PI2 Report Reveals DFC’s Ability to Deploy Catalytic Capital–
Lori Leonard Takes Questions About DFC’s Most Recent Portfolio Assessment

4 min readMay 14, 2024

DFC is pleased to announce the completion of an independent assessment of DFC’s Portfolio for Impact and Innovation (PI2) across the dimensions of financial risk, return, and development impact, conducted by Dalberg Advisors (Dalberg). Lori Leonard, DFC’s Director of Evaluation and Collaborative Learning, recently unpacked some of the study’s most significant findings.

What makes the Dalberg Report on PI2 so interesting?

DFC’s PI2 program invests in innovative, early-stage projects that have high-impact potential and operate in challenging environments. We know these projects can be incredibly impactful but because of the risks and obstacles, many DFIs and return-seeking investors overlook these types of projects.

This study shows that DFC is tackling this important and challenging work head-on and that we are delivering results.

One important aspect of the study is that in addition to flexible payment terms established at the project’s origination, DFC staff provides significant support and flexibility over the life of the loan. This patient capital enabled many of these companies to withstand the unexpected events that occurred over the past 10 years, including a global pandemic and political upheavals. The study showed just how much support these early stage, highly innovative projects require, but that these efforts helped catalyze capital, which, in turn, helped to drive high levels of development impact.

For instance, more than half (57%) of PI2 projects in the sample scored in DFC’s two highest-development classifications — ‘Highly Impactful’ and ‘Exceptionally Impactful,’ as assessed by DFC’s impact management framework, Impact Quotient (IQ). These are pioneering companies that often serve the lowest income populations, addressing some of their greatest needs.

This report shows that in addition to the developmental impact, the sample PI2 portfolio has also delivered small, but positive financial return for DFC. Yes, there are costs to DFC in managing this portfolio and setting these companies up for success. But this is where we can fill a gap in the market and where we can often do the greatest good.

What did DFC do differently to support the success of the projects?

We screen carefully to select the right kinds of projects. As part of the process, we integrate the potential for high developmental impact, combined with DFC’s additionality, into the value proposition of the project. And we have put in place a streamlined approval process that aligns with the relatively small size of these loans.

Since we are looking to drive impact in some risky environments, we know that not every project will be a success. The Dalberg Report looked into these failures, and they teach us a lot too.

Even for projects that have proven successful, sometimes a longer grace period was needed to grow their companies. Sometimes, there were political changes or market fluctuations that get projects stuck on their feet. Just consider that every one of these companies had to grapple with and adjust to a global pandemic.

This study demonstrates how DFC supports companies in these kinds of risky environments through the lifecycle of a loan and that our support makes a difference. In addition to the flexible financing terms, DFC strengthens these companies by instilling high standards for governance and for environmental and social factors, helping to make these companies attractive to other investors. That’s what it means to be catalytic.

What message do you think DFC’s work with PI2 sends the larger development finance community?

I think the Dalberg Report shows that impact investors can be successful in some of the most challenging environments by taking smart risks and a patient approach. With proper support, this can be a formula for enabling companies to attract additional capital and achieve high impact.

Because Dalberg looked at nearly two dozen projects that had at least 10 years to mature and spanned several critical sectors, we can begin to unpack what kind of structures and tools have broader potential in successfully serving low-income populations and operating in challenging markets. We can look at what kinds of structures work most effectively and when there are critical inflection points for an enterprise, which may help to inform effective interventions.

It is hard to demonstrate that ability with one project or even a small group of projects. There are too many complex threads to untangle. It is also hard to demonstrate a catalytic effect without a long enough time horizon. The Dalberg Report provides us some initial evidence and recommendations on how we can continue evaluating DFC’s ability to balance financial risk, return, and impact as the PI2 portfolio grows and matures.

What is your greatest takeaway from the Dalberg Report and more broadly, from PI2?

What makes PI2 so interesting is that this began as a grassroots program, developed by investment officers at OPIC — DFC’s predecessor agency — and supported by OPIC leadership more than 10 years ago. There are all sorts of ways we could have leaned in on risk, but the PI2 program has proven successful because of a number of individuals from DFC and OPIC across a decade who were committed to challenging themselves and our clients to learn along the way. And the Dalberg Report is an important part of that learning. It is by no means an end. It represents a beginning. The report provides initial proof points for how we can drive impact and spur innovation — learning that will have its greatest value in how it informs what we do for the future.




U.S. International Development Finance Corporation. Investing in development and advancing U.S. foreign policy. Twitter: @DFCgov