Not Just Any Capital: Why Development Finance Institution Intervention through Foreign Direct Investment Is Different

Development finance institutions (DFIs) blend their resources with private capital to promote development. But it makes a huge difference what type of private capital DFIs blend with! This essay argues that development outcomes deriving from blending with foreign direct investment (FDI) are fundamentally different from those deriving from blending with other types of capital. This is because FDI – in contrast to other types of capital – is accompanied by propriety assets and competencies that only can be accessed through FDI. This essay discusses the potential implications of this argument for DFI strategies and impact measurement methodologies.