIs, given its size and focus.
FinDev will need to raise more than the $300
million it started with to get there, he added.
“By saying within the next five years we won’t
reach break even, we’re giving ourselves as
much opportunity as we can to go to places that
take time to get a return on your investment,
where there may be higher default rates, where
there may be the requirement of more market
readiness before you can actually invest in those
markets,” Lamontagne said.
FinDev is prepared to make some mistakes along
the way, Lamontagne said. Employees will not
be penalized for trying and failing, as long as
the organization can learn from those errors and
grow, he said.
Another critical discussion in the DFI space today,
he explained, is about the need to drive down
the size of investments, to help fill the gap that
 30
exists in the small and medium enterprise market
for funding of between $1 million to $3 million.
FinDev Canada will not be able to fill that gap
right now, as it can do investments of between $5
million and $20 million, but Lamontagne said he
would like to eventually get to smaller deal size.
The challenge many DFIs have faced is that the
transaction cost and due diligence costs of those
smaller deals mean that they don’t often make
financial sense. So with a much smaller budget
than most at $300 million currently, FinDev
could struggle to deliver on that goal.
Lamontagne said FinDev is lean and small, with
less overhead than some institutions because
of its structure in EDC, and that it may be able
to use technology to do some of those smaller
deals. FinDev Canada is working on an IT
roadmap that is focused on how to use data,
artificial intelligence, and smart contracts that
might be based on blockchain in its work. And
it will convene others on the subject during the
World Bank Spring Meetings.
“With no legacy systems and a blank canvas,
there is a huge opportunity to embrace a lot
of these leading edge and new technologies
and also work with our fellow DFIs and IFIs
on perhaps areas of innovations that they are
looking at,” he said.
FinDev Canada wants to work with the poorest
countries in the world, but it will need to do so
ANALYSIS
in partnership, and work closely with Global
Affairs Canada, which can help provide technical
assistance to help businesses, particularly in fragile
or low-income countries, be investment ready.
FinDev will be announcing a technical assistance
strategy and initiatives designed with Global Affairs
Canada aimed at helping improve deal flow in more
fragile economies, Lamontagne said.
Other countries have also announced the
intention to invest more in least developed
countries, and as a recent report about the CDC
Group’s efforts indicated, it doesn’t always go
according to plan. So it will remain to be seen
how these efforts play out, although several DFIs
have learned that technical assistance can be
key to improving success.
As the organization designs its investment
strategy, it is looking at where there are gaps in
markets or in sectors it could fill, likely in power,
agriculture, and financial services. It expects to
do about six deals this year and is focused on
building a diversified portfolio — both in where
it’s investing and the type of investments it is
making, Lamontagne said. FinDev is looking to
Latin America, and potential debt investments or
other equity fund investments moving forward.
“There’s no pressure on us and no reason we
would do what everybody else is doing. We’ve
got to do what we feel will be the most impactful,”
he said.
 31
Q&A
Swedfund CEO on expansion
plans, investment priorities
By Adva Saldinger | 20 March 2019
SWEDFUND
SWEDEN
Maria Håkansson, CEO at Swedfund
WASHINGTON — Over the years,
Swedfund, Sweden’s development finance
institution, has refined its focus and processes,
and now CEO Maria Håkansson would like to
see it double in size.
Swedfund today has a portfolio of about
$500 million, and while it used to work on
a global level, it now only works in sub-
Saharan Africa and a few countries in Asia
where it believes the needs are the greatest
and it can make the biggest contribution.
About 65% of the DFI’s portfolio is in sub-
Saharan Africa and it focuses on three sectors:
climate and energy, renewable energy,
energy efficiency, and increasingly water
and other climate solutions; health, with a
focus on specialized clinics such as cancer or
heart clinics; and small- and medium-sized
enterprises and financial inclusion as a means
to drive job creation and access to capital,
ANALYSIS
largely delivered through banks or funds.
Swedfund is also focused on working more in
post-conflict and fragile states and is working
with its owner, the Swedish government, to
adjust return expectations as they look to
riskier investments, Håkansson said. Devex
sat down with her to discuss Swedfund’s
priorities, how it works, and where it’s
heading.
The conversation has been edited for length and clarity.
What are your current priorities?
If you look at our business model, we focus
on impact on society, sustainability, and
financial viability. And then from our owner,
we have two cross-cutting themes that have
to be part of everything we do: that’s climate
and women empowerment.
We believe very much that the value add
 32
“What differentiates
a DFI is ... that we
can be very active
in how we work
on supporting the
things that we want
to achieve.”
Maria Håkansson, Swedfund CEO
that the DFI does beyond being additional
and catalytic is of course that we are a very
active owner and a sustainable owner, we are
long-term but our capital that we provide also
comes with conditions and support.
But it’s not enough for us to put the
requirements forward. What differentiates a
DFI is also that we can be very active in how
we work on supporting the things that we
want to achieve. If we want to go to more of
the post-conflict and the poorest countries in
the world, the starting point is often very poor.
It’s important for us to try to illustrate the
change that we achieved in the period of
time. We have actually moved when it
comes to sustainability [from] looking earlier
on at the ESG [environmental, social, and
governance] part as being more of a risk
mitigation to today actually saying that that’s
maybe one of our most important value
creation tools.
What type of conditions and support do you
provide and how does it vary, for example in
investments through funds?
ANALYSIS
For us, the important part is where do we
identify the risk and which kind of actions
do they need to undertake. We normally put
some kind of action plan into place that we
follow up. We say that during the first three
to five years, the company actually has to
commit to a number of actions that they have
to implement.
One good example is around decent work
and around the role of women empowerment
where we could actually put a requirement,
which could be that they have to improve on
working conditions and they need to increase
the share of females in leading positions.
And then we would actually finance that
— normally through a technical assistance
project where we could do a study.
And we would also run, for example, our
program Women for Growth, which is very
much focusing on actually improving the
working conditions for women and also
targeting to increase the share of women
in leading positions. It could be any kind of
technical assistance project, of course, around
the environmental questions or around anti-
corruption, but it can also be how we actually
act and put effort into working in the different
boards ... or trying to guide them, put advice
forward on which investments to make.
Does Swedfund have financial return
targets that you have to meet as part of your
mandate?
There’s not an individual threshold for each
investment but overall Swedfund has to be
profitable, so it’s on a portfolio level that we
have to achieve a return over time.
 33
How do you define profitable? Is there a
specific level of return you have to receive?
The way it has been expressed previously,
which is not so good, is that we have to
generate a profit, so it has to be above zero.
That has been kind of the condition. Now
we’ve had a discussion also saying that
I think it’s important that you look at the
portfolio in two dimensions because as a DFI
we need to take risk.
We are actually in a project with our owner as
we speak, where we’re looking to the return
requirements and how do you create the best
balance between return and our mission. We
want to invest in the poorest countries in the
world and in some cases, we need to take
additional risk. So what’s the balance?
So what we have said is two things, that we
will look at the return and profitability over
a longer period of time, because previously
we’ve been looking year by year. Now, we will
have a rolling profitability measure, we were
discussing some five to seven years, which
I think is a better way to actually reflect and
then you can put different targets on it.
And the second part is that maybe we
should, as I know some other DFIs have
done, actually also separate a certain part
of the portfolio where we say that these are
so high-risk investments where we are just
happy to get back the principal or maybe
not even that. So we don’t have the same
measurement on the entire portfolio.
I am willing to take a bigger risk if the impact
is bigger in a single investment, so it’s very
very important for us overall to look at the
total portfolio. And then, we need to kind
ANALYSIS
of line up with our owner and that’s the
discussion we’re having right now. Should
we make a larger share for example in
post-conflict and fragile states? That has, of
course, an impact on the return and how do
you find that right balance.
I think that’s the important discussion when
you talk about returns for DFIs because that
changes the picture of it. And if you put too
stringent return requirements, you may make
us less inclined to make those most difficult
investments that we also have to make.
As the profile of DFIs is growing, they are
also coming under more scrutiny, with more
questions about how they work together
and whether they sometimes compete for
investments or crowd out private capital.
How do you respond to those questions?
We work very close to several of the DFIs
when it comes to doing investments. We
have been very early [movers] when it
comes to requirements on gender
investments, requirements we put on climate,
on anti-corruption, on decent work, on U.N.
[Guiding Principles] and so on. So for us it’s
also been important to drive a harmonization
because otherwise, it becomes very difficult
to do joint investments.
When it comes to competing, I agree with
you when it comes to fragile states. I think
one of the problems is there are too few
projects and they’re very small. And I think
an important role for the DFIs is also to think
about what can we do to actually catalyze
more investable projects.
 34 ANALYSIS

