The UK’s strategy towards development finance institutions:


Dr Judith Tyson

I am a Research Associate at the ODI and a specialist in private finance for development and financial development. I have engaged with BII as an independent researcher, as an advisor on their most 2022-2026 strategy and as an ICAI team leader and subject matter expert in three relevant reviews. I hold a doctorate from SOAS. I have also acted as advisor to FSDA and as coinvestigator on ERSC-funded research programmes as well as numerous research and policy advisory work at the ODI where I have worked since 2014. This evidence is submitted in a personal capacity.


I wish to comment specifically on BII’s work with financial intermediaries as a complementary ‘deep dive’ to the excellent current oral and written evidence already provided to the IDC.

Financial services[1] compose 34% of BII’s 2021 portfolio and 26% of its 2021 commitments. The sector is its largest sector by portfolio and the second largest (after infrastructure) for 2021 commitments. As such the impact of these financial service investments are crucial to BII’s overall impact and returns.

However, these are important criticisms of BII’s approach in the sector as follows;


BIIs largest investments are concentrated in broad-based financial conglomerates which lack clear financial additionality and don’t predominantly serve poor households.


BII continue to invest in microfinance-dedicated financial institutions despite substantial evidence that microfinance only delivers ‘small’ long-run impact for wages and consumption, has ‘failed’ to deliver transformation impact on economic growth and only delivers short-term poverty alleviation under limited circumstances. [2]


BII have a confused theory of change in relation to its financial intermediaries that does not adequately reflect evidence in relation to financial development, economic transformation and poverty alleviation.


[1] Last published data for 2021


[2] Jing Cai, Muhammad Meki, Simon Quinn, Erica Field, Cynthia Kinnan, Jonathan Morduch, Jonathan de Quidt, and Farah Said, “Microfinance”, VoxDevLit, 3(2), March, 2023