What DFIs Ask After They Like Your Impact Case

Development finance institutions do not fund impact claims in isolation. The projects that reach approval are those that turn an impact ambition into documented, risk-controlled and commercially credible evidence.

In July 2026, the head of the International Finance Corporation’s independent accountability mechanism resigned.

The immediate cause was Cambodia. The Compliance Advisor Ombudsman, known as the CAO, had produced a scathing report on IFC-backed microfinance investments in the country. It found violations of safeguard policies connected to aggressive debt collection. The IFC board rejected the findings. The CAO head then stepped down, according to the International Consortium of Investigative Journalists.

It is an uncomfortable opening to a story about DFI funding requirements. Cambodia was not a case of a project failing to describe its social purpose. Microfinance is commonly presented as a way to widen access to credit. The rupture was over something more basic: whether the institution’s safeguards worked when the consequences became difficult.

That raises the question sponsors often meet too late. What does a development finance institution, or DFI, actually fund?

The easy answer is impact. The harder, truer answer is impact that can survive contact with money, risk, local law, governance and scrutiny.

The first gate is not the real gate

The popular picture of development finance is simple. A business operates in an eligible market. It promises cleaner energy, more housing, or greater access to finance. A DFI supplies patient capital because ordinary lenders have stayed away.

That is mandate fit. It matters.

But it is only the first gate.

The second gate is whether the project is bankable. In plain English, can it be financed and operated without requiring the funder to overlook risks that have not been understood or controlled? Can it show how money comes in, who makes decisions, how suppliers are chosen, how environmental and social harm is prevented, and why DFI money is genuinely needed?

That final question is called additionality: proof that the DFI changes what is possible, rather than simply replacing money that would have arrived anyway.

This is where most people stop looking.

A project can be urgently needed and still be unready. A housing development can help families but sit on unclear land. A lending programme can expand access to finance yet expose borrowers to harmful treatment. A renewable-energy proposal can be climate-positive while lacking the site work, feasibility analysis and environmental and social assessment needed before construction finance makes sense.

For a related warning about why a nearly complete file can still fail, read the data room was 95% done. The lenders still would not fund.

Corporación Dinant. Photo: Gustavo Bueso / Wikimedia Commons, CC BY-SA 2.0.

Cambodia was not an isolated warning

The Cambodia case matters because it punctures a reassuring belief: that a recognised institution’s policies automatically protect the people affected by its investments.

They do not.

The IFC, the World Bank Group institution that invests in private-sector projects, had safeguard policies. The CAO existed to investigate complaints. Yet the dispute reached the point where the watchdog’s findings were rejected by the IFC board and its leader resigned.

For a sponsor, this is not merely a story about institutional politics. It is a diligence lesson. A policy document is not a control. A control is something that works in real decisions, is recorded, is checked, and still functions when a problem is inconvenient.

The IFC case involving Ficohsa, a Honduran bank, shows why this matters before, not after, money moves. IFC made a $70 million investment in Ficohsa in 2011. A 2025 CAO compliance report found that IFC had not asked sufficiently searching environmental, social and integrity questions about Ficohsa’s exposure to Corporación Dinant, a Honduran company whose owner had a record of land-rights violence.

The Honduran intermediary case shows why diligence must follow risks beyond the immediate borrower. Photo: FICOHSA / Wikimedia Commons, Public domain.

The financing went to a bank. The meaningful risk reached beyond it.

Here is the twist: diligence fails not only when someone ignores a risk. It also fails when they stop following the risk too early. Sponsors often draw the project boundary around their own company. Investors follow the money, the contracts and the consequences further out.

That is why governance, procurement and safeguards are not a compliance appendix to the impact story. They are the machinery that makes the story believable.

Twenty-nine good ideas that could not get past the paperwork

In Kenya, the obstacle was not a failure inside a DFI. It was the environment around the deal.

