5 Ways the U.S. Should Retain and Upgrade America’s Development Finance Corporation (DFC)

Congress would be smart to ensure the survival and reform of the U.S. International Development Finance Corporation (DFC) – America’s development bank that invests in private sector projects in developing countries. Washington relies on the DFC, established in 2019 to counter China’s Belt and Road Initiative, to invest in projects that secure American supply chains, establish critical infrastructure in allies, and leverage economic ties to build lasting partnerships. However, the DFC’s congressional authorization expired on October 6, 2025. Renewing this authorization and reforming the DFC are critical steps towards protecting U.S. national security interests.

Here are five measures that Congress should take to leverage and strengthen the DFC:

1. Congress should ensure that the DFC’s work continues.

The single most important step Congress should take is to ensure the DFC’s continued operations. Between 2013 and 2021, China outcompeted the United States in infrastructure financing provision to the developing world by almost nine times, providing $679 billion to America’s $76 billion. Empowering the DFC is the only way the United States can currently compete. Without the DFC, a financing void would emerge that partners would turn to China to fill — simultaneously destroying trust with emerging partners that would take years to rebuild. In the absence of the U.S. Agency for International Development (USAID), the DFC’s role in supporting the developing world is particularly crucial.

2. Congress should make sure DFC funding advances U.S. national security interests.

Congress founded the DFC as a development organization, putting economic growth and prosperity at the core of its mission. However, U.S. financing should serve strategic priorities while simultaneously improving quality of life in developing areas. Though the DFC mission statement links development to U.S. foreign policy and national security aims, national security relevance is not a formal eligibility criterion for DFC funding recipients. Congress should make it one, prioritizing investments that secure U.S. access to critical minerals, diversify American supply chains, expand American port access, and support allied technologies.

3. Congress should provide the DFC flexibility to operate in middle-income countries.

The DFC rightly focuses on investing in poorer countries, but current restrictions limit engagement in middle-income countries where U.S. security interests are often at stake. Investment in projects in Romania, Colombia, and Kazakhstan (all considered upper-middle-income countries) could aid important U.S. strategic priorities while still generating economic benefits and poverty reduction. The United States would benefit from increasing DFC flexibility to consider project utility on a case-by-case basis.

4. Congress should raise DFC’s caps on lending.

The DFC can invest no more than $3 billion on any project and a maximum of $60 billion across its total portfolio. Both caps hobble U.S. priorities. The project-specific cap blocks the DFC from competing with China to invest in some high-impact, long-term investments, such as infrastructure construction. China’s Exim Bank, for example, has invested more than $5 billion in U.S. ally Kenya’s Standard Gauge Railway — an investment the U.S. cannot match. Meanwhile, the $60 billion overarching cap forces the DFC to turn away promising investments. Particularly jarring, the DFC inherited projects, such as a loan from its predecessor organization, the Overseas Private Investment Corporation, that already would cost approximately half of that cap. For instance, DFC inherited $250 million in loans to South African financial institutions.

5. Congress should reform DFC investment risk scoring.

The DFC has authority to make two kinds of investments: loans, which require repayment, and equities, which purchase shares in a project. The DFC must hold cash to cover potential losses in a bad investment. For a loan, the DFC holds cash proportionate to the risk that the loan will not be repaid. For equities, however, the DFC needs to hold the entire amount of the investment. As a result, DFC has made very few equity transactions. This system falsely presupposes a lack of return on any equity investment. In reality, successful equities investments earn a portion of the projects’ profits. Thus, DFC budgets ought to reflect their potential reward as well as their costs.

Elaine Dezenski is the senior director and head of the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD), where Daniel Swift is a senior research analyst. For more analysis from the authors and FDD, please subscribe HERE. Follow Elaine on X @ElaineDezenski. Follow FDD on X @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.