Opinion: 4 essential steps for BUILD Act's development finance agency

As the ink dries on the BUILD Act — Better Utilization of Investments Leading to Development — the administration has 120 days to submit a plan to Congress transforming the Overseas Private Investment Corporation into the new United States Development Finance Corporation.

Implemented effectively, DFC will be a powerful addition to the U.S. foreign policy toolkit. Combined with the grant-based assistance of the U.S. Agency for International Development and Millennium Challenge Corporation, the new institution can improve the coherence of U.S. efforts to help partner countries become more prosperous, democratic, and stable.

To achieve this goal, DFC should be a world leader in transparency and development impact — working seamlessly with USAID and Administrator Mark Green’s Journey to Self-Reliance agenda. Indeed, DFC’s stated purpose is to mobilize private sector capital and skills to complement U.S. development assistance objectives and to advance U.S. foreign policy interests.

To ensure that the agency’s form follows this worthy function, the Modernizing Foreign Assistance Network has put forward four guiding recommendations: fulfill the development mandate; establish strong connectivity with USAID; prioritize agency accountability; and institute robust systems of transparency and consultation.

As the administration drafts its implementation plan, these are four essential areas to focus on:

1. Development-focused leadership

The BUILD Act establishes two important, development-focused leadership posts: a high-level chief development officer and an independent development advisory council. The chief development officer position is designed to ensure senior leadership and fidelity to achieving development impact. The administration’s plan should make this position an empowered core of development expertise, with sufficient staff and resources to: coordinate with development stakeholders inside and outside the U.S. Government; shape internal policies and investment decisions; and ensure high standards of accountability and transparency.

To advise DFC in these efforts, the new external development advisory council should be composed of highly experienced development leaders charged with providing regular input to DFC, particularly as the agency establishes its development impact framework and systems of accountability and reporting.

2. Linkages with development agencies

To infuse poverty-focused development into the new DFC, the linkages with development agencies — especially USAID — must be strong at all levels. Elevating the USAID administrator to vice-chair of the DFC board is a welcome start.

Particularly as USAID’s Development Credit Authority moves over to DFC, both agencies must be intentional about investing in day-to-day systems, staffing, and incentives for USAID missions to channel projects to DFC. For example, USAID should not miss the opportunity to utilize DFC as part of its forthcoming Private Sector Engagement Strategy, and should consider how DFC tools can be leveraged in Journey to Self-Reliance pilot countries.

3. Performance and accountability

To live up to its development mandate, DFC must establish a robust framework for assessing the development impacts of its investments. Organizations such as the Global Innovation Fund, have developed sophisticated tools to draw from. In addition, the agency should establish a robust evaluation framework that meets the Office of Management and Budget’s recent high standards. MCC and USAID are recent examples of how to establish an agency culture of evaluation and improvement so that lessons learned will inform future decisions. These efforts will build on OPIC’s important, existing commitments to environmental and social safeguards, an accountability office, and gender and women’s economic empowerment.

4. Transparency and consultation

Finally, for DFC to maximize its impact, it should set a gold standard for stakeholder engagement and transparency. The BUILD Act was enacted because of a powerful bipartisan partnership between Congress, the administration, and the development community. The administration and Congress should continue to work closely with each other and the development community to shape key policies, roles, processes, and personnel. DFC should also set a new global standard for transparency, publishing policies, project-level data, evaluations, and of course the aid data required by the Foreign Aid Transparency and Accountability Act, or PL 114-191.

If the administration and Congress take these four steps by the end of January — the 120-day timeline — DFC will be well on its way toward fulfilling the promise of the BUILD Act.