• DFIs show minimal support for companies from low-income countries. For instance, only 25% of companies supported between 2006 and 2010 by the EU’s European Investment Bank (EIB) and the World Bank’s International Finance Corporation (IFC) were domiciled in low-income countries.• The financial sector has been favoured by DFIs in recent years, receiving on average more than 50% of funding that has been allocated to the private sector. This has raised serious questions in relation to what kind of development impact investments in the financial sector have, particularly after the recent financial crisis, which was driven by irresponsible investment decisions and financial deregulation.• DFIs’ selection of financial instruments is questionable. This is particularly true in the case of true in the case of equity and guarantees that have not been properly assessed or monitored. • DFIs contribute to foreign private investments flowing into developing countries by supporting foreign companies or by investing their own (foreign) capital directly in local businesses. However, positive impacts of foreign investment can be accompanied by many risks, including macroeconomic problems. These problems have had a particular impact in the experience of Asian countries during their last financial crisis.• DFIs face serious transparency problems, especially when dealing with financial intermediaries. DFIs’ transparency to the general public is limited, which in turn constrains the ability of stakeholders to effectively exercise external control.The next few months are a crucial time for the future of development finance as the post-2015 debate continues and goals and targets for development finance are being set. Donors are realising that existing global public resources will not be sufficient to meet the world’s development needs. Many are increasingly turning to private actors – using scarce ODA to ‘leverage’ this sector. Eurodad recognises that there is a critical role for the private sector to play in development. However, foreign-owned and controlled institutions are not going to provide the country-owned and effective strategies necessary for developing countries to harness the private sector’s power for development.Therefore, before increasing and deepening DFI operations further, a full review from a developing country perspective should be conducted. This should be carried out, for example, by a committee of independent experts from government, civil society organisations (CSOs) and the private sector in developing countries. This review should consider carefully the many concerns Eurodad and partners have consistently raised, including that:
• DFIs should align their investment decisions to developing countries’ priorities and national
• DFIs should demonstrate clear financial and development added value.
• DFIs should comply with the guidelines of responsible finance, as outlined in Eurodad's Responsible Finance Charter. You can find these guidelines at www.eurodad.org.
Eurodad has also launched a research report entitled Private Finance for Development Unravelled: Assessing how Development Finance Institutions work, You can read the report by clicking here.
Eurodad has worked with its partners to compile a series of fact sheets on specific DFIs:
To read about the European Investment Bank (EIB) click here. To read about the World Bank's IFC click here. To read about the Asian Development Bank (ADB), click here. To read about Germany's DFI DEG click here. To read about The Netherlands' DFI FMO click here. To read about France's DFI Proparco click here. To read a briefing summary in English please click here. To read a briefing summary in Spanish please click here.