Module 8 · Development & Grant Finance · Lesson 2
DFI acronyms and terms defined
Reading the acronyms
Three things are worth holding on to before the index. First, domestic institutions are shaped by national policy, multilaterals by shared ownership, and bilaterals by a single foreign government’s priorities, which is why two funders with similar names can want very different things. Second, a name that sounds like a bank may be a fund, an agency or an asset manager: the PIC, for example, is not a development finance institution in the strict sense. Third, small-business support in South Africa was reorganised in 2024, so older documents may still cite SEDA and SEFA separately.
For the concept behind these names, start with what is development finance.
Index of institutions and acronyms
- AfDB
- African Development Bank. A multilateral development bank owned by African and non-African member countries, lending to governments and to the private sector across the continent.
- BII
- British International Investment. The United Kingdom's development finance institution, formerly known as CDC Group, which invests debt and equity in businesses in Africa and Asia.
- DBSA
- Development Bank of Southern Africa. A South African state-owned development finance institution focused mainly on infrastructure in southern Africa.
- DEG
- Deutsche Investitions- und Entwicklungsgesellschaft. Germany's development finance institution for private-sector investment, part of the KfW group.
- DFC
- United States International Development Finance Corporation. The US government's development finance institution, which provides financing and political-risk insurance for private investment abroad.
- DFI
- Development finance institution. An institution established to provide finance that advances development objectives, usually owned by one or more governments.
- FMO
- The Dutch entrepreneurial development bank, which invests in private-sector businesses in emerging markets.
- IDC
- Industrial Development Corporation. A South African state-owned development finance institution that funds industrial and productive-sector projects through loans, equity and hybrid instruments.
- IFC
- International Finance Corporation. The member of the World Bank Group that invests in private-sector businesses in developing countries.
- Land Bank
- Land and Agricultural Development Bank of South Africa. A state-owned development finance institution serving the agricultural sector.
- NEF
- National Empowerment Fund. A South African state-owned institution that funds businesses in support of black economic participation and empowerment.
- NHFC
- National Housing Finance Corporation. A South African development finance institution focused on affordable housing finance.
- PIC
- Public Investment Corporation. A South African asset manager that invests mainly on behalf of public-sector pension funds, notably the Government Employees Pension Fund. It makes development-oriented investments but is not a development finance institution in the strict sense.
- Proparco
- The French development finance institution focused on private-sector investment in developing countries, part of the Agence Francaise de Developpement group.
- SEDA
- Small Enterprise Development Agency. The South African agency that historically provided non-financial support to small businesses; its functions now sit within SEDFA.
- SEDFA
- Small Enterprise Development and Finance Agency. The South African small-business agency formed in October 2024 by the consolidation of SEDA and SEFA.
- SEFA
- Small Enterprise Finance Agency. The South African development finance agency that historically provided loans and guarantees to small businesses; now part of SEDFA.
Index of terms
- Additionality
- The test of whether a development funder adds something the market would not: financing a project that would otherwise not proceed, or on terms a commercial funder would not offer.
- Blended finance
- The use of concessional or catalytic capital, usually public or philanthropic, alongside commercial capital so that a transaction meets commercial investors' risk and return requirements.
- Catalytic capital
- Capital that accepts higher risk or a lower return than the market would, in order to make other investment possible.
- Co-financing
- A financing in which two or more lenders or investors fund the same project under coordinated terms, common where a development institution participates alongside commercial lenders.
- Concessional finance
- Finance repaid on terms more generous than the market would offer for the same risk, through a lower rate, longer tenor, grace period, subordination or reduced collateral.
- Crowding in
- The effect of public or concessional capital attracting commercial capital that would not otherwise have participated.
- Development impact
- The measured economic or social outcome a development funder seeks, such as jobs created, ownership broadened or access to services extended.
- First-loss capital
- A subordinated layer in a financing that absorbs losses before other participants are affected.
- Grace period
- A period at the start of a loan during which repayment of principal, and sometimes interest, is deferred.
- Grant
- Funding that is not repaid, usually tied to conditions or milestones and sometimes reclaimable if those conditions are breached.
- Guarantee
- A commitment by a creditworthy party to cover part of a lender's loss if a borrower defaults.
- Local-currency lending
- Lending denominated in the borrower's own currency, which removes the exchange-rate risk that hard-currency loans place on businesses earning local revenue.
- Mandate
- The objectives, sectors, geographies and limits set out in a funder's legislation, charter or fund agreement, which define what it may finance.
- Minimum concessionality
- The principle that a blended structure should use only as much concessional support as is needed to make a transaction viable.
- Patient capital
- Capital provided with a long time horizon and tolerance for slow or uncertain returns.
- Technical assistance
- Grant-funded support for preparation, structuring or capacity building, rather than for the investment itself.
- Tranche
- One portion of a financing, released or ranked separately from the others.
Terms that belong to lending generally, such as covenants, security and tenor, are defined in debt terms defined. How several of the terms above combine in one transaction is shown in blended finance structures.
Questions, answered
What is the difference between a DFI and a multilateral development bank?
A DFI is any institution set up to provide development-oriented finance, and many are owned by a single government. A multilateral development bank is a particular type, owned by many countries together, such as the African Development Bank.
Is the PIC a development finance institution?
Not strictly. The Public Investment Corporation is an asset manager that invests largely on behalf of the Government Employees Pension Fund. It makes development-oriented investments, but its mandate is managing pension assets rather than providing development finance itself.
What did SEDFA replace?
SEDFA was formed in October 2024 through the consolidation of the Small Enterprise Development Agency (SEDA) and the Small Enterprise Finance Agency (SEFA) into a single small-business agency. Older documents may still refer to the two separately.
What is the difference between a guarantee and first-loss capital?
First-loss capital is money placed in a structure that absorbs losses before other participants. A guarantee is a commitment to cover a lender's loss up to an agreed limit, and it does not require the money to be paid in advance.