We have a number of KPIs, which I think

“If you put too most DFIs have, that we track and we follow
stringent return up on a portfolio level. We try to make sure
both on the portfolio level that we achieve an
requirements, you improvement and also, of course, on each

may make us less individual investment that we achieve the

targets that we have set.
inclined to make
those most difficult We work with what we call integrated
reporting, which means that our auditors
investments that we are making the same kind of audit on the

also have to make.”

data related to impact on society and on
sustainability as they do on the numbers.
Maria Håkansson, Swedfund CEO
And this has been quite a cumbersome
and tough process for us, but it also means
we generate a lot of trust around the data
Another concern has been with impact
when we present because there’s actually
measurement and proving that the funds
someone else auditing our data. And I think
delivered through DFIs are achieving
that’s a very important part. If you can get it
development impact. How does Swedfund
to the same level as your financial statutory
look to assess its impact?
reporting and it has actually been audited,
then I think you increase the transparency
For us, it’s been extremely important that the
and the trust of the data, and I think that’s
data that we present has to be objective and
really, really important.
unbiased and that someone else is actually
looking at it and saying that this is a good
description and reflection of the business that
Swedfund is pursuing.
 35
Swiss DFI focused on job creation, but
struggling to mobilize private capital
By Adva Saldinger | 24 September 2019
Bundles of Swiss franc banknotes in Zurich, Switzerland. Photo by: REUTERS / Arnd Wiegmann
WASHINGTON — Since its founding in
2005, the Swiss Investment Fund for Emerging
Markets has been working to create good jobs in
emerging markets, but fulfilling the other part of
its mandate — mobilizing private capital — has
proven to be more difficult, according to Jörg
Frieden, the organization’s chairman.
While a few large Swiss banks have established
funds that have invested alongside the Swiss
development finance institution only about 10%
of its portfolio goes to mobilize private capital.
“It’s really peanuts if you put it in the context of the
very large financial market [in Switzerland],” Frieden
said in an interview, adding that he would like to
see the proportion of SIFEM’s portfolio working to
mobilize capital double in the next five years.
There should be a strong case for investment —
Swiss government bonds currently have negative
interest rates so logic should push more capital to
ANALYSIS
BIO
BELGIUM
some emerging markets. But Frieden is concerned
because the interest from private investors in Africa
seems to be weakening, he said.
“We are aware that at our size what we can do
directly is not a response to the challenge faced
by partner countries, especially in Africa. We
need to induce, nudge more risk from private
investors,” Frieden said.
Frieden has also tried to engage Swiss pension
funds but said that he hasn’t been able to get
much traction there either. SIFEM needs to
prove to them that it can generate responsible
sustainable returns so that they might invest at
least a small amount, he said.
SIFEM’s total amount of investment is between
$750 and $800 million, with about 60% going
to equity investments aimed at supporting
medium-sized businesses, often those that
produce goods for local markets, that will create
 36
jobs. The agency focuses on those businesses
because they have the potential to change the
economic environment in which they operate
and an increase in independent enterprises helps
fight poverty and promote open participation for
citizens, Frieden said.
SIFEM is also increasingly focusing on climate
and the environment, an area of emphasis that is
expected to grow as civil society and politics push
the organization in that direction.
In order to convince the private sector to
invest, SIFEM needs to be able to demonstrate
consistent positive results over time and in the
past, its funds have not always been stable, with
some years better than others, Frieden said. More
than half of its portfolio is equity investments,
but is trying to increase the number of loans it
does in order to stabilize revenues and find a
balance between the riskier, higher impact equity
investments and loans, he said.
Unlike some DFIs, SIFEM does not offer any
concessional finance or provide blended capital
on its own. As a result, it has to manage risk by
diversifying its investments and so invests across
sectors and typically across multiple countries in
a single fund, Frieden said.
SIFEM is in discussions with Swiss authorities
about what new tools, including access to some
concessional capital, it might have in the future,
particularly as it is urged to invest in more difficult
regions of countries or in countries that are more
difficult to invest in, he said.
The agency is also participating in a number of
initiatives that bring the private sector together
ANALYSIS
“We need to induce,
nudge more risk
from private
investors.”
Jörg Frieden, chairman,
Swiss Investment Fund for
Emerging Markets
with development finance institutions to try to
work on mobilization. It is also working to try to
develop a mechanism that will allow smaller
investors to make equity investments and be
a part of SIFEM funds. The idea is that the
smaller investors will be drawn to the mission
and that the money is less tightly controlled by
intermediaries than the large pools of capital.
One of the challenges that Frieden has faced at
SIFEM, and has seen other countries grapple
with, is DFIs being disconnected from the work of
development agencies, he said. Frieden has been
trying to build relationships where it’s possible
and capitalize on areas where the Swiss Agency
for Development and Cooperation has supported
potential future customers.
SIFEM has also worked with other European
DFIs on creating common standards and Frieden
is now chairing a group working to harmonize
environmental and social standards. Those
common standards improve efficiency and offer
an opportunity to learn from the experience of
other DFIs, he said.
 37
The changing face of KfW
By Andrew Green | 02 April 2019
The KfW logo is pictured at the bank’s headquarters in Frankfurt, Germany. Photo by: REUTERS / Ralph Orlowski
BERLIN — One of the clearest signals of
Germany’s emergence as a leader in global
development is the growth of the country’s
development finance institutions, which are
setting clearer priorities, while also drawing new
scrutiny.
The country’s flagship development bank,
housed within the Kreditanstalt für Wiederaufbau
Group, or Credit Institute for Reconstruction,
has seen its new annual investments grow
from €6.6 billion in 2015 ($7.21 billion) to €8.7
billion ($9.98 billion) last year. The amount of
government grant funds contributing to those
totals has increased from €2.1 billion to €2.9
billion, with the remainder coming from funds the
institution raises on the capital market.
While the development bank focuses
primarily on public sector investments, it has
a colleague — the Deutsche Investitions und
Entwicklungsgesellschaft, or DEG, the German
ANALYSIS
KFW
FRANKFURT,
GERMANY
Investment and Development Company — that
finances private sector development. Also housed
within the KfW Group, DEG’s new investments in
private enterprises in developing countries and
emerging economies have increased from €1.06
billion to €1.86 billion in the same period.
Those commitments, particularly from the
development bank, are a lens into the German
government’s development priorities.
The distribution of funds regionally “is something
that our government decides together with
the governments of the respective partner
country,” Marc Engelhardt, head of strategy,
communication and sustainability at KfW
Development Bank, told Devex. “Our influence
is as an adviser to the government, where we
see a potential and absorptive capacity to invest.
Once this is decided, then it’s our turf to see how
a project in a given country or sector is being
structured.”
 38
The bank often works in tandem with the German
Corporation for International Development, or
GIZ. Though a consulting company with a range
of clients, GIZ is the main implementer for the
federal development ministry, which also sets
KfW’s priorities. “On a sector level there is close
coordination,” Engelhardt said. “And there are
synergies in a given country on a project level.”
While the KfW Group has long been a heavy
hitter, it has been known primarily for its efforts
within Europe, Mikaela Gavas, co-director of the
Center for Global Development’s Development
Cooperation in Europe program, told Devex.
“It’s a massive player in the European context,
mostly in terms of investment within Germany,”
she said, which has limited the development
of its global identity. “They don’t seem to have
a specific focus. It’s hard to say what their
comparative advantage is.”
But as the German government has taken a
stronger role on key development issues in recent
years — including addressing climate change
and the economic conditions that are spurring
global migration — the development bank has
taken on a new prominence.
GROWING GOALS
Engelhardt said that 2015 was a watershed year
for the institution, both because of the signing of
the Paris Agreement on climate change, but also
because of the influx of refugees into Europe.
That helped shape the German government’s
priorities — and, in turn, KfW’s.
The result is a growing emphasis on climate-
responsive infrastructure. Engelhardt said nearly
60% of all 2018 investments went toward
climate-related and environmental protection
projects. He said the institution is particularly
looking to carve out a niche in promoting climate
ANALYSIS
“Our influence is as
an adviser to the
government, where
we see a potential and
absorptive capacity
to invest. Once this is
decided, then it’s our
turf to see how a project
in a given country
or sector is being
structured.”
Marc Engelhardt, head of strategy,
communication and sustainability,
KfW Development Bank
change adaptation projects, which help countries
to manage the impacts of climate change but do
not receive as much global attention as mitigation
projects, which hope to limit further greenhouse
gas emissions.
In addition, Germany used its G-20 presidency
in 2017 to build closer ties to African nations
through its Marshall Plan with Africa, an initiative
that aimed to improve business conditions in
African countries and pave the way for German
companies to invest and potentially grow job
markets across the continent.
KfW is clearly a part of that effort, reporting that
nearly 48% of all new commitments channeled
toward development projects in Africa or the
Middle East, including 71% of the German
government funding that is provided. That has
gone mostly toward basic infrastructural projects,
but also toward more ambitious efforts, such as a
new microfinance bank in Nigeria.
 39 ANALYSIS

