First of all, thanks to the committee for the opportunity to submit today. Greetings from Waterloo, Ontario. We appreciate your facilitating this by Internet.
Good morning, Jessie, who we know well. We respect Desjardins quite a bit.
My name is Jerry Quigley. I'm senior vice-president for Mennonite Economic Development Associates, also called MEDA. I would like to start very simply with three contextual comments on the DFI, and then go to two recommendations that MEDA would make.
The first contextual comment is that MEDA generally supports the creation of a Canadian DFI. We congratulate the current government for seeing this important initiative through.
The second contextual comment is that, at the initial $300 million over five years, we believe this DFI is too small to act like other DFIs. OPIC is investing about $1.6 billion annually. CDC has net assets of somewhere in the neighbourhood of $5 billion. To be meaningful, the Canadian DFI at that level must be bold.
The third contextual comment is that this is the first DFI to be created in the last 20 years. Twenty years is a lot of time to learn, so what have we learned and what can we do that is new?
I'll move on to the recommendations. MEDA believes that there is really no better place to start than a recent quote from the Canadian International Development Platform group.
Development impact and additionality should be at the top of the mandate. The DFI must work complementarily with Canada's wider development strategy.
That is a comment that can be found in the recent CIDP publication called “How Can Canada Deliver? Responding to the Changing Global Development Context”.
First, to their comment about additionality, other countries agree and acknowledge that Canada is an innovative global leader in the area of blended finance. We hear that all the time in the U.S. and the U.K. The DFI offers an excellent opportunity for Canada to grow that reputation and work. The world does not need another baby DFI that competes with other DFIs and private capital for low-risk, high-impact investments in low-income countries. Doing so, or trying to do so, would make it a lightweight, pale duplicate of what all the other DFIs are doing. The world needs a DFI that acts as a catalyst to private capital.
Think CMHC. It is not a perfect example in the development space, but it makes a point. CMHC does not offer mortgages in competition with private lenders, but it takes on risk that allows private capital to flow where it otherwise would not. This should be a focus of the DFI.
If the DFI can truly catalyze private capital, the result can be innovative, transformative, and catalytic. We will know the Canadian DFI is successful by how much private capital it crowds in. Other DFIs are criticized for competing with private capital. That is why we think the DFI must be linked to Global Affairs Canada's new office for innovative finance. The combined result should be bold, different, and disruptive, doing things that no other DFI is doing. That means it probably won't have the lofty returns of its contemporaries in other countries, but it will make a bigger difference.
Second is the issue of development impact. Given its size, the DFI might consider a sectoral or geographical focus.
For instance, it would be innovative to de-risk private capital for investments in environmental infrastructure or women-led businesses or health. However, in development there are always trade-offs. We know that. More narrow focus may undermine greater additionality, keeping in mind that there is an inverse relationship between the willingness of private capital to participate and the narrowness of the opportunity. Narrow fields of investment is one factor in risk. For instance, investments in the health sector in east Africa is a very small pool, but the DFI also has few resources with which to fish, so maybe it needs to be selective. That said, the DFI is new and therefore has a window of opportunity to shape itself to achieve greater impact in a smaller space.
My next comment is aligned with that of Desjardins that the DFI should consider working with Global Affairs Canada to offer sidecar technical assistance to augment and enhance its investments. MEDA's INFRONT project confirmed that many businesses want to do the right thing. INFRONT is a pioneering Global Affairs Canada-funded blended finance project with $15 million of de-risking capital from the Canadian government paired with $5 million in technical assistance to the businesses that are investee companies. We have found that most INFRONT private business owners are genuinely concerned about issues such as poverty, the environment, and women's participation. The DFI will quickly learn that the impact of its investments can be greatly enhanced with targeted additional support from Global Affairs Canada to the investee companies.
Finally, it is good to see that Canada's feminist international assistance policy supports such approaches. I quote two things from the new policy. First, it says:
New instruments such as repayable contributions will be introduced that will better enable Canada to mobilize new streams of financing for underserved private sector partners in developing countries, including woman-led businesses.
Second, the recently released policy says:
Canada's contributions will also be leveraged by expanding and enhancing the options to contribute to initiatives through funding relationships that present a mix of repayable and non-repayable support.
It just needs to find a meaningful way and in collaboration with the new DFI.
Thank you for the opportunity this morning to share our views on the DFI. I turn it back to the chair.