2018 Economic Development Evaluation

DFIs and Development Impact: an Evaluation of Swedfund

Stephen Spratt, Peter O'Flynn, Justin Flynn

Investments in companies to achieve developmental effects are becoming increasingly important in development cooperation. Swedfund, the Development Finance Institution of the Swedish state, has the task of investing in poor countries through equity acquisitions in individual companies, through funds or through lending.

In this EBA report Swedfund is evaluated for the first time in a decade. The authors investigate if recent investments have helped to reduce poverty.

The report was presented during the seminar Swedfund, DFIs and development impact.

The study finds some indications of this and provide a number of recommendations for how positive effects can be enhanced further.


  • Swedfund should focus on a small number of core impact objectives, and design as few indicators as possible to track these impacts. Two such core impact objectives are paid taxes and employment in the companies in which they invest.
  • Swedfund should strengthen its focus on low-income countries and the sectors with the greatest development.

To cope with the enhanced investment risk this entails the researchers propose two alternative strategies:

  1. Swedfund becomes a more specialist DFI focusing on high-risk/high-impact investments, but accepts that this will increase losses in the portfolio, and require regular capital injections from government to support this.
  2. Swedfund expands and develops a more diversified portfolio to mitigate risk. This would enable the focus on high-risk/impact investments to continue within the context of a more diversified portfolio. While this would make it possible retain financial self-sufficiency, it would require a large, one-off capital injection.

Stephen Spratt, Research Fellow and Leader of the Green Transformations Cluster at the Institute of Development Studies

Peter O’Flynn, Researcher at the Institute of Development Studies

Justin Flynn, Research Officer and current Doctoral Researcher at the Institute of Development Studies