DEG, meanwhile, has always had a singular

focus on Africa. Its goal at its founding in 1962 “We need the private
was to build the private sector on the continent sector, we need
and assist medium-sized German companies
moving into the market.
domestic capital on
a larger scale to be
The institution’s reach has expanded since then, used for sustainable
becoming a subsidiary of the KfW Group in
2001. It is now active in nearly 80 countries, with
development. We see
a portfolio of €8.4 billion. Anja Krautz, senior part of our role in being
communications manager at the bank, said its a catalyzer or multiplier
influence is growing “because more importance is
being attached to the private sector in the context
of these funds.”
of the global sustainable development agenda.” Marc Engelhardt, head of strategy,
communication and sustainability,
But the emphasis on Africa remains, with a KfW Development Bank
specific focus on promoting entrepreneurial
opportunities for young people. DEG is in the
Congo as an example. It operated in two phases
process of creating a program called “Africa
between 2008-2015 and provided financing for
Connect,” which will provide promotional funding
61 labor-intensive individual projects — such as
of up to €4 million for small and medium-sized
building water pumps or renovating schools and
German enterprises that want to work on the
hospitals — within areas of the country that were
continent. This reflects a broader German and
experiencing or emerging from conflict.
European emphasis on long-term job growth in
the region, which European officials hope will
PRIVATE SECTOR PIONEER
slow migration.
While the KfW Development Bank may only
now be developing an identity around specific
Still, while KfW channels much of the German
issues, it has long had a reputation for its
government’s funding to sub-Saharan Africa,
investment strategies. The bank was a pioneer in
overall it was only the third-highest region for
blended finance — using development money to
new commitments in 2018, behind Asia, at nearly
mobilize additional funding, which has become
€2.6 billion, and North Africa and the Middle
central to the efforts to achieve the Sustainable
East, which received nearly €2.4 billion. Sub-
Development Goals, the cost of which far
Saharan Africa received €1.7 billion. Engelhardt
outstrips global aid.
said the bank will remain active around the world,
though he said there is a growing interest in
“We need the private sector, we need domestic
funding projects in regions that are experiencing
capital on a larger scale to be used for sustainable
conflict.
development,” Engelhardt said. “We see part of
our role in being a catalyzer or multiplier of these
“Given the sad fact that crisis is the new normal,
funds.”
it requires a different set of investments,” he said.
He pointed to a €70 million peace fund that was
KfW first started blending finance within Germany
established in the Democratic Republic of the
in the early 2000s and even though the approach
 40
has become more common, Engelhardt said
clients still turn to KfW for the service.
But the ties that KfW and DEG have developed
to private industry — through strategies such
as blended finance and the use of intermediary
institutions to channel funds — has alarmed
human rights organizations in Germany. Roman
Herre, who works for FIAN, a group that fights
against hunger, said the institutions often deny
access to information, citing business concerns.
That allows them to dodge questions about the
human rights implications of the projects they are
funding, he said.
Herre also worried that the institutions are too
driven by a business agenda, which diverts
attention from the communities they are meant
to support — a criticism faced by development
finance institutions worldwide.
In current thinking, “development must become
‘bankable’ or ‘investable,’” Herre wrote in an
email to Devex. “This fundamentally changes
the development approach. From a human
ANALYSIS
rights perspective, it would be key to focus on
marginalized groups, to address their needs and
demands as directly as possible. And it would be
important to let them participate in the planning of
development activities beforehand.”
In response, KfW issued an email to Devex
saying it is “fully committed to the protection of
human rights in all business areas. In case of
substantial doubts or complaints, we immediately
start thorough investigations and cooperate
closely with human rights groups and NGOs.”
KfW has also been cultivating closer ties to
other European DFIs. Through the Mutual
Reliance Initiative, which also includes the
European Investment Bank and AFD, the French
development agency, KfW can co-finance a
project with other institutions and rely on peers’
preparatory work to avoid duplication of activities.
Engelhardt said they also work closely with
bilateral development banks in Africa, South
America, and Asia, something he expects to
increase as KfW’s investments grow.
 41 IN-DEPTH

