Boom: A New US Development Finance Corporation!

Today, Congress passed the BUILD Act—which will streamline and strengthen US development finance tools by establishing a full-service US International Development Finance Corporation (USIDFC). This policy change will modernize the US’s development finance agency, and allow the US to play a leadership role in addressing poverty, while promoting American businesses around the world.

Because of the changing global landscape, development finance—rather than aid—is the future, and many previously poor countries are richer today and are looking for partnerships with the United States to deliver jobs, roads, and electricity instead of just aid. The BUILD Act will build markets for American goods in fast-growing emerging markets, support private sector led growth in our strategic allies, and ensure that US companies are competing in these markets with Chinese and European firms—all at less than zero cost to taxpayers.

Change didn’t happen overnight

Way back in April 2011, Todd and our colleague Ben Leo proposed a new consolidated US development bank to replace the Overseas Private Investment Corporation (OPIC). In a terse 3-page memo, we argued that a new modern development finance agency was a bipartisan way to boost development, expand US commercial opportunities, and promote government efficiency. Seven and a half years later, it’s happened.

In a week packed with bitter partisan rancor, Congress passed the Better Utilization of Investments Leading to Development (BUILD) Act. There are many, many people who worked hard to make this happen—special shout-outs to former OPIC CEO Rob Mosbacher, Jr., the diligent staffers for Senators Bob Corker (R-TN) and Chris Coons (D-DE) and Representatives Ted Yoho (R-FL) and Adam Smith (D-WA), and the ONE Campaign. (You can find CGD’s full proposal from 2015 here and recent commentary on BUILD here, here, here, and here.)

So what?

It’s not too grand to say this is the biggest step forward in US development policy since at least the creation of the Millennium Challenge Corporation in 2004 and the launch of PEPFAR in 2003. While foreign assistance remains highly relevant to our development and national security goals, development finance is increasingly in demand. OPIC, a small high-performing agency, has been the United States’ chief vehicle for development finance. But it was created in 1971 and stuck with Nixon-era rules that made it tough to keep pace with its European peers and with the pace of activity by China and others.

The new USIDFC will be:

• Bigger: The cap on its portfolio will double to $60 billion.

• More transparent: Among the bill’s provisions is a requirement to make detailed project-level data publicly available in a machine-readable format. (Hooray.)

• More competitive: New authorities such as equity and a modest grant window for feasibility studies will position the agency to move faster and more flexibly.

So what next?

Once President Trump signs the bill, the clock starts on planning to turn OPIC into the new USIDFC. That’s when the real works starts. We’ll play a modest role from the outside by closely watching the transition and pushing a few ideas to fulfill the vision, such as a stoplight system for more clearly balancing the agency’s triple mandate of development, national security, and commercial viability.

But for now, we applaud this huge step forward for US development policy and for much-needed bipartisan cooperation. Or, how Ben would say it: “Boom.”