Reps. Smith and Yoho Introduce Bill on Equity Investments by the U.S. International Development Finance Corporation
July 9, 2020
WASHINGTON, D.C. – Representatives Adam Smith (D-Wash.) and Ted Yoho (R-FL) introduced legislation today to ensure that the U.S. International Development Finance Corporation (DFC) can utilize equity investments as intended by Congress.
“Congress created the U.S. International Development Finance Corporation to better focus U.S. development finance on development-impact and investments in lower-income countries. The equity authority given to the DFC is critical to helping it fulfill its development mandate, invest in low-income countries, and collaborate with international partners on projects,” said Congressman Adam Smith. “This bill would rightfully ensure that equity investments made by the DFC are not treated like grants for budgetary scoring and instead reflect the returns that the U.S. government may receive from these projects.”
“The BUILD Act of 2018 and the establishment of the U.S. International Development Finance Corporation (DFC) was a much-needed leap forward for the U.S. to regain its competitiveness for financing international development projects,” said Congressman Ted Yoho. “It is imperative for this new and much needed development finance tool to be funded as intended by Congress. To do this we are introducing an equity fix for the DFC. This bill enables the DFC to accomplish the mission assigned by Congress by fully leveraging equity treatment for DFC investments that does not require dollar-for-dollar funding and reduces the exposure of American taxpayers to financial risk from return on investment. I look forward to seeing Congress pass this essential fix to ensure that the DFC is able to operate effectively and carry out its mission in developing nations worldwide.”
The Better Utilization of Investment Leading to Development (BUILD) Act signed into law in 2018 created the U.S. International Development Finance Corporation (DFC). It granted the DFC the authority to enter into equity investments. This bill would amend the BUILD Act to facilitate equity investments by the DFC that are consistent with the size, breadth, and type intended by the original sponsors of the BUILD Act. It does this by providing a budget treatment for equity investments made by the DFC that does not require dollar-for-dollar funding or expose U.S. taxpayers to any significant new risks.
Supporting quotes from international development and foreign aid-related organizations:
Tom Hart, North America executive director for The ONE Campaign
“This is a much-needed fix to ensure that the DFC has access to every tool to advance its missions and fully support the economic development of developing countries. We appreciate the hard work of Congressman Smith and Congressman Yoho in advancing this bill and their efforts to modernize US foreign aid and look forward to working with relevant committees and the administration to resolve this issue.”
Elaine Gibbons, Vice President for Global Engagement and Communications, PATH
“The new equity investment authority that was provided to the Development Finance Corporation through the BUILD Act creates the opportunity to support businesses that are leading critical health and development innovations in low-resource settings across the globe. Therefore, it is critical that Congress ensure that the DFC has the full equity capacity that was intended in the BUILD Act, so that the DFC can maximize its development impact as it expands its investments into key sectors, such as health."
Conor Savoy, Executive Director, Modernizing Foreign Assistance Network (MFAN)
“MFAN strongly supports a fair market value approach to scoring DFC’s equity investments, which would enable the DFC to maximize the use of its equity authority while minimizing the use of taxpayer dollars. MFAN applauds Representatives Yoho and Smith for their initiative and remains committed to working with Congress and the administration to resolve this critical issue.”
Todd Moss, executive director of the Energy for Growth Hub and nonresident fellow at the Center for Global Development
"Equity authority was a central feature of the BUILD Act to enable the US to catalyze private capital in the service of US development goals and national security objectives. Fixing the budget scoring issue by treating equity investments as a credit program under FCRA will allow the DFC to flexibly invest in innovative, high growth companies in emerging and frontier markets while also protecting taxpayers. It's a sensible win-win."