The future of CDC - International Development Committee Contents

Annex 3

Table 6  The perceived strengths of Development Finance Institutions

AWSThe mandate of AWS involves supporting Austrian business in Austria and abroad. Its biggest advantage is its direct link with the Austrian business community. AWS serves as "point of entry" to Austrian companies to the large multilateral DFIs, especially MIGA.
CDCCDC biggest advantage is its knowledge and understanding of the private equity market in frontier markets. As a fund-of-funds their expertise is in identifying good fund managers, especially in sub Saharan Africa and South Asia.
COFIDESThe advantage of COFIDES relies mostly on its proximity to the Spanish investor and its understanding of the Spanish corporate culture. Cofides' client base has traditionally been the SME segment; COFIDES knowledge of emerging markets (especially Latin America) make them the preferred advisor for SMEs which cannot afford large pre-investments expenses. COFIDES already has this knowledge in-house and available. COFIDES-financed projects are mainly based in Latin America--which, owing to cultural links, is the traditional destination of Spanish companies expanding abroad--and increasingly in China and Central and Eastern Europe.
DEGThe strength of DEG lies in being part of a development group and being part of the KfW Bankengruppe, so that it has strength in innovation and can move first in products. DEG has flexibility and regional experience. It has local offices. DEG is good at syndication, and taking equity stakes (because it can use expertise at the KfW). DEG is also good at agriculture projects. Thanks to a reasonable scale, country risk ratings can be done on a bigger scale because its parent, KfW, already does this. Finally, DEG is close to German companies due to historical reasons.
EBRDEBRD has a significant presence in one region, built up significant expertise, good DFI-client relations thanks to its local offices and offers a large range of products. It tends to be in the lead in bigger projects in the region (except perhaps in equity). It uses stricter environmental and social guidelines than other DFIs. Its specific mandate is to promote transition, and in this area EBRD has a comparative advantage.
EIBEIB known as a lean operation (few staff) but with good project appraisal: due to its breadth and depth of knowledge. EIB works across the world, but with different mandates in different regions. It has specific sectoral knowledge areas such as in engineering. EIB-IF is not tied, has a broader focus in terms of countries. It is faster than other multilaterals. EIB is in big ticket projects in infrastructure such as power and water. Scale is an issue here. Other DFIs more focused on specific countries, but EIB cannot ignore less popular countries.
FINNFUNDBetter suited to deal with small to mid-size projects. Ability to adjust better to the limited resources small clients have, and are more flexible to adapt to the client's capacity.Assist clients to "grow into the DFI system", in this way, they have served as a sort of training experience for clients before approaching the big multilaterals. Due to FINNFUND's link to Finnish business community, they have developed special knowledge in those industries where Finnish companies are at the forefront of technology, especially, forestry, energy efficiency (bio-power), and telecommunications
FMOFMO is good in infrastructure and financial services, less so in production, services and equity funds. It excels in using networks and so-called knowledge streets (networks). The network of financial institutions in Africa is very important and second to none (including IFC). FMO is flexible, investing a lot in Africa, and introduces new products. FMO has good relations with co-financiers, such as DEG or the private sector: it uses ABN AMRO in Indonesia, needs the expertise of Rabobank in agribusiness deals and relies on country knowledge of the City Bank.
IFCIFC see themselves as the main innovator among DFIs in three areas: (i) risk mitigation, (ii) advisory services, (iii) standards setting. IFC is also good at innovation on municipal finance (bonds), and energy financing in retail estate (low income) market. IFC is moving from predominantly a 'finance' institution into a 'development' institution, with a far stronger 'knowledge' base as its comparative advantage. It already has 50% of its staff in field offices (up from 30% a few years ago).
IFU/IØ/IFVIFU can play a role and make a difference in financing small projects and its ability to accommodate the client. Their procedures are flexible and client-friendly.

Due to the fact that IFU's funds are tied and in 99% of the cases this is understood as the need to have a Danish co-investor in the project, IFU has specialized in mobilising Danish capital into developing countries, especially LDCs.

NORFUNDNORFUND's strategy of channeling one third of their funds to Least Developed Countries gives them a large exposure and understanding of high risk projects.

Special knowledge developed by their priority investment in hydropower through the SN Power initiative. Funds management has also developed as a special knowledge through their involvement in Aureos Capital Fund.

PROPARCOKnowledge in French speaking developing countries. Industry.
SIFEMSIFEM has focused its strategy in channeling its funds either directly in financial institutions or in private equity funds with an emphasis in infrastructure and SME development. SIFEM positions itself as a flexible and agile organisation. A small team that can handle small projects without being anti-economic. Special knowledge has been developed in certain countries: Ghana, South Africa, Peru, India and the Balkans.
SWEDFUNDSWEDFUND advantage is its ability to take part in small projects. Its closeness to the Swedish business community allows them to remain flexible and up to date with the daily thinking of the private sector companies, its needs and concerns. As a result, their capacity to adapt to a need for change is more agile than for large DFIs. Small companies also need world-class shareholders when investing into developing countries, a small bilateral DFI like SWEDFUND can provide that support. Special knowledge developed during the re-structuring of the banking sector in the Baltic states. In some countries, SWEDFUND has a long standing experience by being shareholders in companies which later became the largest tax payers in the country, such as in Namibia and Tanzania.
Source: analysis based on interviews as reported in D.W. te Velde, M. Warner, and G.Dellacha (2008), "The strengths and weaknesses of bilateral development finance institutions", Report for EDFI.

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