The UK has long been at the forefront of overseas development assistance, being the first country to launch a development finance institution. With overseas aid contracting among many of its economic peers, Britain’s DFI is focusing its new five-year strategy on private capital mobilization for emerging economies.
To do that, British International Investment is promising to do what many DFIs are reluctant to: take more risk.
“The structuring of deals, the technical financial engineering is now what we are using to enable this mobilization effort,” BII’s Leslie Maasdorp tells ImpactAlpha. “The risks are still there. We are just willing to take more risk [than private investors].”
Between 2026 and 2031, BII aims to drive £15 billion ($20 billion) of new investment capital into emerging markets. Just over half – £8 billion – will come from BII directly. The other £7 billion is its target goal from insurers, pension funds and asset managers.
The target represents about a 40% increase from the previous five-year period.
BII will direct 40% of its capital to climate opportunities, including via the new £1.1 billion British Climate Partners, an entity that will funnel climate transition capital to coal-reliant countries in Asia, like India and Vietnam.
It also plans to direct 30% to gender-focused opportunities and at least 25% to the least developed countries, such as Sudan and Cambodia, which are largely shunned by commercial investors for their perceived lack of opportunity and steep risk.
“The next five years will be about working hand in glove with these large institutions,” says Maasdorp, who has led BII since 2024. “We know these markets much better than [institutional investors]. We have people on the ground. We have a pipeline of investments that we can put in front of them.”
Strategic evolution
The organization’s increased focus on mobilizing outside capital stems partly from the UK’s own cuts to overseas assistance. Last year, amid budget constraints and increased defense spending, the UK government cut its development aid budget to its lowest level since 2008. The government has been moving more overseas development funding to an investment-centered approach over aid.
“We are modernizing our approach to development to have the greatest impact abroad and secure the best value for money for taxpayers at home,” Jenny Chapman, the UK minister of state for international development and Africa told the UK Parliament.
BII has received more than £5 billion ($6.8 billion) from the British government since 2015. Its investees have supported more than a million jobs and paid $2.5 billion in taxes to local governments in 2024, Chapman said.
The latest strategic refresh follows a long history of development finance makeovers in the UK. The British government launched what is now BII in the aftermath of World War II. The Colonial Development Corporation invested in UK business interests within its colonial territories. One of its earliest investments was a cement producer in Zambia that supported the construction of the Kariba Dam on the Zambezi River.
The organization changed its name to Commonwealth Development Corp., or CDC, in 1963, and then to British International Investment in 2022.
CDC/BII’s experiment with “private capital mobilization” began more than 30 years ago. One of its first catalytic investments was the creation of the Ghana Venture Capital Fund in 1992, which was designed to attract investors to private sector opportunities in the country. In 2023, BII set up Growth Investment Partners to mobilize local institutional capital for Ghanaian businesses (Ghana also has a strong and growing ecosystem of local fund managers focused on local capitalization mobilization, including Ci-Gaba fund of fund and Mirepa Capital).
The organization 12 years ago launched a dedicated catalytic capital portfolio, Catalyst, that could take on greater risk in the interest of deepening its impact and cushioning other investors’ engagement in unfamiliar markets and sectors. The portfolio accounts for about 20% of BII’s total investments.
About four years ago, BII went deeper with Kinetic, a program that is even more flexible and can take even more risk than Catalyst. It has since launched two thematic Kinetic facilities: one that makes concessional investments in climate opportunities and another that uses first-loss capital or guarantees to catalyze institutional capital for more mature emerging market opportunities. The model for the latter, its Mobilization Facility, was the $1.1 billion SDG Loan Fund from German insurer Allianz that leveraged first-loss capital and guarantees from FMO, the Dutch DFI, and the MacArthur Foundation.
BII’s more recent experiments in private capital mobilization have also covered building and exiting renewable energy startups from scratch, scalable green lending for small businesses, simplified blended finance templates, and secondary transactions that juice liquidity and exits.
In January, BII and several other DFIs contributed $150 million in concessionary financing to anchor Allianz’s Credit Emerging Markets fund, a blended finance debt fund for climate-related services and infrastructure in emerging markets. The fund has raised a least $540 million more from institutional investors including Allianz SE and Swiss pension fund GastroSocial Pensionskasse.
Defending the record
BII’s strategic evolution hasn’t come without setbacks and criticism. DFIs and multilateral development banks, which invest public money, have been in the hot seat for a lack of transparency around portfolio and impact performance.
Indeed, last week as BII was announcing its new five-year strategy, the UK network for development NGOs Bond, released a report claiming that $640 million of BII’s investments went to “billionaire-owned companies” developing luxury hotels, fossil fuel-based fertilizer and dual fuel power plants.
“The numbers that they have quoted to frame their narrative are wrong, so therefore they have come up with the wrong conclusions,” Maasdorp counters.
In an email to ImpactAlpha addressing the claims, a BII spokesman denied that the organization was an active investor in “luxury hotels”; instead, it noted a single historic investment in a mid-market hospitality business that had created “a significant number of new jobs for developments that have boosted tourism numbers and acted as a boost to wider economic growth in West African regions.”
The email also called Bond’s claim that BII commits just 14% of its portfolio to the world’s least developed countries “wrong”; its exposure to these markets is about 20%, he wrote. Emily Loynes at Bond countered that Bond’s figure may have differed because it excluded multi-country investments. It was “the most credible number we can reach using publicly available data,” she added.
Maasdorp argues that development finance is in deep need of a fresh approach. The traditional approach, he says, “is no longer fit for purpose” and “not sustainable in the long term,” and DFIs often “don’t work in a harmonized, coordinated way.”
Maasdorp cited the sudden shutdown of USAID last year by US President Donald Trump, which exposed deeply entrenched dependency on foreign aid in frontier markets like Malawi and Zimbabwe.
“You should never have a situation where a dependency, such as the AIDS program stops. Literally hundreds of thousands of people were projected to die from the fact that the program was terminated,” Maasdorp says.
In other markets, like Burundi or the Democratic Republic of the Congo, it’s not uncommon to see DFIs, multilateral development banks and philanthropists running parallel programs on the ground that have led to “coordination failures,” Maasdorp says.
The hope for capital mobilization efforts from BII and other DFIs, he adds, is to drive greater local ownership and agency. “Foreign players can, at best, complement, reinforce and support.”
