TACOMA, Washington — On Nov. 6, 2020, the Senate released a bill for the 2021 fiscal year state and foreign operations budget that included a proposed $821 million allocated for the U.S. International Development Finance Corporation (DFC). The House proposed $311 million for the agency. The DFC announced its first global development strategy in October 2020 which focuses on investing $75 billion into developing countries by the end of 2025 in order to address challenges linked to global poverty.
The DFC was established by the BUILD Act of 2018 to finance global developmental solutions and strengthen the United States’ foreign policy. Though 2021 will be the first full year of the agency’s operation since its official opening in 2020, the DFC was granted a $60 billion liability limit — more than twice the amount given to the predecessor agency, the Overseas Private Investment Corporation (OPIC). The DFC has also been given expanded objectives and more authority to make direct investments with non-U.S. partners. The DFC follows what it has dubbed a “Triple Aim” approach, balancing the three goals of implementing global development impact, advancing U.S. foreign policy and ensuring returns for U.S. taxpayers.
Goals for 2025
The DFC announced its first global development strategy in October 2020. Named “The Roadmap for Impact: DFC’s Inaugural Development Strategy,” the plan focuses on investing $75 billion into developing countries by the end of 2025. One way the DFC intends to achieve this goal is by reserving 60% of its projects for developing countries and fragile states. Another self-imposed criterion is to only invest in projects that will have a significant, measurable impact. An additional aspect of strategy’s methodology is the prioritization of projects that promise to foster nations into becoming future U.S. trading or strategic partners. To these ends, the DFC has identified six key sectors for investment along with a preliminary list of investment partners:
Offer loans and financing services, especially for women and other marginalized populations. Create sustainable jobs by bolstering supply chains, agriculture and manufacturing. In one instance, DFC partnered with Kinara Capital to fund loans to small- and medium-sized Indian businesses. By 2020, Kinara created 60,000 new jobs.
- Goals: Invest $6 billion to businesses that benefit women; invest $100 million in innovative financial technology projects; transition 100 companies to the formal sector; assist 18 million women and marginalized individuals; create 100,000 new jobs; increase client base by 15 annually.
- Partners: 2X Women’s Initiative, DFC Portfolio for Impact and Innovation Initiative.
Improve healthcare, delivery systems, infrastructure and medical supplies, in addition to the separate COVID-19 response. In Angola, DFC helped construct a health clinic complete with medical training in addition to basic medical services.
- Goals: Invest $3 million; catalyze $6 million; support 10 hospitals or clinics; provide healthcare to at least two million people.
- Partners: Global Health Security Agenda, PEPFAR, President’s Malaria Initiative, DFC Health & Prosper Initiative.
Technology and Infrastructure
Expand access to internet technologies, especially after COVID-19 spurred a shift to online platforms. Use investments in infrastructure to prompt growth and prosperity. This is well demonstrated by DFC’s plan to invest $1 billion in Connect Africa’s threefold key areas of telecommunications, value chains and essential infrastructure.
- Goals: Invest $5 billion; conduct 10 major infrastructure projects; increase internet access for three million people.
- Partners: Connect Africa, Prosper Africa, Indo-Pac Strategy, Three Seas Initiative, Mekong Fund.
One-third of DFC’s current portfolio is dedicated to improving access to electricity. This includes not only access but also energy security, diversification, emerging technologies and markets. In a single project, DFC loaned $20 million to provide the first significant off-grid solar home system in Kenya which is expected to provide energy to 1.2 million people.
- Goals: Invest $10 billion; increase energy security in 10 countries; initiate 2 cross-border investments; increase access for 10 million people.
- Partners: Three Seas Initiative, Power Africa, Asia Edge, America Crece, European Energy Security & Diversification Act.
Agriculture and Food Security
Strengthen agricultural smallholders through projects such as supply chains, markets, innovative technology and sustainable resource management. In one investment, DFC provided $371,000 in technical assistance to help Milk Mantra source milk from 60,000 smallholder Indian farmers.
- Goals: Invest $500 million; conduct 50 projects specific to food security and supply chains; pledge 75% of food security investments to developing countries; support one million smallholder farmers.
- Partners: Northern Triangle, Columbia Eradicate Coco, Feed the Future, Food for Progress.
Water, Sanitation and Hygiene
Improve sanitation, hygiene services and resources management. Additionally, provide basic access to potable water, especially in Africa and Latin America. For example, DFC invested in Azure Source Capital to loan funds specifically for establishing safe water sources in rural El Salvador with the goal of reaching 300,000 people.
- Goals: Invest $250 million; conduct 25 WASH projects; increase potable water access for one million people.
- Partners: 2X Women’s Initiative, Ocean Plastics & Waste Management, U.S. Global Water Strategy.
What to Expect in 2021
The DFC requested a program budget of $700 million for 2021, stating that such funds would extend its capacity to sufficiently impact development challenges in a manner supportive of U.S. foreign policy. While its “Triple Aim” agenda will undoubtedly inform the use of the proposed 2021 FY budget, the DFC’s development strategy outlines a clear idea of which sectors and actors can be expected to receive the agency’s support in 2021. The goals outlined in the development strategy provide a clear indication of the DFC’s commitment to improvements in developing countries that align with the Sustainable Development Goals and will help alleviate global poverty.
– Andria Pressel