“OPIC’s
approach to international development is effective and efficient:
Effective because we operate with commercial discipline, and
efficient because we generate income for the American taxpayer and
the federal budget.”, writes Elizabeth L. Littlefield
(President and CEO) in OPIC’s 2012 annual report.
Let’s
have a closer look at what OPIC is and what it does.
About
OPIC
OPIC
is the U.S. Government’s development finance institution. Its 220
employees facilitate U.S. private investment in developing countries
and emerging market economies.
OPIC
refers to its investment practice as “impact investing”:
It aims to transform capital into answers for common challenges such
as access to education, financial inclusion, housing, healthcare, and
climate change. At the same time, OPIC looks after generating
sufficient returns on its investments to make the profitable.
As a
consequence, the agency operates on a self-sustaining basis at no net
cost to American taxpayers. Historically, every dollar of OPIC
support has leveraged, on average, 2.60 USD in private sector
investment.
OPIC
supports projects in 103 countries in Sub-Saharan Africa, Middle East
and North Africa, Asia, and Latin America. In terms of sectors, OPIC
works in renewable resources (namely solar, wind, and geothermal
power), agriculture (for example sustainable food production and
clean water), infrastructure, SME lending, healthcare.
Development
criteria
OPIC’s
development matrix measures the developmental impact of projects
across five key categories:
- Jobs and human capacity building (How many and which type of jobs will the project create?)
- Demonstration effects (Will the project result in the introduction of new products, services, business practices or production processes in the host country? Will it have a positive influence on the local regulatory or legal environment?)
- Host country impact (Will the project procure local goods and services, generate export earnings, local taxes or other fees?)
- Development reach (How many local people will benefit from the project?)
- Environmental and community benefits
Products
OPIC’s
main products are
- political risk insurance (covering inconvertibility of currency, expropriation, and political violence in the form of war, revolution, insurrection, etc.),
- investment guarantees (covering risk of default for any reason and compensating principal and (fixed or floating rate) interest), and
- direct loans.
Investment
guarantees and direct loans are together referred to as “investment
financing”. Such financing is only available for projects
involving significant equity and/or management participation by U.S.
businesses.
Refinancing
OPIC
refinances its operations either through appropriations (i.e. direct
allocation of federal funds to OPIC) or through borrowings from the
US treasury. OPIC’s engagements are backed by a public fund and, in
addition, pledged with full faith and credit of the United States of
America.
OPIC
Financials
OPIC’s
political risk insurance business is stable; its investment financing
business fluctuates significantly over time.
Direct
loans outstanding have more than doubled since 2008.
Net
income has experienced a stable increase on average in
recent years.
Resource:
- www.opic.gov
- OPIC Annual Report 2012
