What is Development Finance Institution (DFI)?
A development finance institution (DFI) is a government-backed entity that provides capital to private sector investments in developing or emerging markets with the dual mandate of generating returns and promoting economic development.
DFIs bridge the gap between commercial capital markets and underserved developing economies. They invest in private equity funds, infrastructure, and direct deals in regions where private capital is scarce, often providing first-loss tranches or guarantees that encourage co-investment from commercial LPs.
Prominent DFIs include the International Finance Corporation (IFC), the British International Investment (BII, formerly CDC), the German DEG, the US DFC, and Proparco (France). They are important anchor LPs for emerging markets-focused funds.
Also known as: DFI, development finance