Hello. My name is Paddy Carter. I am a senior research fellow here at ODI where I have worked on DFIs. Previously, I was an academic economist.
I'm going to hop around the questions that you've posed to try to identify some areas that haven't already been so ably covered by Simon and Diana. I'm going to start with your orientation around women and young entrepreneurs, and also with the reality of the budget that you have set. To me, those things say that you are likely to be looking at a business model that is based on intermediaries, that is based on providing a line of credit for onlending to a local organization, perhaps an NGO or a commercial entity, which is then going to, for example, lend money to small farmers or something like that.
I think one of the innovations that Diana brought to the CDC was the reorientation of the CDC around direct investments. A question that you have to ask yourselves is whether, within the budget you've set for yourselves, it makes sense to also try to have a direct investment line of business as well.
You may find yourself being asked why, because there's already a lot of money being put into DFIs. The CDC's budget envelope is increasing. There's the new World Bank private sector window. At the same time, one often hears about there being a lack of bankable projects. There's always the question that maybe this market is getting close to saturation. Maybe there aren't any projects that have everything you want: that they're additional, that they are things that the private sector would not do by themselves, that they also fit your development mandate. Maybe the world doesn't have enough of them.
However, if you're going to focus more on the SME side of things, then those worries needn't necessarily concern you so much. If you look around the world, there are a lot of very successful examples of small funds targeting SMEs in particular localities. They may all be looking for money to expand in the new territories. The world certainly isn't saturated with organizations lending to small farmers, for instance. So, you could very well start by asking your team to look around the world and identify some successful funds in other models that you would wish to support the expansion of.
Something else that DFIs will often say is that they decide whether or not to put money into something, but they do not create investment opportunities. This maybe echoes something that Diana said. If you instruct your DFI to go out and support businesses that are either female-led or female empowering in some other sense, maybe there are only so many of those. There's a finite number of those opportunities out there, and if you just focus on those, in practice what that can mean is that you don't do other things. It doesn't mean that you do more of those because there aren't any more of those.
That raises the possibility of collaboration and co-operation with other parts of the Canadian development architecture, which is one of the themes of your questions. That suggests maybe there could be scope for other parts of Global Affairs Canada to work on increasing the supply on the female entrepreneur side of the problem, and then have the DFI seen as the source of money to finance those entrepreneurs as they are created.
I want to say a quick word about transparency. Because you are starting afresh, you have an opportunity to lead the world in terms of the transparency of the DFI's operations. All the other DFIs in the world are moving rapidly in this direction anyway, but you can start out ahead. That means it should be possible for Canadian citizens to look at where you have invested; to understand the rationale for that investment; if there are questions to be asked about the tax arrangements of those investments, to be able to see what the taxation arrangements are; and also to be able to see beneficial ownership. This is a tricky one because there are, potentially, sometimes reasons why a DFI is not in a position to insist that all the owners of an investment are public information. Nonetheless, you can find ways of pushing this frontier forward. You could maybe experiment with insisting on beneficial ownership information as a requirement for your investments.
The last thing I want to mention before we move on to Qs and As is the Canadian comparative advantage. The evidence shows that the vast majority of businesses in fragile and conflict-inflicted states are run by a returning diaspora. Of course, every country has a comparative advantage in that it has connections with the diaspora communities within its own borders. That is something you could look to exploit.
I'll stop there.