OPIC — THE U.S. DFI

FOUNDED LEADER
1971 David Bohigian, acting president and CEO

OWNERSHIP
Wholly-owned by the U.S. government

INVESTMENT TYPES: Financing, investment funds, political risk insurance

AMOUNT INVESTED (2017): $3.8 billion
TOTAL PORTFOLIO (2017): $23.2 billion

BIGGEST PROJECTS IN 2017

$250 MILLION
to support Noble
Energy Inc. with $250 MILLION
the development of to support Noble Energy Inc. with the supply
Leviathan gas field of natural gas sales to Jordan from the
offshore in Israel. Leviathan gas field offshore in Israel.
 42
EXCLUSIVE
New US DFC will be ‘proactive, forward-
leaning and strategic’ says new CEO
By Adva Saldinger | 05 August 2019
Adam Boehler, new CEO of the U.S. International Development Finance Corporation. Photo by: OPIC
WASHINGTON — The new U.S.
International Development Finance Corporation
may not be officially up and running yet, but
the agency’s new CEO Adam Boehler has been
sworn in and is ready to manage an organization
he describes as “more proactive, forward-leaning,
and strategic.”
Boehler met with the staff of the future DFC
— still technically employed by the Overseas
Private Investment Corporation and the U.S.
Agency for International Development until
Congress passes a budget providing funding for
the new agency — on Wednesday, beginning
what he sees as an effort to build an agency that
is more flexible and can be more thoughtful about
sourcing deals.
IN-DEPTH: OPIC
“When you have a new organization, there is a
culture change and one of the things that I know
we need to focus on is how do we maintain the
entrepreneurial spirit, the flexibility, and some
of the best things there are ... about OPIC while
orienting within a broader U.S. government
context and not getting over bureaucratized,”
Boehler told Devex on Wednesday, in his first
interview since taking up the position.
Boehler wants to align the agency more
closely with other parts of the U.S. government,
particularly USAID, to better leverage resources,
he said, adding that he’d also like to work more
closely with U.S. allies and co-invest alongside
their development finance institutions.
 43
“I think you will see a doubling down in focusing
on development, that’s not going anywhere,” he
said. “Now, I don’t believe that having a national
security and policy orientation has to be apart
from that. I think the two can coexist in a very
nice way.”
While Boehler isn’t well known in the
development community, he said that his
past experience in domestic and international
investment, as an entrepreneur, and running the
Center for Medicare and Medicaid Innovation has
prepared him for this job.
Boehler said he believes that a great CEO really
knows their strengths and knows where they
need to partner and listen. He started Landmark
Health, one of the largest in-home medical
businesses in the U.S., but isn’t a doctor or a
clinician so he relied on his chief medical officer
and clinical staff.
“The analogy holds true here from a
development perspective,” he said, adding that
he will work closely with the agency’s chief
development officer and career staff at the
agency. “My job as a CEO in all areas is to listen
and to harness and empower that talent.”
Getting a chief development officer in place is
one of Boehler’s top priorities and the process is
underway — the job has been posted and the
agency is beginning to gather those applications,
he said.
While the agency is in limbo, Boehler said he
will work closely with David Bohigian, acting
president and CEO of OPIC. And while the
budget woes have delayed the official launch,
the agency was unlikely to be writing equity
checks immediately, despite the preparation that
has been underway since the Better Utilization
IN-DEPTH: OPIC
On the Congress
delay: “I think all this
does is buy a short
period of time to
prepare even more
and really hit the
ground running, so
I doubt we lose much
footing.”
Adam Boehler, CEO, US DFC
of Investment Leading to Development Act was
signed into law, creating the agency.
“I think all this does is buy a short period of time
to prepare even more and really hit the ground
running, so I doubt we lose much footing,”
Boehler said.
One of the key issues as the budget process
has played out is how much money the new
agency will be able to invest in equity and how
that money will be scored for budget purposes.
The current scoring would require equity to be
treated similar to grants, whereas advocates want
to see a system where a loss reserve fund could
be used to leverage a greater amount of equity
funding. Boehler said that he doesn’t think there
is too much difference between what different
parties want, and that there are different avenues
to ensure that the agency has the capital it needs.
“I feel I have a decent sense of Congress’ intent
by reading the BUILD Act and my main job
in advocating with the administration, with
 44
Congress, is to make sure that we live up to the
full potential of the BUILD Act and are not limited,”
he said.
In preparation for his Senate confirmation
hearing, and for the job, Boehler met with past
OPIC presidents, USAID Administrator Mark
Green, development leaders, and members of
Congress.
In his conversations with Green and Deputy
Administrator Bonnie Glick, Boehler discussed
how the agencies can work together so that the
DFC has feet on the ground and blended funds,
enabling it and USAID to use grants and private
capital to address key issues.
IN-DEPTH: OPIC
“As you know, we’re not overflowing with staff
at DFC … we’ve had a doubling of assets in
DFC but no change in staff, which is something
we have to think about,” he said. “We need
to have the conversation with Congress and
the administration about making sure we’re
adequately resourced.”
While it is important that the agency continues
to return money to the U.S. Treasury, not every
deal has to make money, particularly if there is a
strong development need, Boehler said.
“I want to be forward leaning,” he added.
 45
Failure to launch: Why congressional
budget drama delayed US DFC
By Adva Saldinger | 01 October 2019
The dome of the U.S. Capitol Building. Photo by: REUTERS / Erin Scott
WASHINGTON — The new U.S.
International Development Finance Corporation
will not officially launch as planned on Oct. 1,
a result of congressional delays in approving
annual funding.
Congress failed, as it has done regularly in
recent years, to pass a budget bill for foreign aid
before the start of the new fiscal year. Instead,
lawmakers approved a continuing resolution to
fund the government through Nov. 21, giving itself
more time to come to a budget agreement. The
result is that the new DFC does not have funding
to begin its operations.
For now, the Overseas Private Investment
Corporation and U.S. Agency for International
Development’s Development Credit Authority will
continue normal operations as some preparations
for the DFC proceed.
There were some efforts by DFC advocates to
ANALYSIS
US DFC
UNITED STATES
try to get Congress to include an anomaly, or
clause in the continuing resolution, that would
have allowed the DFC to spend the money that
had been appropriated for OPIC but they fell short.
When passing a stopgap spending measure,
Congress is typically hesitant to add such clauses.
“We’re dependent on appropriations from
Congress; that will dictate when DFC begins its
operations,” OPIC’s COO Edward Burrier told
Devex in an interview.
While the much-touted DFC, already being
represented as a key part of President Donald
Trump’s development legacy, will be delayed,
Burrier said he is still confident that the new
agency has congressional support, pointing in
part to the speed with which the nominee to lead
DFC was approved last week.
Incoming DFC CEO Adam Boehler will likely
begin work for DFC as soon as he’s sworn in,
 46
even if the agency hasn’t formally launched
and David Bohigian, the acting CEO of OPIC
will continue to lead that agency in the interim,
according to Burrier.
While the launch of DFC was slated for Oct. 1,
the agency was created by the Better Utilization
of Investment Leading to Development, or