International Housing Solutions, a fund seeking to deliver €85 million of affordable housing in Kenya, reviewed more than 50 proposed projects around Nairobi over two years. Together, they represented about 3,000 potential homes.

Twenty-nine proposals were rejected.

The reason was not that Kenya lacked a housing need. The Centre for Affordable Housing Finance in Africa’s 2023 practice note found legal, land, environmental, social and market due-diligence failures among the rejected proposals. Unclear land titles and regulatory difficulties kept appearing.

This is where the language of “good projects” starts to mislead. The proposed homes may have addressed a real need. The sponsors may have been serious. Yet a fund manager could not make unclear title disappear by admiring the social case.

At first glance, that seems harsh. DFIs and impact funds are supposed to operate where markets are difficult. Why reject projects because the conditions are difficult?

Because difficult is not the same as unpriceable.

Put Kenya, Honduras and Cambodia side by side and a pattern appears that none of the reports says outright. In Kenya, risk sat in the land and regulatory setting. In Honduras, the weakness was the depth of investigation. In Cambodia, it was accountability after the investment. Different sectors. Different countries. The same missing link: no one can safely rely on an impact claim if the commercial, governance and safeguard chains do not hold together.

The grant that did more than the loan

The strongest counterpoint comes from work that is barely visible in a funding announcement.

The Seed Capital Assistance Facility, a project-preparation facility operating across Africa and Asia, funded early-stage development work: identifying sites, conducting feasibility studies, completing environmental and social assessments, and building the capacity to take projects forward.

That may sound like preamble. It was the investment.

As of February 2026, $2.8 million of SCAF’s SL2 support had helped develop 299 MW of renewable energy and mobilised $313 million, reported as 112 times leverage. SCAF II deployed $11 million to build project pipelines and capabilities, helping raise $1.1 billion from private investors and DFIs, reported as 100 times leverage.

The interesting part is not the multiplier. Funding announcements are full of impressive multipliers, a problem explored in The Most Dangerous Number in a Funding Announcement.

It is what SCAF paid for before the larger sums arrived.

It paid to turn a promise into evidence another investor could inspect. Where is the site? What might derail it? Have environmental and social effects been assessed? Does the sponsor have the capacity to deliver? Those are not administrative chores. They are the work that converts a worthy ambition into a decision a credit or investment committee can defend.

Imagine two renewable-energy sponsors with identical climate claims. One has a presentation. The other has feasibility work, site evidence and assessed risks. The second sponsor has not made the project risk-free. They have made its uncertainty visible.

That is often what catalytic capital really does. It does not buy certainty. It buys the evidence needed to decide which risks can be carried, by whom, and on what terms.

When the structure does the hard work

The evidence does not say that complicated projects cannot work. It says the complication must be dealt with openly.

The Asian Development Bank’s Monsoon project succeeded during COVID-19 through a complex syndicated financing, meaning several lenders participated in one coordinated transaction. The ADB account describes concessional finance, reserve structures and active coordination as central to the outcome. It identifies the project as being in Asia, but does not specify its country or sector in the research available here.

That limitation matters. We cannot pretend Monsoon offers a sector-specific blueprint for a Kenyan housing sponsor or a Cambodian lender. Its operational lesson is narrower and more useful: its risks were not wished away. ADB used cheaper or more flexible finance, reserves set aside for defined stresses, and coordination among participating funders to allocate them.

ADB's Monsoon transaction shows how precise risk-sharing can make difficult financing possible. Photo: Eugene Alvin Villar (seav) / Wikimedia Commons, CC BY-SA 4.0.

In Peru, IFC’s $50 million loan to Cálidda, a Peruvian company working to improve energy access, mobilised a further $35 million in private capital, according to the World Bank Group’s Independent Evaluation Group.

Cálidda matters for more than the $35 million figure. The transaction showed private capital joining a DFI-backed energy-access financing rather than waiting for the public institution to carry the entire burden. That is the point of mobilisation: not money following an impact slogan, but a structure that gives other funders a reason to participate.

