As U.S. DFI Capital Melts Away, Africa’s Bold Ventures Enter Uncertain Waters

In rural Kenya, it used to be normal to go without power. No electricity meant no cold storage, no internet, and no way to charge a phone. That started to change when M-KOPA, a local fintech, began offering pay-as-you-go solar kits and smartphones to low-income households who may not have access to traditional credit.

Efforts like this require some financial muscle, and for M-KOPA, it didn’t come from the government or local partners; it got some tailwind from a USD 51 M investment by the U.S. International Development Finance Corporation (DFC). Of course, M-KOPA was already scrapping and solving real problems, but that funding was instrumental in helping M-KOPA expand electricity and smartphone access to off-grid communities, schools, clinics, and small businesses.

These kinds of stories aren’t rare, there are similar fingerprints by the DFC all over the continent: a USD 90 M equity investment in Cassava Technologies to drive Africa’s digital transformation; a USD 100 M loan provision to Nigeria’s First City Monument Bank to support women-led businesses, another USD 30 M to AgDevCo for agricultural lending, a USD 200 M to Nigeria Mortgage Refinance Company, and USD 140 M for a wind plant in Egypt—plus many other developmental and infrastructure projects.

The thing is, over the past five years, the DFC has quietly become one of Africa’s most important financial partners, backing over USD 13 B across 300 projects and catalysing investment in the digital, finance, energy, healthcare, and infrastructure sectors.

Beyond Africa, it stood as one of America’s most potent tools in fostering global development through private-sector investment. With a massive USD 50 B portfolio, it played a critical role in powering economic growth in low- and lower-middle-income countries like those in Africa. But that momentum has come to a sudden, unsettling stop. Investment from the DFC has pretty much gone silent.

A deafening silence that coincided with U.S. President Donald Trump’s return to the White House in January 2025. Sure, the agency announced over USD 4 B in global investment approvals for the first quarter of Fiscal Year 2025 (ended December 2024), but a closer look at DFC’s active investment database reveals a curious absence of investment since January 15.

It has become all too apparent that a funding freeze from the DFC has taken hold, and Africa, once a central focus, could be drifting out of the agency’s frame.

There is unease. Deals that would’ve unlocked local hiring, product launches, or cross-border expansion are suddenly stuck in limbo. Private equity and venture capital firms also face the prospect of shifting their portfolio strategy as the ripple effects manifest.

An Administration That Never Believed in Foreign Aid

Trump’s hostility toward international aid has been no secret. “America First” wasn’t just a campaign slogan; it became the defining principle of his foreign policy.

He viewed foreign assistance as an unnecessary drain on U.S. resources, often equating it with wasteful spending that benefited other countries at the expense of American taxpayers.

From his first day in office, he wasted no time in slashing billions in foreign aid. On January 20, his administration launched an aggressive 90-day pause and review of every U.S. foreign assistance program, with the goal of determining which should be cut entirely.

Driving that campaign is ally Elon Musk’s so-called Department of Government Efficiency (DOGE), a newly created division tasked with gutting bureaucratic “waste” and helping the U.S. achieve financial efficiency. But that’s only part of the story. In truth, it has launched a full-blown war on foreign investments.

Trump and Musk’s “America First” approach has led to a dramatic pullback from global commitments that have resulted in billions of dollars in eliminated aid in their push to cut the spending of the federal government.

Foreign investment programs such as the United States Agency for International Development (USAID) were some of its first casualties, seeing their budgets slashed to levels not seen in decades and throwing global humanitarian relief efforts into chaos.

In March 2025, a 281-page internal report shared with lawmakers listed 5,341 USAID-funded projects set for termination, totalling nearly USD 76 B. Much of that was earmarked for long-term African development work, leaving NGOs and governments that relied on those partnerships scrambling. DFC, which had seemed insulated from the worst of these cuts, has also been caught in the crossfire.

Unlike USAID, which primarily provided grants and direct humanitarian aid, DFC operated more like a bank. Its model leaned on private-sector capital to drive sustainable development, offering loans, guarantees, and political risk insurance to support projects in infrastructure, clean energy, and small business development.

It was created through the 2018 BUILD Act, which merged the Overseas Private Investment Corporation (OPIC) with several USAID offices, with the goal of making U.S. foreign development self-sustaining.

For years, that model functioned. By the end of 2024, DFC had deployed over USD 3 B in sub-Saharan Africa alone, including over USD 700 M in the final two quarters of the year. Even as late as October 2024, it continued its expansion in Africa, opening a new regional office in Côte d’Ivoire, signalling its commitment to expanding in the region.

In theory, one would assume a self-sustaining, investment-driven model would appeal to Trump’s business-minded administration, as it was less about giving away money and more about making strategic investments. But behind the scenes, the administration was already laying the groundwork for a dramatic shift in the DFC’s priorities.

An Executive Order That Could Reshape DFC’s Future

With DFC’s notable absence from the global investment landscape already causing a stir, a full-on strategic pivot finally came on March 20, 2025, when Trump signed an executive order that reorients the agency’s focus from international development to boosting the domestic production of critical minerals.

By invoking emergency powers, the order specifically redirects DFC funding to support U.S.-based mining and mineral extraction projects under the Defense Production Act. The order dictates that within 30 days, the agency’s leadership, alongside the U.S. Secretary of Defense, must propose a plan to establish a mineral production fund, effectively abandoning DFC’s original purpose.

