What does the data tell us about DFIs?

Data on bilateral development finance institutions can provide a high-level overview of what they are doing and where they are working, but not necessarily why they are choosing the investments they are making. Each DFI has its own parameters to define regions and financial instruments, and these are not always shared publicly — making it difficult to compare their work or in even fully understand it. Despite the challenges, there are still insights to be gained from looking at where DFIs are operating and who they are supporting. To support greater insights into DFIs and their objectives, Devex has collated more than 3,000 investments publicly accessible from 17 DFIs made between 2012-2017. High-level time series data has been collected on 16 — excluding FinDev Canada which was founded in 2017 — and profile information is available for all. These profile and investment details are provided in our new DFI tableau interactive. The data shows that DFIs have been increasing their investments since 2012, with a focus on financial inclusion and least developed countries. It shows a growing commitment to SME development, energy projects, and environmental initiatives. But it also shows diversity in DFIs’ objectives — from development first to economic expansion first. Headline figures Between 2012-2017, new commitments made by the 16 DFIs analyzed in detail have increased in value by 43 percent, totaling $12.5 billion in 2017. The total value of portfolios has also risen across the same period of time — up 59 percent to a total of $65.2 billion in 2017. Profits at DFIs are also on the rise — the median profit for DFIs increased from $13 million in 2012 to $17 million in 2017. The Dutch FMO is one DFIs that is expanding rapidly, with new commitments in 2017 that supported 48 markets — a big growth from the 23 supported in 2012. FMO’s annual commitments has increased from $1.7 billion in 2012 to $2.3 billion in 2017 in support of these new markets, with the total portfolio valued at just under $11 billion. During the same period, Denmark’s IFU, has grown from the ninth largest bilateral DFI, with a portfolio worth $569 million, to the seventh largest, with a portfolio valued at $1.5 billion. Its annual commitments have more than tripled in this time. These numbers show the growth of DFIs, but also raise questions about where they are investing and whether their growth is achieving development impact. According to the 2017 data, the geographic focus of the portfolio for these DFIs was sub-Saharan Africa (23.9 percent). This was followed by closely by Latin America and the Caribbean (23.4 percent), South Asia (15.1 percent), and other and multicountry fourth (13.1 percent). DFIs invested about 30.8 percent of their funding in 2017 in finance, 28.9 percent in industry projects, and 11.3 percent in energy projects. These numbers are heavily influenced by the dominance of OPIC in the data. OPIC accounted for 36 percent of the combined portfolio of the bilateral DFIs analyzed in 2017 and 30 percent of new commitments. As a result, the geographic and sector focus reflects the political priorities of the United States and its private sector. While there is a focus on supporting least developed countries, only 29 of the 47 countries classified as LDCs received direct support from DFIs in 2017 — not including additional countries that may have been supported by multicountry initiatives. Topping the priority LDC countries for investment in 2017 were Guinea, Benin, Senegal, Bangladesh, and Cambodia. Explore the series. Geographic insights The detailed investment data collated for 15 DFIs with publicly accessible data — neither BMI-SBI nor SIMEST have detailed public information — shows that the geographic and sector priorities for bilateral DFIs can vary greatly. This means generalizations on priority regions and sector priorities for bilateral DFIs can vary greatly, making generalizations on priority regions and sectors potentially problematic. By region, BIO, CDC, Finnfund, Norfund, SOFID, and Swedfund have more than one-third of their portfolios focused in sub-Saharan Africa. CDC delivers this through multiregional investments in Africa, which have increased from $170 million in 2012 to more than $440 million in 2017. For some African nations, this may have been at the expensive of country-focused projects. New commitments for Nigeria have been declining since 2012 when a $36 million commitment was made. In 2017, CDC made no new commitments specific to Nigeria. Since 2012, the most consistent recipient of funding from Norfund is Africa, with a primary focus on supporting the development of food and agribusiness markets. This includes mango markets for export to South Africa and rapid wheat production. The focus of opportunities in Africa is