DFC 2.0: A blueprint for a bigger, faster and more strategic agency
Bottom lines up front
- The DFC’s current impact is hindered by outdated policies, risk aversion, complex procedures, and equity limitations, all of which restrict its ability to mobilize private capital and take on high-impact, high-risk investments— particularly in critical sectors like minerals needed to compete with China.
- Key policy recommendations for a “DFC 2.0” include granting the agency greater operational flexibility (e.g., higher lending cap, expanded project eligibility), establishing volunteer “deal ambassador” networks to overcome workforce constraints, launching a “Business Corps” for international commercial diplomacy, and streamlining equity scoring and fund management processes.
- Success for DFC 2.0 will require cultural change within the agency to embrace risk, celebrate innovation, coordinate more closely among U.S. government agencies, and rapidly scale its presence and influence—both domestically and globally—to better counter China and advance U.S. national security and economic interests.
The Trump administration is pursuing a major overhaul of US development finance through the forthcoming congressional reauthorization of the Development Finance Corporation (DFC), aiming to align the agency with a more aggressive “America First” and commercial diplomacy agenda, expand its portfolio to $250 billion, and introduce a $3 billion revolving equity fund. DFC is one of the core pillars of US commercial policy, but a 2.0 version must be bigger, faster, and more visible to meet the goals of the Trump administration’s foreign policy agenda. Doing so will enable the United States to better compete with foreign adversaries, such as China, in critical sectors, strengthening commercial ties and promoting the dual benefits of economic prosperity at home and influence abroad. With the DFC’s reauthorization this year, Congress and the Trump administration have an opportunity to refine the tools, deepen partnerships, and expand expertise in order to make the investments at the scale and with the flexibility needed to strengthen US national security and enhance global competitiveness.
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Image: Under Secretary of State Keith J. Krach participates in the US International Development Finance Corporation board meeting at the US Department of State on March 11, 2020. Photo by IMAGO/piemags via Reuters.
