The Growing Role of the Development Finance Institutions in International Development Policy

This report places Nordic development financial institutions (DFIs) in the context of current international development policy priorities.

DFIs are state-owned risk capital investment funds. Their role in development cooperation is to invest in sustainable and profitable businesses in developing countries. DFIs are well-known in most of Europe for their strong track record in promoting development. In the Nordic countries, however, their methods and achievements are less understood. Each of the Nordic countries has its own DFI. They include Finnfund (Finland), IFU (Denmark), Norfund (Norway) and Swedfund (Sweden). These funds cooperate closely, primarily by sharing knowledge and experiences. DFIs add value to development policy in three areas:

• Investing in under-served project types and settings such as small and medium enterprises, agribusiness and post-conflict settings;
• Investing in undercapitalized sectors such as specialized financial services, energy and infrastructure;
• Mobilizing other investors by sharing knowledge and setting standards.

DFIs, aid and multilateral development banks form the three pillars in international development policies of Nordic countries. They help Nordic governments reach development goals and also act as an important counter-cyclical force in the economic downturn.