Development Finance Institutions Come of Age

Monday, October 20, 2014

Bangladesh now has 117.6 million mobile phone users, and Afghanistan has 21.6 million – both upwards of 70 percent of the population. Fifteen years ago there were essentially no cell users in either of these countries, yet a handful of entrepreneurs and investors in each decided they could create a telecom market in the heart of the developing world. Similarly, Sudanese born engineer and entrepreneur Mo Ibrahim founded African telecom giant Celtelin 1998, at which point Africa was the most underserved telecom market in the world. Today, Africa is the world’s second largest cellular market and is projected to hit one billion cell users in 2015, or about 90 percent of the continent’s population.

These examples illustrate that, even in the world’s most underdeveloped regions, there are significant opportunities for successful business and investment, yet financiers often write these ideas off as crazy. In many instances, capital is a coward. Even when opportunities exist, somebody needs to prove there is money to be made in these exotic markets by leading the way.

These “somebodies” are often development finance institutions (DFIs), and the successes mentioned above could not have happened without investments and the “good housekeeping seal of approval” from these institutions. DFI is an umbrella term for the alphabet soup of somewhat obscure organizations that include: theInternational Finance Corporation (IFC), European Bank for Reconstruction and Development, the Overseas Private Investment Corporation (OPIC), CDC Group,PROPARCO, FMO, and DEG that share financial risk, provide loans, take minority equity investments, support emerging market equity funds and provide advice to both companies and government in the developing world.

Source: Forbes (link opens in a new window)

Impact Assessment
lending, poverty alleviation, social development