MFAN is a strong proponent of development finance as a cost-effective and powerful tool to drive private investment and catalyze economic growth in the developing world. The enactment of the Build Act was an important step toward modernizing the United States’ development finance tools; it consolidated the Overseas Private Investment Corporation (OPIC) and the Development Credit Authority (DCA) into a new Development Finance Corporation (DFC). The new DFC also has new tools, including the ability to make equity investments and a higher investment cap, and a mandate to focus investments on the countries where it is needed most.
Since the Development Finance Corporation opened its doors in December 2018, MFAN has worked to ensure that the new agency lives up to the promise of the BUILD Act. This includes maintaining a strong focus on investments that contribute to economic development in low-income and lower-middle-income economies. It also includes incorporating best practices in evaluation and transparency.
MFAN also advocates for technical changes that would allow the DFC to effectively use its new authority to make equity investments. Under the status quo, such investments are “scored” (accounted for, in budgetary terms) on a dollar-for-dollar basis, as if they were grants, not loans. This makes DFC’s equity costlier than it need be. Furthermore, it limits the potential of this powerful new tool; since the foreign affairs budget is already stretched thin, Congress is unlikely to provide sufficient new appropriations to fully fund the DFC’s equity authority. This problem could be fixed by changing the way that DFC’s equity investments are scored so that their budgetary cost reflects the fair market value.