The quiet revolution: What Congress should know about foreign assistance today

February 11, 2021

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.

To read more please vis­it Brook​ings​.edu