October 2016: Canada’s Development Finance Institution

The Birth of Canada's Development Finance Institution

While Global Affairs Canada compiles inputs from its wide-ranging International Assistance Review consultations and moves to integrate resulting changes to Canada's international assistance priorities into the 2017 federal budget, it is timely to underline the importance of getting one change right in particular: the birth of Canada's Development Finance Institution, or DFI.

Currently existing more or less only on paper within Export Development Canada (EDC), our DFI has the potential, like Penny Oleksiak at this summer's Olympic Games, to defy expectations and achieve unexpected international results from a very young age. To realize this potential, like any successful athlete Canada's DFI needs to establish a clear plan of preparation. In the DFI's case, this means having the proper structure and governance in place to lay the conditions for the equivalent of Olympic gold: catalyzing good private sector projects in developing countries while achieving a high degree of development impact.

As the only G7 country without a DFI, Canada has the opportunity to incorporate the best and most relevant elements of what has worked for other DFIs around the world, and to avoid what has not. While all that might seem obvious, getting the formula right is tricky and the wrong choices could easily lead the new institution on a path that, for example, replicates private sector capacity or has little or no significant impact in scaling up private sector activity in developing economies, which are the ultimate goals. We believe there are three main areas the DFI needs to "get right" in order to succeed: governance, development impact, additionality and mechanisms for involving the private sector in its investments.

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