WHAT IS A DEVELOPMENT FINANCE INSTITUTION?

The document examines how DFI lending through financial intermediaries (FIs) reduces transparency, weakens environmental and social safeguards, and often fails to reach the poorest populations compared to direct investment. It highlights specific cases of land disputes and environmental degradation in India and Brazil, and recommends that DFIs prioritize local ownership, increase public disclosure of sub-projects, and implement stricter due diligence focused on development impact.

• DFIs operate with a dual mandate to generate profit for stakeholders while achieving public policy goals, such as the International Finance Corporation's (IFC) "explicit poverty reduction mandate".
• Lending through financial intermediaries (FIs) creates a transparency gap where the public has "virtually no access to information" regarding high-risk activities, unlike direct DFI funding where extensive information is made public.
• The use of FIs often shifts the responsibility for managing environmental and social risks away from the DFI, leading to inadequate safeguards and a failure to ensure proper community consultation.
• DFI lending via FIs may fail to reach the poorest people or small and medium-sized enterprises (SMEs) because FIs are primarily profit-motivated and DFIs often fail to use a "pro-poor lens" to guide these investments.
• The GMR Kamalanga Energy Limited (GKEL) coal mine project in India, financed by the IFC through the India Infrastructure Fund, resulted in the displacement of nearly 1,300 families from 486 hectares of land with allegations of poor consultation and lack of livelihood restoration.
• The IFC's investment in the Altima One World Agriculture Fund (AOWAF) via a 'special vehicle' allows the fund to invest in projects that might be excluded from direct IFC funding, such as activities in Mato Grosso, Brazil, where soy expansion contributes to the destruction of natural vegetation.
• DFIs often fail to leverage their power as 'anchor investors' to ensure positive change, as their influence typically diminishes significantly once funds are disbursed to an FI.

APA

Thilakasiri, S., Nash, R., & Perrault, A. (2012). WHAT IS A DEVELOPMENT FINANCE INSTITUTION? Center for International Environmental Law. https://www.ciel.org/wp-content/uploads/2015/06/RiskyBusiness_English_US.pdf

Chicago

Thilakasiri, Sasanka, Rob Nash, and Anne Perrault. WHAT IS A DEVELOPMENT FINANCE INSTITUTION? Center for International Environmental Law, 2012. https://www.ciel.org/wp-content/uploads/2015/06/RiskyBusiness_English_US.pdf.

Wikipedia

{{cite report |last1=Thilakasiri |first1=Sasanka |last2=Nash |first2=Rob |last3=Perrault |first3=Anne |title=WHAT IS A DEVELOPMENT FINANCE INSTITUTION? |publisher=Center for International Environmental Law |date=April 2012 |url=https://www.ciel.org/wp-content/uploads/2015/06/RiskyBusiness_English_US.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{thilakasiri2012what, author = {Thilakasiri, Sasanka and Nash, Rob and Perrault, Anne}, title = {{WHAT IS A DEVELOPMENT FINANCE INSTITUTION?}}, institution = {Center for International Environmental Law}, year = {2012}, month = apr, url = {https://www.ciel.org/wp-content/uploads/2015/06/RiskyBusiness_English_US.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }