Development Finance Corporation (DFC)

New Approach To Promoting Growth

DFC and the authorities of Serbia and Kosovo are currently discussing four projects to which DFC could contribute, thus enhancing the region’s growth and development while promoting the rule of law and fair business practices

The U.S. International Development Finance Corporation (DFC) opened an office in Serbia this September, while DFC and the Export-Import Bank of the United States (EXIM) recently signed Letters of Intent (LOIs) with Serbia and Kosovo, in order to help finance the important projects identified through the U.S.-brokered agreement on the normalization of economic relations between Kosovo and Serbia, signed in Washington on September 4th by Serbian President Aleksandar Vučić and Kosovo Prime Minister Avdullah Hoti.

Speaking in a recent press briefing, DFC Chief Executive Officer Adam Boehler said that four projects are currently being discussed in Serbia and Kosovo. The first two are the Peace Highway and the railway connecting Serbia to Kosovo. Some projects are already underway and are multi-phased, and DFC’s approach to them will aim to broaden the financial tools and resources available to both sides, in support of their efforts to better lay the groundwork for enhanced economic cooperation. The third project is a lending framework to help support small and medium-sized enterprises and so-called local small–mid caps. Here DFC is reviewing a proposal tabled by the Serbian Government. Lastly is a project representing an effort to better promote entrepreneurship between young Serbs and Kosovars, both cross-border but within Kosovo.

DFC is a fairly new agency that emerged via the BUILD Act to become a new developmental entity endowed with more resources and a broader mandate to place development and growth at the center of its work, compared to its predecessors: the Overseas Private Investment Corporation (OPIC) and USAID’s Development Credit Authority (DCA). It’s enhanced authority is intended to enable it to compete more effectively with the support provided by China and Russia for infrastructure in emerging markets,, and to combine its efforts with those of the State Department and USAID.

As stated in the President’s National Security Strategy, “the United States must today compete for positive relationships around the world. China and Russia target their investments in the developing world to expand influence and gain competitive advantages against the United States. China is investing billions of dollars in infrastructure across the globe. Russia, too, projects its influence economically, through the control of key energy and other infrastructure throughout parts of Europe and Central Asia… The United States provides an alternative to state-directed investments, which often leave developing countries worse off. The United States pursues economic ties not only for market access, but also to create enduring relationships to advance common political and security interests”.

This newly formed development finance institution will have sufficient resources and authorities to engage the American business community in advancing America’s development and foreign policy goals

The executive summary prepared for the Congress states that the new institution would be better placed to advance development and national security policy goals in the developing world, which is critical to promoting American prosperity and national security. Furthermore, the DFC would be better aligned with development and national security goals, designed to better manage U.S. taxpayer risk, streamlined to increase effectiveness and operational efficiencies (making more funding available for programming), focused on mobilizing private sector funding, and modernized with a 21st century toolkit that allows the DFC to compete and cooperate globally.

The new institution combines the resources and expertise of OPIC and the DCA, boasting similar tools to OPIC and DCA today, e.g. loans, guarantees, and insurance. Furthermore, the DFC will be able to support development finance related feasibility studies and other tools as authorized. Its governance structure, which is more connected with the State Department and USAID, will drive better pipeline and programming coordination among different agencies. Therefore, for example, the DFC will be able to support a feasibility study and subsequent early-stage financing for a new project in high priority countries, while USAID will fund economic-policy reforms that aim to strengthen the enabling environment and attract more private sector investment.


Prior to this modernization, OPIC spent the last 15 years operating without significant legislative updates, while the DCA has operated for over 18 years without any significant update or expansion of its original authorities. This resulted in the lack modern, development-finance mechanisms needed to counter the state-driven model of countries like China, or to cooperate with Development Finance Institutions (DFIs) of U.S. allies like the United Kingdom, Germany, Canada, and Japan, which are investing heavily throughout developing world countries. In contrast to OPIC and the DCA, which had budget authorization on an annual basis, the DFC will have multi-year authorization, in order to reassure U.S. businesses and allies that the U.S. Government will continue to co-invest with the private sector in order to increase global development and support countries’ journeys to self-reliance.

As commentators note, among the enhancements are the doubling of the maximum size of the agency’s portfolio to $60 billion (up from OPIC’s $29 billion), its authorization to make equity investments, and the abolition of U.S. eligibility requirements for the beneficiaries of guarantees and political risk insurance. Accordingly, these resources and authorities are seen as sufficient to engage the American business community in advancing America’s development and foreign policy goals, and to promote the rule of law and fair business practices, as well as the more sustainable development of the countries that are recipients of DFC support. Emerging trading partners are expected to adhere to free market principles and provide transparent, rules-based governance. Developing relationships with the countries that are recipients of the support will, over the long term, result in a strengthened geopolitical position of the United States, as well as providing the economic foundation for future alliances.

The objectives of the DFC are to deploy development finance to support economic growth as part of a long-term strategy to transition countries toward self-sufficiency; coordinate with U.S. firms to facilitate new market entries, when appropriate; align development finance as a core tool of U.S. national security, including as a counter to the rise of other countries’ influence in developing markets; and promote sustainable and economically responsible policies that help partner countries on their own journey to self-reliance and prosperity. The aim of the DFC is to be a catalyst for investment, as well additionally ensuring private sector resources while taking care not to displace private sector investment by deploying development finance in selective circumstances, where markets are otherwise unable to attract quality, stand-alone private capital.

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