A development finance institution (DFI) or development bank or development finance company (DFC) is a financial institution that provides risk capital for economic development projects. They are often established by governments or charitable institutions to provide funds to projects that would otherwise not be able to get funds from commercial lenders. Some development banks include socially responsible investing and impact investing criteria into their mandates. Governments often use development banks to form part of their development aid.
DFIs can include multilateral development banks, bilateral development banks, microfinance institutions, community development financial institutions and revolving loan funds. These institutions provide a crucial role in providing credit in the form of higher risk loans, equity positions and risk guarantee instruments to private sector investments in developing countries. DFIs are typically backed by countries with developed economies.
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