Understanding the role of development finance institutions in promoting development

This report by the Stockholm Environment Institute assesses the alignment between Development Finance Institution (DFI) investments and the national development plans of Ethiopia, Ghana, and Kenya. It examines how DFIs can better support strategic sectors to enhance development impacts and the achievement of Sustainable Development Goals (SDGs).

• DFIs generally operate based on internal strategies and shareholder mandates rather than national development plans. Interviews with six DFIs (Swedfund, Norfund, Finnfund, DEG, IFC, and CDC) revealed that while they seek to support growth, alignment with country-level plans is not an explicit determinant of investment, and some DFIs do not consult national development plans at all.
• The alignment of financial flows with national priority sectors varies by country and source. Ethiopia shows the highest overall alignment across all finance sources. Among DFIs specifically (excluding generic funds), Ghana has the highest alignment with priority sectors, followed by Kenya.
• In Ethiopia, DFI investments are heavily concentrated in agribusiness (60% of sector-specific funding) and tourism (35.5%), leaving strategic sectors like construction and manufacturing under-represented. However, commercial finance is strongly aligned with these priorities, funding agriculture, construction, and manufacturing at a total of 47.5%.
• In Kenya, DFI funding is primarily focused on the finance sector (57%) and energy (13%), with limited investment in other strategic priorities such as education and ICT. Economic Official Development Assistance (ODA) shows the strongest alignment with Kenya's strategic sectors, particularly in transport, energy, and education.
• In Ghana, DFI investments are strongly geared toward energy (41% of total funds) and the financial sector (22%), showing a 58% alignment with government priority sectors. There is significant under-funding by DFIs in the healthcare and ICT sectors, with healthcare relying on ODA and ICT receiving some FDI.
• DFIs can provide 'financial additionality' by targeting sectors where commercial finance is absent. Opportunities include funding healthcare and ICT in Ghana to reduce ODA dependence and support SMEs, and financing transport and ICT in Kenya to provide commercial alternatives to ODA.
• The report proposes a four-step process for DFIs to increase funding toward strategic sectors: identifying strategic sectors, comparing them with current DFI activities, discussing support with stakeholders (private sector, other institutions, and government), and investing in those target sectors.
• DFIs contribute most effectively to SDGs 7 (energy), 8 (economic growth), and 13 (climate change). They achieve this through job creation, investing in clean energy (hydropower and solar), and promoting better working conditions and safety standards.

APA

Marbuah, G., Velde, D. W. T., Attridge, S., Lemma, A., & Keane, J. (2022). Understanding the role of development finance institutions in promoting development. Stockholm Environment Institute. https://www.sei.org/wp-content/uploads/2022/02/sei-report-development-finance-three-countries-03032022.pdf

Chicago

Marbuah, George, Dirk Willem te Velde, Samantha Attridge, Alberto Lemma, and Jodie Keane. Understanding the role of development finance institutions in promoting development. Stockholm Environment Institute, 2022. https://www.sei.org/wp-content/uploads/2022/02/sei-report-development-finance-three-countries-03032022.pdf.

Wikipedia

{{cite report |last1=Marbuah |first1=George |last2=Velde |first2=Dirk Willem te |last3=Attridge |first3=Samantha |last4=Lemma |first4=Alberto |last5=Keane |first5=Jodie |title=Understanding the role of development finance institutions in promoting development |publisher=Stockholm Environment Institute |date=February 2022 |url=https://www.sei.org/wp-content/uploads/2022/02/sei-report-development-finance-three-countries-03032022.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{marbuah2022understanding, author = {Marbuah, George and Velde, Dirk Willem te and Attridge, Samantha and Lemma, Alberto and Keane, Jodie}, title = {{Understanding the role of development finance institutions in promoting development}}, institution = {Stockholm Environment Institute}, year = {2022}, month = feb, url = {https://www.sei.org/wp-content/uploads/2022/02/sei-report-development-finance-three-countries-03032022.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }