What is a DFI?
A strong private sector is a driver for economic development. Businesses need funding to grow and contribute to their local environment and communities.
Development Finance Institutions (DFIs) are specialised development banks that are usually majority owned by national governments. DFIs can be bilateral, serving to implement their government’s foreign development and cooperation policy, or multilateral, acting as private sector arms of International Finance Institutions (IFIs) established by more than one country.
DFIs invest in private sector projects in low and middle-income countries to promote job creation and sustainable economic growth. They apply stringent investment criteria aimed at safeguarding financial sustainability, transparency, and environmental and social accountability. DFIs source their capital from national or international development funds or benefit from government guarantees which ensures their credit-worthiness. The financial support they bring to relatively high-risk projects helps mobilising the involvement of private capital, bringing in such diverse actors as commercial banks, investment funds or private businesses and companies.
CSIS, in partnership with EDFI, wrote a report in 2016 on trends in development finance for the private sector. This report is the result of a research project that has looked at the role of DFIs in the new global development policy landscape. It explores the significant shifts that have taken place, while also looking at where DFIs fit in this evolving architecture. You can read and download the report here.
EDFI represents 15 European bilateral DFIs. Similar bilateral DFIs exist in other countries, e.g. the United States (OPIC) and Japan (JBIC).
Several multilateral DFIs work at a regional level, such as AFDB (African Development Bank) ADB (Asian Development Bank) EBRD (European Bank for Reconstruction and Development) EIB (European Investment Bank) and at the global level, such as the IFC (International Finance Corporation).
Please read EDFI’s Flagship Report for more information.