BUILD Act, which was signed last year and its
foundations have been built since, including
the approval of its bylaws and its risk and audit
committees by the board in June.
The agency’s new authorities — including the
ability to make equity investments, provide
technical assistance, and provide funds in local
currency — will be delayed until the launch, but
there is still some planning work on the way to
ease the transition once the funding is in place.
Staff from USAID’s Development Credit
Authority will be moving to OPIC’s building and
they will continue to be paid by USAID until
the appropriations bill goes through. OPIC will
continue to finalize and hone “impact quotient,”
a new tool to measure development impact
and work with Boehler and the board to select
someone for the chief development officer role.
Top officials at OPIC and USAID are talking
multiple times a day, with Bonnie Glick, deputy
administrator of USAID, leading the efforts for
that agency, working on the links between the
organizations and helping ensure that each
USAID mission has a DFC point of contact.
“Momentum is not pausing on some of these
mechanics, nuts and bolts,” so that the DFC is ready
once the appropriations come through, Burrier said.
Budget bills in both the House of Representatives
and the Senate have both included funding for
the new DFC, though at different levels.
ANALYSIS
Both bills that have been approved by Congress
include less funding for equity investments
than many supporters of DFC had wanted. The
cap for equity investments in the DFC’s 7-year
authorization was $20 billion, whereas the
administration asked Congress for $150 million in
year one — the Senate bill matched that number
and the House bill provided less for equity.
At issue is how the administration-proposed equity
investments would be scored for budget purposes,
which would essentially treat the investments as
grants and assume they would result in a total loss
of the money invested. DFC advocates have been
working to try to get appropriators instead to score
equity investments using a system similar to that
other development finance institutions use, called
“net present value,” which would be more in line
with how debt investments are scored and how
banks account for risk.
Advocates are recommending what they
consider to be a conservative approach — using
the $50 million appropriated in the House bill
as an equity loss reserve fund that could cover
potential losses. That fund would enable up to
$1 billion in equity investments, assuming that
the agency’s equity investments would lose an
average of 5% of the funds invested, although the
equity investments are expected to make money
rather than lose it.
If DFC does not receive sufficient equity
investment funding scored appropriately, “this
new tool will be severely limited in accomplishing
economic development in developing countries
and cede our leadership in development finance
to China,” a group of congressional supporters,
including BUILD Act co-sponsors Rep. Ted Yoho,
a Republican from Florida, and Rep. Adam Smith,
a Democrat from Washington, wrote in a letter to
the House Appropriations Committee earlier this
year.
 47
Report outlines how new DFC and
USAID will work together
By Adva Saldinger | 05 August 2019
U.S. Agency for International Development Administrator Mark Green. Photo by: USAID
WASHINGTON — One of the final steps
required before the opening of the new U.S.
International Development Finance Corporation
is now complete. The administration has
submitted a coordination report to Congress
outlining how the new institution will work with
the U.S. Agency for International Development
and other government agencies.
“As the DFC increases its ability to mobilize private
capital, and USAID places more emphasis on its
engagement with the private sector, coordination
between USAID and the DFC to pursue U.S.
development objectives is essential. The DFC and
USAID must forge and maintain strong linkages
for the United States to maintain its leadership in
international development,” USAID Administrator
Mark Green and Overseas Private Investment
Corporation Acting CEO David Bohigian wrote in a
IN-DEPTH: OPIC
letter that accompanied the report.
The report addresses the importance of links
between the two agencies as key to the U.S.
maintaining its leadership in international
development and says that access to the DFC’s
financing tools will be “critical” to USAID’s
“journey to self-reliance” framework aimed at
helping countries move past aid.
The report outlines how the new agency will be
structured and how it will work with USAID and
other agencies — one of the issues that has most
concerned development experts throughout the
formation of the new agency.
STRUCTURE
The most significant differences between the way
OPIC is structured today and the way the new
DFC will be structured, center around the creation
 48
of a new chief development officer and an office
of development policy.
The chief development officer will lead the DFC’s
interagency work, manage measurement, and
assessment of development impact and be
responsible for coordinating the agency’s new
technical assistance capabilities, according to the
report. Hiring for this position is expected to begin
in earnest soon, and one development expert
who requested anonymity in order to speak
freely told Devex that informal conversations with
prospective candidates are already underway.
The chief development officer will report directly
to the board and will be charged with ensuring
that the DFC prioritizes investments in low-
income or lower-middle-income countries. The
chief development officer will be a member of the
Development Advisory Council.
The Office of Development Policy, which the
CDO will lead, will “focus on the development
impact of each transaction,” drawing on expertise
from other agencies. The office will likely be
staffed in part by USAID and State Department
employees who will join the agency on a long-
term rotating basis. The office will have four
primary units: the development coordination unit
charged with working with USAID, State, and the
Millenium Challenge Corporation; a development
assessment unit that will evaluate the impact of
transactions; a policy assessment unit focused
on evaluating projects on environmental and
social impact, labor and human rights issues; and
a technical assistance and feasibility studies unit.
The report also offers some insights into how
the transaction side of the agency will be
structured. It will have three departments focused
on different types of transactions: structured
finance and insurance; investment funds; and
development credit, which will be the new home
IN-DEPTH: OPIC
of USAID’s Development Credit Authority and
OPIC’s small and medium enterprise finance
division.
COORDINATION
The plan is for the new DFC to leverage existing
staff at U.S. embassies and USAID missions
around the world to help create a pipeline of
deals, monitor them, and otherwise support the
expanded development finance institution.
The U.S. government will create a Development
Finance Coordination Group to improve
interagency coordination, according to the report.
The group is somewhat modeled after the Power
Africa Working Group, and will be an opportunity
for different agencies to learn about the DFC’s
transactions and priorities in an effort to capture
expertise and “ensure policy coherence across
the entire USG,” according to the report.
There are a number of ways that the DFC
and USAID, along with other agencies will
work together, according to the report. On the
origination and structure front, the DFC will
develop investment deals that support U.S.
national security, commercial and development
objectives. And USAID will help manage, monitor
and evaluate the transactions so they align with
foreign policy goals and deliver development
results. The report doesn’t go into details about
how exactly that will be funded or delivered.
Among the concerns about merging the DCA into
OPIC was that it would disrupt the deal pipeline.
Most credit guarantees came out of work at
