Development Finance Institutions "a Proven Theory of Change" – Podcast with Heads of OPIC and CDC

January 10, 2017

“It’s very straightforward,” says Diana Noble, head of CDC, the UK’s development finance institution (DFI). “If you provide wise financing with responsible investment practices to growing businesses, financial institutions and infrastructure projects in countries where this is needed, what results is economic growth, jobs and more taxes are paid.”

In a new joint CGD podcast, her US counterpart, Elizabeth Littlefield, the CEO of the US Overseas Private Investment Corporation (OPIC), agrees. “The DFIs’ business model is fully self-sustaining,” she says. “[It] supports businesses, creates development impact, and transforms our business leaders into some of the best ambassadors we can have that are investing in the very things people want most out of their own governments.”

OPIC and CDC are among the largest bilateral DFIs, in a group that includes most of the major donor countries. They are designed to use their funds to attract more private capital into developing markets through, for example, lending or insuring projects against political risk. In 2015 OPIC made new investments of $4bn bringing its total portfolio to $20bn, while in the same year CDC invested the equivalent of around $1bn for a total portfolio of around $5bn. Both institutions are profitable, returning money on their investments to their national treasuries.

Littlefield and Noble were both guests at CGD a few months ago, along with the heads of other major DFIs from Norway and Germany, at an event entitled $50 Billion in One Room. CGD senior fellow Todd Moss wrote that his takeaway from the event was that "development finance is the future."

In the podcast, Noble argues CDC’s own finances show the model is a “proven theory of change”, pointing out that “until [2014], when the UK government decided to give CDC more capital to grow, the UK taxpayer had invested net GBP144m in CDC since 1948 and yet we [have] a balance sheet of $5 billion.”

Click below to see Noble and Littlefield explain what they think their institutions need in order to do more—and it’s not just the obvious: additional capital. 

One major difference between OPIC and CDC is that while CDC is allowed by the UK government to take ownership stakes in companies it invests in—equity—Congress does not permit OPIC to do so. Littlefield sees this as a major constraint.

“Frankly [we need] a twenty first century tool kit,” she says. “Our tools were designed many, many years ago and right now they are not adequately designed for the way business is done today. I’m speaking particularly to the point about equity, in fact.”

Littlefield, who as a presidential appointee will soon step down from her position, also wants greater ability for OPIC to reinvest more of its earnings through an increase in the Congressionally-mandated cap of $29 billion on its portfolio. This echoes CGD work which lays out how an 'unleashed OPIC' could make a much bigger difference to development with no added cost to the US taxpayer.

For Noble of CDC, a much smaller institution, capital is not the main issue. “The limiting factor is much more deal flow and people, than capital,” she says. “Deal flow in terms of investable opportunities—that and the human capital bottleneck - skilled commercial investors who want to do this kind of work. Both are greater bottlenecks than availability of capital.”


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.