CDC’s investments in low income and fragile states

We are conducting a performance review of CDC – the UK’s development finance institution, wholly owned by the UK government – focusing on how effectively CDC has adapted its strategy and operations to help meet DFID’s economic development priorities and drive growth in low-income and fragile states.


CDC is the primary vehicle through which DFID invests development capital and plays a key role within DFID’s Economic Development Strategy. It aims to “support the building of businesses throughout Africa and South Asia, to create jobs and make a lasting difference to people’s lives in some of the world’s poorest places”.

CDC invests capital in businesses either directly (by investing equity or providing loans and other debt finance) or indirectly (by investing through commercial funds), through a structured process of investment selection and portfolio management seeking to generate both positive development impacts and a financial return. Financial returns are then recycled into new investments.

There have been significant and ongoing shifts in CDC’s approach over the period covered by this review. CDC’s net assets more than doubled over the period 2006-16 to £4.8 billion. A significant new capital injection of £735 million was received from DFID in 2015 – the first investment in CDC in 20 years. Since 2012, CDC has sought to better align its portfolio of investments with DFID’s priorities. It has increased its focus on Africa and South Asia, particularly in low-income and fragile states where the private sector is weaker and financial risks are greater. CDC’s net assets are set to increase further, to above £8 billion by 2021, as a result of earnings and additional capital commitments from DFID.


ICAI has decided to conduct a performance review of CDC’s investment activities. The review will look at whether CDC’s investments are achieving their intended development impact, including meeting social and environmental goals, while still delivering an overall financial return on its portfolio. It will generate lessons for DFID and CDC, which will inform CDC’s ongoing scale-up and greater focus on development impact.

The review will cover a sample of the 345 new investments made in companies since 2012, with a particular focus on CDC’s progress in building its portfolio in more difficult investment markets. The review will also consider CDC’s piloting of higher-risk investment strategies designed to maximise development impact. The review will cover both direct investments in companies and investments through intermediary funds. This review will complement previous reviews of CDC.

Review questions

Through a combination of a literature review, corporate and investment team reviews and country case studies this ICAI review will assess the following questions:

  • Does CDC have a credible approach to achieving development impact and financial returns in low-income and fragile states?
  • How effective are CDC’s investments in low-income and fragile states?
  • How well does CDC learn and innovate?

Approach paper

For more information read the full approach paper:

ICAI approach paper – CDC’s investments in low income and fragile states