Bi- and multilateral DFIs in many ways represent a third pillar in international development cooperation, along with bilateral and multilateral aid. The three channels of the development system are complementary and together support development. However, the DFIs constitute the channel that contributes most directly to economic growth and development by boosting the private sector and thereby increasing economic activity, spurring job creation, and reducing the developing countries dependence on development aid.
An important distinction between traditional aid, illustrated by the first pillar in the diagram below, and official development assistance through DFIs, is that DFIs don’t give away the fund, they invest in commercial enterprises. This means that the funds used will be returned to the DFI and can either be given back to the donor country’s Government or reused to finance new projects. In other words, DFIs represent a sustainable way of using development assistance funds in which the same funds can be used over and over again.
Norfund is a member of European Development Finance Institutions (EDFI), an organization for cooperation between the 16 European DFIs. Through EDFI, the organizations share their knowledge about topics of common interest and collect statistics. The effects of this cooperation include the development of a common set of legal agreements and the establishment of indicators of development effects.