DFIs and Development Finance

The focus on private investment represents a notable shift in the global development finance landscape, and development finance institutions play a key part in that evolution.

Aid, public sector loans and private investment form the three main channels exist for development finance from the OECD Development Assistance Committee (OECD DAC) donor countries and multilateral institutions to low- and middle-income countries. Each channel receives each year significant publicly backed flows of development finance. Aid, public sector loans and private investment  prove highly complementary and increasingly balanced, but the methods and instruments involved vary greatly.

Components of development finance under the European Financial Architecture for Development (EFAD)

While donor countries maintain Official Development Assistance (ODA) at a steady level, publicly backed development finance provided by DFIs for private sector projects has risen by an average annual rate of around 10 per cent. European governments have backed a large expansion of DFI portfolios, primarily to spur job creation, growth and private sector development. European DFIs achieved a remarkable €9.6 billion in new investments, reaching  a total portfolio level of €53 billion. Despite a lumpy macro-economic landscape and geopolitical unease, EDFI members increased new investments by 10%, bringing them beyond the pre-Covid commitment level.