Devex Invested: Inside DFC’s surprise restructuring

Big changes are afoot for the 3-year-young U.S. development finance institution that has been expanding rapidly. Last week Scott Nathan, CEO of the U.S. International Development Finance Corporation, or DFC, revealed to staff plans for a major reorganization of the agency’s staff structure and operations, Devex has learned. It could significantly change the jobs of staff who do DFC’s core work. Several employees tell Devex they are surprised, upset, and confused. • DFC plans to reorganize its teams’ structure and focus on five key sectors: infrastructure and minerals, energy, health and agriculture, small business support, and funds, according to a strategy document Devex obtained. Currently, DFC staff work in units or departments based on investment expertise — the type of financial instrument they manage — or transaction size, which can range from $1 million to $1 billion. • People are “anxious” and feel the changes are “being rushed,” according to Sudhir Paladugu, the interim first vice president of DFC’s collective bargaining unit, or union, who works as a data analyst at the agency. People who have asked questions have not received answers, he says. They want to know where specific units will sit in the new structure and whether staff with expertise in one kind of transaction — loans, for example — will also be asked to do equity deals, which are very different. • DFC confirmed that a reorganization is in the works, but did not respond to specific questions on its rationale or expected benefits. “Given an expanded mission, increasing demand, and extensive growth in personnel, for the last six months DFC has embarked on a strategic review as well as implementing improvements in processes and procedures,” DFC’s spokesperson Pooja Jhunjhunwala tells me via email. • DFC grew from 373 employees in 2020 to 513 this year, with plans to hire hundreds more in the coming 18 months. The number of new projects the agency committed to also jumped 132% between fiscal years 2020 and 2022. • For an agency looking to scale fast, these changes could present a challenge. Not only are reorganizations often messy, but the restructuring would also remove a key incentive for choosing to work at DFC in the first place, staff and outside experts tell Devex. A primary perk for working — and staying — at the agency instead of earning double the salary on Wall Street is substantial travel and the chance to work on different types of deals in varied sectors and geographies. Exclusive: DFC plans restructuring, ‘anxious’ staff say it is rushed Time to suit up World Bank staffers may soon be required to spend more time in the office, managers began telling staff last week. The staff union is already pushing back against the plan, which is short on specifics because there is still no official organizationwide policy, my colleague Shabtai Gold reports. “We are moving from a default of work-from-home to a back-to-office default,” one person with knowledge of internal discussions tells him. The changes come as Ajay Banga takes over the presidency of the global anti-poverty lender Friday. Some staff members are worried that they will eventually be asked to report in person five days a week after having more flexibility in the past three years — many of the headquarters-based teams have largely been working from home since the start of the COVID-19 pandemic in March 2020. Those pandemic-era rules were always intended to be temporary, a World Bank spokesperson says. Top leaders are now “in the process of finalizing our return to regular in-office presence,” the spokesperson adds, saying “staff will be the first to know when that decision is made.” Scoop: World Bank’s return-to-office plan sparks staff pushback Related: USAID wants everyone back in the office Blending solutions for health The Transform Health Fund is officially open for business. The impact investing market is about $1.2 trillion but less than 2% of that total goes to health-related investments in Africa. Most goes to supporting businesses aimed at middle-income or wealthier clients largely focused in urban areas. Closing funding gaps will likely require solutions that blend commercial and concessional capital, Colleen Connell, the managing director of the Health Finance Coalition, said at a Devex event in Geneva last week. The goal is for the fund to eventually be $100 million, and it has a unique feature: a deal construction team that is working with businesses to get them ready for investment, her colleague Martin Edlund, executive director of the Health Finance Coalition, tells me. The fund will invest in businesses supporting underserved populations in three key areas: health supply chains, innovative care delivery, and digital innovation. The Transform Health Fund, and other blended finance or innovative financing instruments, can help close key market gaps. Often, small and medium-sized companies face serious challenges accessing the money they need to grow — either it is too expensive or they don’t quite have everything in place that investors are looking for. That’s where funds that combine assistance to help get companies to a place that is investible or mechanisms that help de-risk investments for funders are critical to improving the status quo. Read more: New funds aim to tackle gaps in African health financing (Pro) + Start your 15-day free trial of Devex Pro today to unlock the piece as well as access all our exclusive reporting and analysis. Changing incentives Inter-American Development Bank President Ilan Goldfajn is serious about making the institution more effective and making internal changes to that end, he said at a Center for Global Development event last week. Among the ways he’s looking to change the internal culture is by linking compensation to impact and effectiveness. He said he is in discussions with his human resources team to come up with effectiveness indicators to help determine how much staff will get paid. “If we continue to promote performance based on how much was the envelope, how much you lend,” he explained, then IDB won’t get the focus on effectiveness that he wants. ICYMI: New LatAm bank chief gets warm welcome for tough job ahead And don’t miss: Goldfajn lays out vision, seeks to move IDB past sex scandal What we’re reading Better disclosure and Wall Street scrutiny are resetting $6 trillion in ESG debt. [Bloomberg] Moody’s ratings agency says Ecuador’s debt-for-nature swap is in default. [Nasdaq] More companies quit the Net-Zero Insurance Alliance. [Financial Times]