U.S. International Development Finance Corporation

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U.S. International Development Finance Corporation

Agency overview
Formed	December 20, 2019
Preceding agency	Overseas Private Investment Corporation (OPIC) and Development Credit Authority (DCA) of the United States Agency for International Development (USAID)
Headquarters	Washington, D.C.
Motto	Investing in Development
Agency executive	, Acting Chief Executive Officer
Website	www.dfc.gov

The United States International Development Finance Corporation (DFC) is a development finance institution and agency of the United States federal government. DFC invests in development projects primarily in lower- and middle-income countries. First authorized on 5 October 2018, the independent agency was formed 20 December 2019 by merging the Overseas Private Investment Corporation (OPIC) with the Development Credit Authority (DCA) of the United States Agency for International Development (USAID), as well as with several smaller offices and funds.^[1][2]

DFC's lending capacity is used to provide loans, loan guarantees, equity, and insurance for private-sector led development projects. As with the OPIC, the DFC is predominately self-funding through the fees and interest collected during its regular operations.

History[]

DFC officially began operations on December 20, 2019.

DFC was created was so that no single authoritarian country had undue influence over another country,’ said its CEO, Adam S. Boehler.^[3]

The BUILD Act[]

DFC was created through the passage of the BUILD Act, which consolidated the Overseas Private Investment Corporation (OPIC) and Development Credit Authority (DCA) of the United States Agency for International Development (USAID). The BUILD Act was introduced to Congress with broad bipartisan support in February 2018 and signed into law by President Donald Trump on October 5, 2018.^[4]

The impetus for DFC was the notion that private investment could supplement conventional government-funded aid projects in the developing world.^[5] Hence, the Act stipulates that DFC will aim to provide an alternative to “state-directed investments by authoritarian governments," has also been highlighted by analysts as a response to China's Belt and Road Initiative.^[6]

Key changes mandated by the BUILD Act include:

• The doubling of the investment cap to $60 billion
• New financial tools including equity financing, technical assistance, and feasibility studies
• The ability to use local currency loans and first-loss guarantees to reduce risk
• A “preference” for U.S. investors, rather than a requirement, thereby expanding partnership opportunities with foreign investors
• Prioritization of low- and lower-middle-income countries
• Enhanced alignment with U.S. foreign policy in close coordination with counterparts like the U.S. Department of State
• A seven-year authorization

The changes are predicated on making DFC more responsive, and cost-effective.

DFC is governed by a public-private Board of Directors and a Chief Executive Officer who oversees project approval. DFC helps companies manage the risks associated with investment in emerging markets by providing financial tools when they are unavailable or insufficient from commercial sources. It provides direct equity and support for investment funds, as well as direct loans and guarantees of up to $1 billion for tenures as long as 25 years, with specific programs targeting small and medium U.S. businesses, It offers coverage of up to $1 billion against losses due to currency inconvertibility, government interference, and political violence including terrorism. DFC also offers reinsurance to increase underwriting capacity.

Investments[]

DFC invests in sectors ranging from critical infrastructure, energy, and technology to healthcare and financing for small businesses and women entrepreneurs. To ensure that all investments adhere to high standards and respect the environment, human rights, and worker rights, the agency monitors all projects from their inception to the conclusion of DFC financial support.

DFC's investments span Latin America, Sub-Saharan Africa, the Indo-Pacific, and emerging markets around the world with a focus on low- and lower middle-income countries. The agency considers investments in other countries that are important to U.S. foreign policy and national security or address key agency priorities such as women's economic empowerment.

Initiatives[]

2X Women's Initiative[]

Launched by OPIC in March 2018, DFC's 2X Women's Initiative has catalyzed more than $1 billion of investment in women globally. In addition to pursuing projects that are owned by, led by, or supporting women in the developing world, DFC applies a gender lens to all investments to ensure that women are receiving the net benefits of projects supported by the agency.

DFC also collaborates with the development finance institutions (DFIs) of other G7 countries^[which?] through the 2X Challenge—a commitment to mobilizing $3 billion for global women's economic empowerment.^{[citation needed]}

Connect Africa[]

Through Connect Africa, originally announced by OPIC in July 2018, DFC is committed to investing $1 billion in transportation, information and communications technology, and value chains in Sub-Saharan Africa to improve connectivity and support economic growth.

Advancing a Free and Open Indo-Pacific[]

In recognition of the great need for quality investment to spur continued economic growth across the Indo-Pacific as well as increasing instances of “debt trap” investments advanced by authoritarian regimes in the region, the Indo-Pacific has become a region of focus for DFC. DFC has prioritized the development of the region's transportation, energy, and digital infrastructure through transparent, responsible, and private sector-led investments.

Response to COVID-19[]

On May 14, 2020, President Trump signed an Executive Order which delegates authority to the DFC Chief Executive Officer to make loans to private institutions to support the response to COVID-19 or strengthen relevant supply chains.^[7] Trump administration, through DFC, announced that it planned to give Kodak a $765 million loan for manufacturing ingredients used in pharmaceuticals, in order to rebuild the national stockpile depleted by the COVID-19 pandemic and reduce dependency on foreign factories.^[8] The funding was put on hold as the U.S. Securities and Exchange Commission began probing allegations of insider trading by Kodak executives ahead of the deal's announcement,^[9] and DFC's inspector general announced scrutiny into the loan terms.^[10] The agency received criticism for the loan deal.^[11] The agency has given millions of dollars to ApiJect Systems.^[12]

2020 Kosovo–Serbia agreement[]

The governments of Kosova and Serbia both signed memorandums of understanding with DFC and the Export–Import Bank of the United States to operationalize the between Niš and Pristina, the rail link between Pristina and Merdare, the rail link between Niš and Pristina, providing financing to support loans required for small and medium-sized enterprises, additional bilateral projects. U.S. International Development Finance Corporation will open its office for full time presence in Belgrade, Serbia.^[13]

Leadership[]

DFC was led by Adam S. Boehler, the agency's first Chief Executive Officer. His nomination to lead the agency was announced by the Trump administration on July 10, 2019 and unanimously confirmed by the Senate on September 26, 2019. Dev Jagadesan currently leads the agency in an acting capacity.

Reception[]

Commentators have criticized the DFC's investments in upper-middle-income countries that are apparently intended to achieve U.S. foreign policy objectives other than international development, describing these investments as mission creep.^[14][15] Scott Morris of the Center for Global Development has criticized federal budget rules that require the DFC to treat equity investments as expenditures "with no offsetting allowance for [their] expected financial returns," unlike loans, which are budgeted based on their subsidy costs.^[16]

See also[]

• Export–Import Bank of the United States

References[]

External links[]

• Official website