Development finance is most appropriate for large capital investments that-with the right incentives to reduce risk-can generate strong private sector interest. This typically includes large-scale infrastructure, energy, water, agriculture, and public health projects. Such investments create conditions that promote local and private sector-led economic growth and job creation.
Grant funding and development finance can be employed in tandem to de-risk innovation and achieve greater impact. For example, Zola Electric (formerly Off-Grid:Electric), a Tanzanian company that provides clean energy to low-income communities through a pay-as-you-go service based on mobile money, was the first to receive all three tiers of DIV funding. An initial $100,000 DIV grant allowed Zola to test this novel business model. Once the market potential was validated another $1 million grant supported the build-out of infrastructure for full-scale operations. Finally, a $5 million stage-three grant served to unlock the working capital from commercial lenders needed to scale. In addition to grant funding, an early loan from the Overseas Private Investment Corporation (OPIC, now DFC) further smoothed the transition to private financing, ultimately enabling Zola to raise more than $200 million in debt and equity from private sources. OPIC has continued to support dozens of other pay-as-you-go home solar companies, both directly and indirectly, with subordinated financing that has catalyzed private investment and created one of the fastest-growing markets across Africa.
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