Development finance needs to be bolder

For cash-strapped governments, development-finance institutions (dfis) offer an understandably alluring vision: that of development executed by the private sector at little cost to the state. Such institutions try to build businesses and create jobs by lending money and buying stakes in firms, and seeking healthy returns. Their aim is “to do good without losing money”, as an early chairman of the British one put it. Of late they have been tasked with fixing the climate, promoting sustainable-development goals and shepherding investors to difficult markets, too.

This grand vision explains a recent rush of money into bilateral dfis. In 2019 America set up the us International Development Finance Corporation (dfc), with an investment limit of $60bn, twice that of its predecessor. The year before, Canada launched its first dfi. In Europe the combined portfolio of the 15 biggest institutions has doubled in a decade, to €48bn ($53bn) by the end of 2021. Some organisations operate as…

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