The Better Utilization of Investment for Development Act (BUILD Act), enacted on October 5, 2018, led to the creation of the U.S. Development Finance Corporation (DFC).
This followed the consolidation and expansion of development finance functions, which until then were primarily performed by the Overseas Private Investment Corporation (OPIC) and the Development Credit Authority under the U.S. Agency for International Development (USAID).
According to the World Trade Organization (WTO), the following are some of the characteristics of the DFC.
The stated purpose of DFC is to mobilize and facilitate the participation of private sector capital and expertise in the economic development of less developed countries (with priority given to low and lower middle income economies) and countries in transition to a market economy, in order to complement development assistance objectives and promote U.S. foreign policy interests.)
DFC
In order to facilitate this market-based private sector development and inclusive economic growth in less developed countries, DFC provides credit, equity and other financial assistance to, among other things, offer countries a sound alternative to state investments made by authoritarian governments and strategic competitors of the United States, using best practices in terms of transparency, environmental and social safeguards, and taking into account the debt sustainability of partner countries.
The DFC is the successor agency to OPIC by statutory provision.
Although the DFC takes over many of OPIC’s powers and policies, the new agency is characterized by a higher exposure ceiling ($60 billion, up from OPIC’s $29 billion), the ability to make limited equity investments representing minority stakes and to provide technical assistance grants, and more specific oversight and risk management functions.
Currently, under the BUILD Act, the DFC is authorized to approve new project commitments under its programs for a period of seven years.
In contrast, OPIC program operations were authorized annually through a budget appropriations act, especially towards the end of its trajectory.
Like OPIC, the DFC must be financially self-sufficient.
The DFC has its own inspector general, who is responsible for reviewing, investigating and inspecting its operations and activities.
