The U.S. is pushing its development finance tools to shift from careful steps to bold competition in key industries. A new report urges the U.S. International Development Finance Corporation (DFC) to align with America’s industrial goals, such as semiconductors and critical minerals. This move aims to build stronger global supply chains while boosting U.S. jobs and partner countries’ growth.
DFC’s Past Role and Limits
The DFC uses loans, guarantees, and investments to support projects abroad. Congress created it to compete with China’s big spending, but rules keep it cautious with limits on risks and equity stakes up to 30%.
This setup helped fund minerals in South America and solar in South Asia, yet slow approvals hold back speed and scale.
New Strategic Direction
The U.S. government is currently placing more of the DFC work on the industrial strategy of America. The DFC will not only be cautious when doing their financing, but they will concentrate on work that conforms to the U.S. industrial priorities.
They include those areas that are essential to the competitiveness of the country and resilience of the global supply chain, including semiconductor manufacturing, mining of essential minerals, digital infrastructure, and clean energy.
This new approach means moving away from just managing risks to taking more strategic and calculated risks that can create bigger returns. The DFC will also increase support for projects owned by state-owned enterprises (SOEs) if they clearly advance U.S. interests.
Link to U.S. Industrial Strategy
Recent U.S. laws outline priorities in semiconductors, digital infrastructure, critical minerals, transport, health, and energy. The report calls for tying DFC’s work to these areas to create shared production networks that cut risks and lower costs.
For example, vaccine projects in Africa show how this can mix U.S. goals with local benefits.
Key Fixes for Stronger DFC
Experts call for a clear strategy: focus on six hot sectors from U.S. laws, semiconductors, digital tech, minerals, transport, health, and green energy. Add rules for shocks, but keep them short. Free up political risk insurance from budget limits to use it fully.
Other steps include testing loans to governments, more support for state firms if they help U.S. goals, and flexible debt for big projects. Cut red tape in approvals, raise funding caps, hire experts abroad, and make DFC permanent. This turns caution into competition.
Why Change is Needed Now
The DFC started as a cautious agency to avoid risks like debt traps seen in China’s Belt and Road Initiative. But in today’s world, slow and safe is not enough, speed, big money, and clear goals win. Congress has passed laws on chips, clean energy, and minerals that set up a new U.S. industrial plan, and the DFC must link to it.
Past projects show promise, like funding minerals in South America, solar factories in South Asia, and vaccines in Africa. These tie the U.S. to global growth without bad loans. Yet, rules limit equity stakes, insurance use, and quick deals, holding back real power.