USAID missions around the world and the report
says the new DFC will work to make the new
process easy for USAID missions and create
incentives.
“USAID is working to reduce significantly the
many internal steps required to make mission-
 49
level funding available for a DCA transaction,
and will incentivize USAID mission directors to
access the DFC, as appropriate through their
performance plans,” the report said.
There will also be coordination around
relationship management, with country teams
helping to build relationships with new partners,
particularly with those in developing countries
that OPIC might not have been able to invest in
but the DFC will be able to. The DFC will provide
USAID support in these efforts as well.
USAID will work with the DFC to target some of
its technical-assistance programs focused on
building better business environments to support
DFC deals, and USAID will help monitor DFC
transactions, which the report says “will enable
the DFC to provide a deeper level of monitoring
of development impact on its projects than
previously possible.”
IN-DEPTH: OPIC
Much of this work will be coordinated through
newly created DFC liaisons, which will be
appointed in each USAID mission and at U.S.
embassies and will be the primary link to the DFC.
While the report includes a fair amount of
language about ensuring development impact,
it also focuses on the agency’s role as a tool to
advance foreign policy objectives. The report
outlines how the DFC will relate to ongoing
initiatives including Power Africa, Prosper
Africa, the Women’s Global Development, and
Prosperity Initiative.
Development experts following the new DFC
have told Devex in the past that they will be
watching how the agency balances foreign policy
and development objectives.
 50
A new US development finance
agency takes flight
By Adva Saldinger | 04 October 2018
Photo by: Brandon Mowinkel / CC0
WASHINGTON — The United States will
have a new development finance institution.
On Wednesday, the U.S. Senate passed the
Better Utilization of Investment Leading
to Development, or BUILD Act, which will
create a new U.S. government agency —
the U.S. International Development Finance
Corporation. Development experts called
it the biggest change in U.S. development
policy in 15 years.
The DFC will combine the Overseas Private
Investment Corporation and the U.S.
Agency for International Development’s
Development Credit Authority, add new
development finance capabilities, including
equity authority, and have a higher lending
limit than its predecessor.
IN-DEPTH: OPIC
A year or two ago, few would have
thought a new U.S. DFI possible. The
Trump administration had recommended
eliminating OPIC in its first budget, previous
attempts to reauthorize OPIC had failed, as
recently as 2015, and it has operated without
a long-term reauthorization for more than a
decade.
But a dedicated bipartisan group of
lawmakers, administration officials, advocates,
and think tank experts worked to make it
happen. Consolidating some government
functions to create a new agency that was
seen as more efficient helped, as did a
growing desire within the administration to find
tools to counter China’s influence.
A few weeks ago, there was still uncertainty
 51
over whether it could pass in the Senate.
But in the last two weeks, the BUILD
Act was attached to the Federal Aviation
Administration reauthorization bill in an
effort to work around challenges presented
by some senators opposed to the act. The
overarching FAA bill passed by a vote of 93
to six.
“I think it was the right vehicle at the right
time,” said Representative Ted Yoho, a
Republican from Florida, who was a co-
sponsor of the House bill and played a key
role in creating Freedom Caucus support for
the legislation.
Yoho, who chairs the Caucus on Effective
Foreign Assistance, pushed for the legislation
to improve aid effectiveness and help
countries transition from aid to trade. “This
“It depends how
the administration
treats the new
agency — and
that’s why getting
really strong
governance in place
with the board
and congressional
oversight is so
important.”
Todd Moss, senior fellow,
Center for Glboal Development
IN-DEPTH: OPIC
will be a significant enhancement to our
foreign aid.”
Next comes the hard part of setting up a new
federal agency. Some planning has already
begun but the process begins in earnest
when President Donald Trump signs the bill
into law, likely within the week.
MOVING FORWARD
Once signed, the administration will have
120 days to create and submit to Congress a
transition plan for the new DFC, though the new
agency may not open its doors for about a year,
several people who worked on the bill said.
Some lingering questions to be answered
include where USAID’s Office of Private
Capital and Microenterprise and its Enterprise
Funds will end, along with details about
personnel, assets, and functions of the DFC,
a senior government official told Devex. OPIC
has already been working with USAID’s DCA
on fiscal year 2020 budget requests and
USAID will play a key role in the discussions
about the new institution, he explained.
The administration, likely led by OPIC, will
have to work on a number of policy issues
related to the new authorities or instruments
the DFC will have. This includes creating
criteria for the use of equity investments, how
it will use technical assistance grants, what
framework it will use to decide if it will make
a local currency loan, and when it will invest
in non-U.S. businesses or projects, which is
also new.
OPIC policies and procedures, along with its
leadership, will transfer to the new agency,
though the top posts may need to be re-
confirmed by Senate.
 52
One of the greatest challenges, according
to a senior administration official, will be
about management and communicating the
changes with staff at OPIC and USAID, and
ensuring that operations continue smoothly
as the new agency comes together. Part
of that will be successfully moving DCA,
ensuring that staff handle the cultural shift,
and that the pipeline for deals, which comes
from USAID missions, is maintained.
Rob Mosbacher, a former OPIC CEO who
has been an active advocate for the BUILD
Act, said that senior leaders from OPIC and
USAID need to work together on some of
the issues early in this process, including
how to have a fully integrated evaluation of
development impact.
“I think they need to make sure they’re
standing up this new agency as effectively
and as responsibly as possible,” he said,
adding that it shouldn’t “get out over its skis
before the right policies and procedures” are
in place.
OPIC has a strong starting point with capable
agency staff and good management, said
Todd Moss, a senior fellow at the Center for
Global Development. He would like to see a
focus on making the DFC as transparent as
possible and prioritizing projects with good
development outcomes as it balances out
IN-DEPTH: OPIC
a need for commercial viability and foreign
policy and national security objectives.
“There is always a risk that the administration
can force an agency to do dumb things for
national security, but as long as it’s done
in the context of the board and investment
process, that has historically not been a
problem,” he said. “It depends how the
administration treats the new agency — and
that’s why getting really strong governance
in place with the board and congressional
oversight is so important.”
Key questions about the agency’s
relationship with USAID will need to be
resolved and details will have to be ironed
out, particularly about how the chief
development officer — a new post created in
the legislation — will work with the two.
Several people Devex spoke to expressed
concerns that the agency would be under
pressure to do projects quickly, at the risk of
sacrificing proven decision-making practices.
“The biggest worry is that the OPIC team will
be under a lot of pressure to stand up some
of the capabilities quickly and in haste and
under pressure to disburse,” said Elizabeth
Littlefield, a former OPIC CEO. “I hope it’s
not the case they move more quickly than is
prudent.”
 53 IN-DEPTH

