The US Senate passed legislation to create a new US development bank on 26 September, bringing the process one step closer to being law. The Better Utilization of Investments Leading to Development (Build) Act will establish a development finance institution with a $60bn lending cap.
The bill now needs a to be signed into law by president Donald Trump. The White House has issued statements of support for the creation of the International Development Finance Corporation.
The legislation aims to modernise the US approach to development finance by “facilitat[ing] the participation of private sector capital and skills in the economic development of countries with low- or lower-middle-income economies”. It will roll several government agencies into a single, larger development bank. It will more than double the lending cap of the agency that currently fills this function, the Overseas Private Investment Corporation (Opic), while granting it the power to take equity stakes and a seven-year re-authorisation period.
Sponsors hope the legislation will streamline US “foreign aid vehicles so we can help countries improve their infrastructures to develop their economies, and create strong bilateral trading partners. The ultimate goal is to transition countries from aid to trade efficiently and effectively,” says Ted Yoho, a Republican congressman from Florida.
Countering China’s growing global influence is a key concern among US lawmakers. China has invested heavily in development across Asia, Africa and Latin America through infrastructure initiatives such as the Belt and Road project. “At a time when China is investing heavily in emerging markets under a state-directed model, the US model offers an alternative for advancing development in a manner that is financially sound, adheres to high standards and avoids debt traps,” said Opic president Ray Washburne.