expanding for Norfund, 2017 saw $12.5 million committed for two hydro-energy projects in the region supporting responsAbility Renewable Energy Holding and New Africa Power. And for PROPARCO, new investments are focused on the Republic of the Congo and Benin — although India and Jordan are also top recipients of PROPARCO funding. Southeast Asia is also a growing focus in the objective of supporting developing economies. SIFEM, for example, is increasing its contribution to SME development — its focus sector in 2017 — through new investments in Cambodia worth $8.4 million. In 2012, there was no SME-related investment for the year. Sector insights DFIs’ priority sectors have been another area of transition since 2012. OPIC’s focus on Latin America and the Caribbean is a region that has seen DFI sectoral shifts. In 2012, commitments in the region were focused on Peru — through solar power investments. But the regional focus has since shifted. By 2014, SME investment saw OPIC focus on investments in Brazil and Chile. By 2017, it shifted again, with Colombia the focus of a low-income mortgage portfolio. A growing sector of investment for Finnfund is ICT and telecommunications. Combined, commitments of $23 million were made to support ICT and telecommunications technology development in 2017 — categories not listed in new commitments in 2014. But the largest shift is the growing focus on renewable energy. For OeEB, energy infrastructure has been among its priority sectors since 2012, with $140 million in commitments made in 2017. For DEG, India was also the single biggest country for new commitments in 2017, with a $37 million investment supporting ReNew Wind Energy to build clean energy infrastructure one of their largest investments. And Swedfund saw a shift from a focus on banking and financing to energy in 2017 through new commitments. There are others that stand alone in their focal sectors. In 2017, PROPARCO committed $488 million for new investments in water and sanitation projects — its largest focus sector. In comparison, banking and finance initiatives — a focus for most DFIs — accounted for just $2.4 million of PROPARCO’s new investments. It is a large transformation in focus for the DFI, which in 2012 was focusing new investment in transportation — $777 million to be precise. Data landscape To improve transparency, some DFIs — including OPIC, PROPARCO, and CDC — are taking steps forward to provide data through open platforms or standards. Others, such as BMI-SBI and COFIDES, continue to make accessing data a challenge. COFIDES has password-protected or scanned-image annual reports that prevent data scraping and analysis. Additionally, inconsistent reporting standards among DFIs limit the ability to accurately analyze DFI data. Since 1992, the Association of Bilateral European Development Finance Institutions has been supporting greater transparency among European DFIs by providing aggregated data that can be compared and contrasted. The Organisation for Economic Co-operation and Development has been another important player in the DFI data space. In 2014 it began engaging with DFIs through a workshop to discuss data standards and improved reporting and produced a basic visualisation of DFI operations to further the discussion. “[The visualization] was meant to incentivise DFIs and their respective governments to work on more comprehensive reporting to the OECD,” Tomas Hos, research officer at the OECD Financing for Sustainable Development division, explained to Devex. DFI reporting to OECD is currently ad hoc and there is limited coverage of DFI activities in the OECD statistical system for the recent years, Hos said. “While some DFIs report in a very comprehensive and detailed manner, others do not report their activities to the OECD or report only aggregate level data,” he added. OECD’s focus in the space is in understanding how much private finance is being leveraged through these development finance activities. The 2016 OECD survey “Amount Mobilised from the Private Sector” provides detail on the methodology used to collate preliminary data for 2012 -2017. Looking beyond just bilateral DFIs and into broader areas of ODA financing and private sector support to report impact as a share of private sector investment, it offers another way of reporting the numbers. OECD, aware that development finance alone cannot support the delivery of the Sustainable Development Goals, is one of the organizations that will push for greater collaboration and transparency on data initiatives. “The secretariat of OECD is in ongoing discussions with members and their DFIs to improve the quality, coverage, and comprehensiveness of the reported data,” Hos said. “The provision of reliable statistics for analytical and transparency purposes is in the heart of the OECD raison d’être.”