CDC GROUP — THE U.K. DFI

FOUNDED LEADER
1948 Nick O’Donohoe, CEO

OWNERSHIP
Wholly owned by U.K. government, its sole shareholder is DFID

INVESTMENT TYPES: Debt, direct equity, intermediated equity, guarantees

AMOUNT INVESTED (2017): $1.4 billion
TOTAL PORTFOLIO (2017): $5.3 billion

BIGGEST PROJECTS IN 2017

$200 MILLION to Credit Facility for Access to Medicines,

or CFAM Limited. An innovative social finance company
committed to expanding and accelerating access to life-saving
medicines, vaccines, and diagnostics in Africa and South Asia.
 54
Q&A
Nick O’Donohoe on impact investing,
CDC in India, and a riskier portfolio
By Adva Saldinger | 22 November 2018
CDC CEO Nick O’Donohoe. Photo from CDC Twitter
NEW DELHI — As the impact investing
industry gains steam, questions are emerging
about the role of development finance
institutions in mobilizing capital toward
development goals as more mainstream
investors get involved.
CDC, the United Kingdom development
finance institution, was given a mandate
in the past two years to focus on the most
challenging countries to invest in. It can look
to past examples, including India, where CDC
has been and continues to be a critical player
in helping to build the private equity industry.
Devex spoke with CDC CEO Nick O’Donohoe at
the Global Steering Group for Impact Investing
Impact Summit in New Delhi, India, last month,
to get his take on the impact investing market,
IN-DEPTH: CDC
how CDC’s role is changing in India, and to
ask his advice for the new United States
development finance institution.
The conversation has been edited for length and clarity.
There is quite some hype about impact
investing and the potential for broader
financial markets to help finance the
Sustainable Development Goals. Do you
think we’ll get to a point where 20% of
financial markets are investing for impact?
What do you see as realistic?
It is realistic to hope that consideration of the
impact of your capital investment decisions
will be something that every organization
will think carefully about, and I think that’s
happening already.
 55
There is not an investment manager in the
world at the boardroom level who isn’t thinking
about this question. It’s become top of mind
and that is a very encouraging development.
I think ultimately that will raise the cost
of capital for companies that are creating
negative externalities — tobacco companies
[for example] — and it will lower the cost of
capital for other companies where the positive
benefits and impact of what they do is clear.
The greatest challenge is how do we
persuade capital to go and address problems
in Africa, where really, the amount of capital
is falling, not rising.
Impact investment does talk about being
on a spectrum. We’re doing an increasingly
good job at attracting capital at that end of the
spectrum, where the return is commercial.
It’s much harder to attract it toward the more
impact-oriented end of the spectrum.
The impact investing community has done
a great job of building a brand because
everybody’s heard of this thing and it’s one
of these things nobody can argue against.
It’s done a far less effective job of moving
money. It’s definitely more hype than money
moved, but a lot more money is moving now
than moved three or four years ago. So, we
are moving in the right direction.
This year the GSG Impact Summit is in
India. CDC has played a key role in building
India’s private equity market. At what point
do you stop investing in Indian private equity
because private commercial investors are
now interested?
To some extent, we’re stepping back in
the market already. Our role in the mid-
1990s was to almost cornerstone or invest
IN-DEPTH: CDC
in anything because we saw building that
investment ecosystem as being part of our
role. But very clearly, now, we’re stepping
back from large generalist funds that attract
lots of foreign capital and we’re focusing
our attention on funds that are focused
regionally.
So, [for example], the northern states of India
have 50% of the population and 5% of the
investment capital — so we’re focusing on
funds that are very specifically trying to get
capital to Uttar Pradesh.
The other thing is being focused on specific
sector-oriented funds, particularly in
infrastructure, in agriculture, in affordable
housing, health care. Those are areas that are
investable, you can build scale, but there’s
still a significant developmental impact.
How do you balance the need, particularly
in the political environment, to make money
for the British government with the push
to invest in riskier or more challenging
environments?
In the last year, we’ve got a separate pool
of money, about a billion dollars, which is
more risk-oriented, more impact-oriented,
and allows us to do things where there is
a significant probability of not getting our
capital returned. It’s allowed us to do more in
places like Afghanistan and Myanmar.
In our traditional portfolio, which is consistent
with other DFIs, we’ve earned a consistently
positive return over our 70-year history. With
the traditional portfolio, we think it is possible
to earn a return. Most people would look at
what we invest in, the risk we take, [and say],
“that’s not a risk-adjusted return.” It probably
isn’t, but it’s still a positive return.
 56
I think the idea of having some bifurcation in your
portfolio, clearly identifying a tranche of money
where the pressure on the people is not to earn
a return, and identifying strategies and areas of
market failure where you think by investing now,
you can build great markets, [works].
It’s early days for us in that portfolio, but I
think that it has helped us do a lot of difficult
things we never would have invested in.
Another issue that comes up a lot in
conversations is leverage ratios and how
DFIs and multilateral development banks
can mobilize more capital. But there is a
tension between that and investing in the
hardest markets. How do you handle that
pressure?
There is a key priority for CDC, as well as
from its shareholders, to mobilize more
capital.
We can do a number of things to help
mobilize capital — some of that is just about
sharing our experience and our data, helping
people better understand what the risks
are. Because, you know, the default rate on
power in Africa is lower than it is in Europe.
So there are some misconceptions about risk.
We’ve begun to take a higher profile in terms
of being willing to talk about our experience,
share our data, which historically DFIs have
not been willing to do. We’re also prepared
to be the cornerstone investor often in new
impact funds.
Some of the DFIs are trying to do more in
terms of blended finance, where they’re
providing more concessionary capital to try
and leverage in more commercial capital.
We’ve done a limited amount of that, partly
because we’re more focused on trying
IN-DEPTH: CDC
to, as I said earlier, identify and invest in
areas that are subcommercial today and
hopefully demonstrate that they can become
commercial.
The U.S. is about to get a new development
finance institution, with double the spending
cap. CDC has also fairly recently gotten a
huge influx of capital. What advice do you
have for the new corporation?
The role of a development finance institution,
in my view, is to take greater levels of risk and
go to more difficult countries and places. I
think a lot of the development finance money
today is spent in easier countries doing easier
things. And one of the great things about
the CDC — and this was a DFID [the U.K.
Department for International Development]
decision, not a CDC decision — was to focus
our investment in 2012 in sub-Saharan Africa
and South Asia.
That makes our job of earning return
much more difficult, and finding investable
transactions much more difficult, but that is
the role of a development finance institution.
My advice to them would be, from a risk
perspective, we need equity more than we
need debt. From a geographic perspective,
we need Africa more than we need Southeast
Asia. In the fund business, we need support
for smaller, emerging impact-oriented funds,
more than we need support for TPG [one of
the largest private equity investment firms
globally]. The role of a DFI is to fill those
difficult gaps. That’s my advice.
Editor’s note: The Global Steering Group for
Impact Investment facilitated Devex’s travel
for this reporting. However, Devex maintains
full editorial control of the content.
 57
Is CDC doing enough to ‘make
tackling poverty its top priority’?
By Adva Saldinger | 26 March 2019
A scene from Freetown in Sierra Leone. Photo by: REUTERS / Baz Ratner
WASHINGTON— Despite progress, the
CDC Group’s approach to investing in low-
income and fragile countries could be more
focused, more effective, and produce greater
impact, according to a new report from the
Independent Commission for Aid Impact
released Tuesday.
Between 2012-2018, CDC, the United
Kingdom’s development finance institution,
“made progress in redirecting investments
to low-income and fragile states, but has
been slow in building in-country capacity to
support a more developmental approach”
and has not done enough to monitor results,
improve evaluation or apply learning,
according to the report.
The report examined three primary subjects:
IN-DEPTH: CDC
whether CDC’s approach to achieving
development impact and financial returns
in low-income and fragile states is credible;
whether its investments in those countries
are effective; and how well the agency learns
and innovates.
“This report shows that, despite recent
progress, CDC is still not doing enough
to make tackling poverty its top priority,”
Oxfam’s head of government relations Jon
Date said in a statement.
CDC responded that the review mainly
looked at the organization’s performance
between 2012-2016.
“Since 2017 we’ve introduced a whole host of
changes to better understand and maximize
 58
our development impact, which means
we’ve been able to make transformational
investments in countries like Sierra Leone,
Malawi and Nepal,” a CDC spokesperson told
Devex via email.
“While we are confident that these recent
improvements address many of the
review’s suggestions, we’re motivated
to improve further and welcome ICAI’s
recommendations.”
ICAI decided to conduct the evaluation
because of the growth of CDC’s importance
within the U.K.’s aid work, and the influx of
capital from the Department for International
Development to CDC. Between 2015-2018,
CDC received £1.8 billion ($2.37 billion)
in new investments from DFID, with more
expected in the coming years.
RISK-TAKING
CDC has been shifting its focus increasingly
to low-income and fragile states in recent
years, and in 2017 created a separate
portfolio through which it can make higher-
risk investments with the potential for greater
development impact.
Between 2012 and the end of 2017, the
growth portfolio’s returns were 10.6%,
which means that CDC could have pushed
harder to achieve development impact,
according to the report. While 53% of the
investments made in the growth portfolio was
in countries classified as “difficult investment
