A New Chapter for the U.S. International Development Finance Corporation

Commentary by Erin L. Murphy

Published October 8, 2025

The U.S. International Development Finance Corporation (DFC) is entering its next phase in its operation with the confirmation of its new CEO, Benjamin Black, and upcoming reauthorization. Since becoming fully operational in 2019 with the passage of the Better Utilization of Investments Leading to Development (BUILD) Act, the agency has struggled to meet the high expectations of policymakers, investors, and countries eligible for DFC financing. Part of this is due to a lack of understanding among policymakers in how to mobilize private sector capital, which the DFC is tasked to do; the availability of commercially viable and developmental projects; and the appetite for risk in deploying taxpayer money on potentially risky investments overseas. A new CEO and lease on bureaucratic life present an opportunity to build on the successes DFC has had and define a role in the foreign policy and national security space that will not be left to conjecture.

When the DFC-an organization that brought the former Overseas Private Investment Corporation and U.S. Agency for International Development (USAID)'s Development Credit Authority together-launched in December 2019, Washington saw it as a solution for a myriad of foreign policy and national security problems: offering a legitimate alternative to China's Belt and Road Initiative (BRI), infusing strategic objectives into investments overseas, and bringing a renewed vision on aid and development. The DFC has provided financing to projects that have addressed these goals, especially on geostrategic competition and strengthening supply chains. For example, the agency provided $30 million in equity financing to support a mining facility producing nickel and cobalt in Brazil; gave a $553 million loan to upgrade and repair 800 miles of railway and a mineral port in the DRC and Angola; and provided $50 million to finance the construction of four data centers in Kenya, Ghana, Morocco, and Libera.

That said, there has been unease as to the pace and scope of DFC investments. Ink has already been spilled on how the DFC should be reformed through the reauthorization process, with key recommendations around the equity scoring fix, not being hemmed in by income classifications, raising the investment cap, and streamlining the project approval process, among others. There have also been discussions around using it for domestic purposes, including mining initiatives to secure critical minerals or promoting tech industries. However, the new CEO should focus on solidifying the agency's core values and mission, rather than being pulled in directions that the BUILD Act did not intend. This can be done in a few, but important, ways.

Maintain International Focus: The temptation to refocus DFC investment domestically should be avoided. There are now very few tools for the United States to shore up its interests and engagements overseas, and a plethora of options to support domestic priorities on manufacturing and technology, including AI and quantum computing. In a CSIS report, Alternative Funding Mechanisms in Review: Catalyzing Investment to Achieve U.S. Government Aims, scholars assessed federal credit programs that spurred U.S. investment in emerging and critical technologies using financial tools such as debt and equity financing, loan guarantees, technical assistance, and grants. The Departments of Energy and Commerce, the Small Business Administration, and the relatively new Office of Strategic Capital use this to spur domestic industry. The latter can also double down on Trump administration priorities to make the United States a leader on AI and other critical technologies and in supporting our national security by investing in domestic companies in these fields.

The United States is increasingly lacking in tools that support foreign policy and national security priorities. Without USAID and Department of State programs, it is left to the DFC, the Export-Import Bank of the United States, the U.S. Trade and Development Agency, and the Millennium Challenge Corporation to pick up the slack. Given the Trump administration's views on foreign aid and assistance, as evidenced by cutting 83 percent of USAID programs, DFC investment fulfills the intent of the BUILD Act as well as the "America First" ethos of making the United States safer, stronger, and more prosperous. These investments can strengthen supply chains critical to U.S. industries, promote economic stability and therefore lessen political instability, offer opportunities for U.S. businesses, and counter China by offering viable alternatives.

Don't Compete with Traditional BRI, Compete with the DSR: Congress has been especially keen on the DFC competing with China's global mega infrastructure plan, the BRI, but those geostrategic economic concerns are misplaced. BRI hit its transportation infrastructure investment peak in 2016, and its major investments in transportation infrastructure projects have slowed and refocused on its Digital Silk Road (DSR) initiative, a component of the BRI. The DSR funnels investments into 5G and likely future evolutions of telecom networks, AI, cloud computing, fintech, and, more worryingly, surveillance technology. There are reasons behind this shift and lessons here for the United States: bypassing due diligence concerns, supporting vanity projects (particularly Sri Lanka's Hambantota International Port), and saddling countries with debt with no discernable path for repayment (particularly in the wake of the Covid-19 pandemic that slowed economic growth and drained government coffers), China's infrastructure efforts were not providing a significant return on investment and only hemorrhaging money. The DSR is easier to deploy, financially more feasible than transportation infrastructure or hydropower dams, and is more likely to generate a financial return.

This does not mean that the DFC should exclude infrastructure investments particularly as these are still important to development and economic growth; however, China's shift to expanding its digital offerings not only undermines U.S. commercial position overseas, but also leaves the United States and its partners and allies vulnerable to cyberattacks, espionage, ebbing influence, and an inability to shape standards and regulations around digital security and free flows of data.

Mobilizing Private Sector Capital and Taking Risks: Those who oversee the DFC expect investments to mobilize private sector capital, be highly developmental, adhere to foreign policy priorities, and be commercially viable. This is a tall order, especially as the U.S. private sector has a different definition of developing countries than U.S. policymakers. In conversations with private equity investors, Chile and Poland strike them as risky markets, strongly suggesting countries like Indonesia and Nigeria are out of bounds. To engage in geostrategic countries to counter China and promote U.S. businesses, the DFC and member departments of its board, including the Departments of State and Commerce, must use its investments to spur an enabling environment for the U.S. private sector to flourish. A whole-of-government approach helps as departments and agencies play a crucial role in promoting transparent regulatory and taxation policies, building capacity in the workforce and in governance, and using DFC tools such as technical assistance, feasibility studies, and political risk insurance to build investor confidence. This needs to be an ongoing conversation with the private sector; instead of creating tools policymakers think will drive investment, it should create and promote the tools that will.

As the DFC enters a pivotal new chapter with its CEO confirmation and its upcoming reauthorization, it faces a critical opportunity to clarify its mission and build on its foundational successes. While the agency has not fully met the ambitious expectations set at its launch-particularly in countering BRI-it has demonstrated the potential to align strategic investments with U.S. foreign policy goals. Rather than expanding into domestic or tangential priorities, the new leadership should focus on reinforcing the DFC's core mandate as envisioned by the BUILD Act. With thoughtful reforms and a clear strategic direction, the DFC can evolve into a more effective instrument of development finance and national security.

Erin Murphy is deputy director of Chair on India and Emerging Asia Economics and senior fellow of Emerging Asia Economics at the Center for Strategic and International Studies in Washington, D.C.

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