Evidence Submission to the International Development Committee’s Enquiry on Investment for Development: The UK’s Strategy towards Development Finance Institutions

July 27, 2023

On June 27, 2023, CGD senior fellow Charles Kenny submitted evidence to the UK International Development Committee inquiry on “Investment for Development: the UK’s strategy towards development finance institutions and the effectiveness of aid spending through British International Investment (BII).”


This evidence submission will focus on the question posed by the Chair in her comments on the enquiry: “whether BII delivers impact and value for the UK taxpayer.” I will argue that while BII (British International Investment) has been a leader amongst development finance institutions (DFIs) in important respects, and has a strong staff and management focused on improving development outcomes, it still suffers from constraints that limit the impact of DFIs as a whole in supporting sustainable development, especially in the poorest countries. Like other DFIs, BII is unable to mobilize significant capital by crowding in private finance to its investments, its efforts to create new markets for private finance have had limited success and its use of subsidized capital has been inefficient. BII has some specific issues around leverage and transparency that might be amenable to reform but these larger problems are inherent to the DFI model, and only likely to become more severe given the growing scale of the DFI sector. Given that, future flows of official development assistance are best allocated elsewhere.



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