These cases do not weaken the central argument. They confirm it. DFI capital is most powerful when it has a precise job: pay for preparation, absorb a defined risk, support reserves, coordinate a difficult financing, or create the conditions under which private money can join.

What it cannot reliably do is erase unresolved land rights, weak oversight or an unproven route to revenues.

GI Network's view: The question is not “Is this impactful enough for a DFI?” It is “Which specific risk does DFI involvement solve, and can every remaining risk be evidenced, allocated and monitored?”

Build for the committee, not the pitch

For founders and project sponsors, the practical shift is uncomfortable but liberating. Stop treating impact, finance and compliance as separate workstreams to be stitched together shortly before fundraising.

Start with the project boundary. What depends on land, licences, regulation, suppliers, intermediaries or local institutions? The Kenya rejections show that many fatal risks sit outside the company. Name them early, before a funder spends months finding them.

Next, make the commercial story testable. Explain where cash comes from, what it depends on, and what happens if conditions turn. The evidence does not offer a universal ratio or revenue threshold. Nor should sponsors hunt for one as though it were a password. The real test is whether a sceptical committee can understand the assumptions and see how the project withstands pressure.

Then make governance inspectable. Keep decision records. Keep procurement documentation. Assign responsibility. Show how environmental and social commitments are monitored in operations, not simply stated in a policy. Cambodia and Ficohsa are warnings against mistaking institutional branding for working oversight.

Finally, write the additionality case as if someone wants to disprove it. What will private capital fund today? What will it not fund? What exact DFI intervention changes that answer? SCAF, Monsoon and Cálidda all point to the same discipline: specify the blockage, then specify the instrument that removes it.

GI Network would pressure-test that integrated case before investor outreach: map land, governance, safeguard and commercial weaknesses; test whether projected cash flows can be underwritten; align the documents with likely DFI requirements; and rehearse the investment-committee objections around additionality and private-capital mobilisation. The objective is not a more decorative pitch. It is a transaction structure that can survive scrutiny.

What experienced capital notices first

Investors are often less impressed by a headline impact claim than first-time sponsors expect. That is not cynicism. It is memory.

They have seen strong housing cases stopped by title uncertainty. They have seen a safeguard policy fail in practice. They have seen a claimed funding gap remain vague because nobody identified the precise risk behind it.

Experienced capital therefore looks for the missing connection. Does DFI involvement have a specific purpose rather than a decorative one? Are the risks allocated to parties capable of carrying them? Are controls usable after signing? Can private investors join once the right barrier is removed?

That is why the deal may not die in the pitch. It dies when someone must defend every assumption in the investment committee memo. The deal doesn’t die in the pitch, it dies in the IC memo is a useful companion to this point.

The central misconception is that DFI capital rewards goodness. It rewards credible change under constraints. Goodness may get the meeting. Proof of controlled, additional and financeable change gets the decision.

The Two-Gate Test

Before pursuing a DFI, use the Two-Gate Test.

Gate one: mandate fit. Is the project in a relevant market or sector? Is the intended development outcome clear? Can the sponsor articulate why it matters?

Gate two: integrated bankability. Can the project demonstrate five things together?

1. 1.A commercial spine: a credible route to repayment or returns under real operating conditions.
2. 2.A controlled setting: land, legal, regulatory and market risks identified, especially those beyond the sponsor’s direct control.
3. 3.Working safeguards: environmental, social, governance and procurement controls that are documented and usable in practice.
4. 4.A truthful additionality case: a specific explanation of why DFI intervention is needed.
5. 5.A mobilisation route: a believable account of what preparation, risk-sharing or transaction structure will allow private capital to do next.

Fail the first gate and the project is outside the mandate. Fail the second and it may be impactful, eligible and still unfundable.

That is not a verdict on the project’s social value. It is an instruction about the work still left to do.