environments,” many of those were focused
in just a few countries with larger economies,
such as Kenya and Nigeria, according to the
report.
DFID has asked CDC to “be even
more ambitious” with the catalyst
IN-DEPTH: CDC
portfolio, according to the report. In a
recent conversation with Devex, CDC’s
Chief Operating Officer Colin Buckley
acknowledged the need to take on more
risk, saying “one thing DFIs need to be more
comfortable doing is rolling the dice for
transformative impact.”
BETTER MEASUREMENT
A theme throughout the report is that CDC has,
in recent years, made progress on many of the
shortcomings identified, but that the new policies
could be more robust or better implemented.
This critique applies to how CDC has
identified, measured, and managed impact.
For years the institution’s measurement of
development impact focused narrowly on
jobs, for example.
“We believe that CDC should have done
more to select impactful projects,” the
report said. “Beyond the decision to invest,
CDC did not set targets or expectations for
development impact, nor did it do enough
to encourage opportunities to enhance
development impact. Until recently, it also
monitored only a narrow set of metrics,
making it difficult to assess CDC’s overall
impact, both at the investment level and
for the portfolio as a whole, for much of the
review period,” the report reads.
The agency did redefine development
impact in its 2017 strategic framework and
is measuring based on impact on people
and communities; companies and local
economies; and broader capital markets,
according to the report.
The report acknowledged these changes,
including that CDC has integrated impact
professionals into its investment teams and
 59
requires that a development impact case is
developed for each potential investment. It
recommended that the new processes and
resources are quickly integrated.
To be more effective, CDC could also be
better at ensuring that investments couldn’t
be commercially financed, the report
said. The institution lacks a strategy for
mobilizing private finance, which could
help its investments have more impact,
despite it being a goal in the current strategic
framework, according to the report. CDC has
submitted a proposal with a new mobilization
plan to the board, according to the report.
STAFFING AND COLLABORATION
The report also examined CDC’s staff and
capabilities to operate in fragile contexts,
urging more strategic geographic priorities
and clear plans for various sectors — as well
as the hiring to do it well.
CDC has grown its staff, in part to expand
the direct equity investments it makes. In
2012, CDC had 47 employees, a number
that grew to 308 by July 2018. CDC aims
to have 450 staff by 2021 as it implements
its new strategy. The agency had seven staff
members in Africa by the end of 2017 but has
plans to open four regional offices in Africa by
2019, with representatives in three additional
countries, according to the report.
DFID and CDC could work together more
closely at the country level, which would
create more opportunities for collaboration and
knowledge sharing, the report found. DFID
responded to the findings, highlighting that CDC
has taken steps to increase its development
impact and expand its presence overseas.
“Over the past 3 years CDC investments
have mobilised over [$3 billion] of additional
private capital which have supported the
IN-DEPTH: CDC
growth of successful businesses in the
world’s most challenged countries. These
firms are creating jobs, providing essential
services and boosting local tax revenues
which help transform economies, lift people
out of poverty and achieve the global goals,”
DFID wrote in a statement to Devex.
Both DFID and CDC said they would respond
to the ICAI recommendations in time.
RECOMMENDATIONS
CDC must better manage development,
expand its impact criteria, improve monitoring
and evaluation, and communicate how it is
calculating the tradeoffs between financial
risk and development impact, according to
the report’s recommendations.
Specifically, CDC should develop a set of
wider development impact criteria for the
growth portfolio and provide more clarity
on how development impact cases are
weighted in the decision-making process.
The report also stated that CDC should work
more closely with DFID and other partners,
especially in building geographic or industry
plans and on sharing learning.
DFID’s future investments in CDC,
meanwhile, should be based on stronger
evidence of the effectiveness of its
investments and clear progress toward
addressing some of the challenges.
It is difficult to justify increasing the amount
of aid spent through CDC until it can show
unambiguously that it is willing to invest in
a way that maximises the returns for the
world’s poorest,” Oxfam’s Date wrote, adding,
“a reformed CDC has an important role to
play in helping to grow the private sector in
poorer countries.”
 60
In response to critical report,
CDC lays out changes in its work
By Adva Saldinger | 08 May 2019
A scene from Freetown in Sierra Leone. Photo by: REUTERS / Baz Ratner
WASHINGTON—The United Kingdom’s
development finance institution has
responded to a critical report from the
Independent Commission for Aid Impact by
detailing its work to improve development
assessments, better monitor development
impact, and more actively engage with
companies it invests in.
The response, which was jointly issued
by CDC Group and the U.K. Department
for International Development, said the
agencies are “pleased that many of ICAI’s
recommendations are aligned with the
ambitious commitment made in CDC’s
Strategic framework 2017-2021” and called
it a “timely contribution” as CDC is nearly two
years into the implementation of those plans.
ICAI’s report, released earlier this year,
examined three primary subjects: whether
IN-DEPTH: CDC
CDC’s approach to achieving development
impact and financial returns in low-income
and fragile states is credible; whether its
investments in those countries are effective;
and how well the agency learns and
innovates.
It found that between 2012-2018, CDC
increasingly made investments to low-
income and fragile states, but was too slow
in building in-country capacity to support a
more development-focused approach, and
had not done enough to monitor results,
improve evaluation, or apply learning.
CDC’s response to the report provides some
insight into how the U.K. development
finance institution has focused its work in
the past few years, and outlines some of the
changes it has made to implement a new
strategic framework.
 61
For example, CDC is implementing a
new framework to improve its impact
management systems, which is part
of how it is addressing the ICAI report’s
recommendation that the institution better
incorporate development impact criteria in
investment decision-making.
Since 2018, after the period of the
report’s analysis, CDC has broadened
the development impact criteria it uses to
include indicators for specific sectors and
investments, including creating a specific
impact case for each investment that is
published online. The impact team has also
grown since 2019 — from three in 2012
to 56 today — and incorporated impact
specialists on investment teams, as well as
added a chief impact officer.
To better support and more actively manage
investments, the institution has changed
quarterly portfolio reviews to better track
progress and make recommendations about
how to engage with investees, and provided
investees with more support on gender
equality, climate change, job quality and skills
and leadership, according to the statement.
The agency also launched CDC Plus, which
provides grants to support impact within a
company and the “wider environment.”
In response to concerns about its monitoring
and evaluation of development impact and
a need to learn from those evaluations, CDC
said it is expanding its learning program by
launching an impact challenge fund with
DFID and doubling the number of “deep
dive” studies into specific sectors it conducts
by 2021. CDC and DFID also created a £20
million ($26.07 million) joint evaluation and
learning program overseen by a steering
group chaired by DFID’s chief economist.
IN-DEPTH: CDC
CDC and DFID “are deepening their
partnership in a thoughtful way to optimize
the value of official development assistance,”
according to the statement. They are doing
so by creating connections between DFID’s
country offices and CDC’s regional network,
linking sector specialists, and through
strategic engagement. CDC is also standing
up a new “global affairs function” that will
work to “deepen relationships with DFID and
a broader range of development partners,”
the response reads.
CDC opened new offices in South Africa,
Kenya, and Pakistan in 2017 and 2018, has
representatives in Ethiopia, Zimbabwe, and
Myanmar and expects to add permanent
staff in Nigeria and Bangladesh before the
end of the year.
One of the key recommendations in the
ICAI report was that DFID consider CDC’s
development impact before transferring more
money to the agency in the future.
In response to that concern, CDC and DFID
wrote: “Any new business case to increase
the level of equity invested by DFID in CDC
will follow departmental guidelines. It will
consider the context, the need, and the
rationale for the additional capital, as well
as the outputs and outcomes expected
from the new investment. Evidence of the
development impact already achieved by
CDC and progress in expanding its overseas
country presence will be two of the factors
that DFID would consider when assessing
any case for further investment capital.”
DFID will commission an independent
review of CDC’s progress toward its strategic
objectives, which it will use to help determine
any future investments, the statement said.
 62
WEBINAR
A deeper look at European DFIs
05 April 2019
Development finance institutions are on the rise.
Not only are DFI investment portfolios growing,
they are diversifying across regions and sectors,
as summarized in a Devex profile of 17 DFIs.
The emergence of new DFIs on the global stage
— including FinDev Canada and the burgeoning
U.S. Development Finance Corporation —
suggests a heightened commitment to the
growth of private sector development over
traditional aid. As official development assistance
plateaued, Europe’s DFIs more than tripled their
balance sheets between 2010-2015.
Devex convened a panel of experts to provide
data-driven insights into the funding priorities of
WATCH THE FULL WEBINAR:
https://www.devex.com/news/webinar-a-deeper-look-at-
european-dfis-94606
WEBINAR
European DFIs — and how implementers can
best engage with them.
This one-hour webinar covered:
• Investment trends among 15 European DFIs.
• The evolving role of DFIs on the development
landscape.
• Criteria for success in DFI projects.
• Guests: Søren Peter Andreasen, general
manager, EDFI, the Association of European
DFIs; Lisa Cornish, data journalist, Devex
• Moderator: Adva Saldinger, associate editor,
Devex
Have follow-up questions? Send them to
webinars@devex.com.
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