Once focused on financing economic growth in low-income countries, DFC will now prioritise loans, guarantees, and political risk insurance for domestic projects.

There are also discussions within Trump’s administration about consolidating U.S. development finance institutions, according to Politico citing a leaked memo. The memo suggested that the Millennium Challenge Corporation and the U.S. Trade and Development Agency could be merged under the DFC to make U.S. foreign development more self-sustaining.

Meanwhile, other reports note that some officials are exploring turning DFC into a sovereign wealth fund. This comes after Trump’s executive order in February directing the Treasury and Commerce secretaries to develop a plan for such a fund within 90 days.

That would mean fewer checks, more executive control, and a fundamental shift away from DFC’s broader influence in international private sector development.

For now, Congress holds the power to intervene. DFC is up for reauthorisation this year, and lawmakers could push to return the agency to its original mission. But discussions have yielded little clarity. And the administration doesn’t appear to be backing down.

The Consequences of DFC’s Inaction

While the policy debates rage in Washington, the reality on the ground is already changing. The DFC, which has long been a key funding lifeline for African ventures, is leaving a notable absence.

Across Africa, DFC-backed projects are on hold. Fund managers (private equity and venture capital) are facing indefinite delays on approved loans, predictably throwing deals into question. The uncertainty also hits small business lenders, infrastructure developers, and clean energy initiatives.

To put the scale in perspective, in just the final two quarters of 2024, DFC investments in sub-Saharan Africa had topped USD 700 M. Now, that stream has dried up. And the timing couldn’t be worse.

Africa is already walking a tightrope, navigating a tough macroeconomic climate. Venture capital funding into the continent has continued to drop, falling to just over USD 2 B from its USD 4.3 B peak in 2021 and USD 3.6 B in 2022, according to the WT Annual Report 2024. That’s nearly half of what flowed in the years before.

Early-stage startups are especially exposed. Once-eager investors are now more cautious about deploying capital into frontier markets. It’s in vacuums like this that development finance institutions (DFIs) like the DFC usually step in with patient capital. They’re designed to move counter-cyclically to keep investment flowing when the private sector pulls back.

In long-term plays like energy and infrastructure, where returns take years, DFIs are often the only players with enough risk appetite to get things moving. So when one of the biggest players suddenly vanishes, the effect is seismic.

Moreover, African infrastructure and energy investment needs are estimated at USD 110-170 B per year, with a financing gap of USD 68–108 B, according to the African Development Bank. While other notable DFIs like Proparco, Acumen, IFC, and BII remain active, DFC’s absence will leave a huge vacuum.

Without U.S. support, many African governments and project developers are turning to whoever is still lending, and that’s often China. Per a Reuters report, in 2024, China pledged over USD 51 B in new African infrastructure funding over three years. Chinese state-owned banks are now offering fast financing, albeit often with stricter terms and higher long-term debt risk. But when capital is urgent, speed wins.

A Moment of Reckoning for African Founders

As the dust settles on Trump’s development finance shakeup, it appears the U.S. is at a crossroads in its role in global economic development, and Africa is directly in its crosshairs.

The DFC funding pivot points at a shift in America’s priorities, and the longer the U.S. remains disengaged from global finance, the harder it will be for economies significantly dependent on its support.

Even before the DFC freeze, the mood was shifting. By the end of 2023, about 30% of African startup deals had some involvement from U.S.-based investors, down from about 40% just two years earlier, according to data found in the Venture Capital in Africa Report from the AVCA. When the sudden halt in U.S. development finance is factored in, that downward trend might well become a freefall.

For African founders, this moment represents a significant reckoning. Startups and small businesses that once thrived from impact-driven funding from the U.S., particularly in sectors like fintech, agritech, and healthtech, face new uncertainty.

If U.S. investment becomes more commercially selective, the availability of risk-tolerant capital for the already struggling early-stage landscape could shrink. Those with years-long paths to profitability—especially those in rural services or public-good sectors—will have to tighten their models, pivot, or pause altogether.

This could result in a domino effect that affects Africa’s low-income population. The United Nations Economic Commission for Africa has repeatedly stressed that a drop in foreign direct investment (FDI), especially in core sectors, could mean slower growth, job losses, and rising poverty.

Filling the Gap

Still, it’s not all bad news. As Global players are pulling back, local DFIs and private equity firms are showing what it looks like to lead from the front and are making efforts to plug the funding gaps.

Take the African Development Bank (AfDB), a multilateral development finance institution focused on Africa. It has deployed a mix of financial instruments, including loans, grants, and equity investments. In 2023, the bank approved USD 8.2 B in project financing. It also invested up to USD 2.73 B in just Q3 2024 alone, putting into perspective the scale of its growing influence.

Other notable names like the African Export-Import Bank (Afreximbank), Africa Finance Corporation (AFC), Development Bank of Southern Africa (DBSA), and East African Development Bank (EADB) are also beginning to play vital roles in sectors like agribusiness, renewable energy, and trade finance at regional and national levels.

None of this fully replaces the weight or reliability of U.S. development finance, but it reflects that when the spotlight moves, others can take the stage. Still, for African economies already juggling currency depreciation, rising debt, and climate shocks, losing a partner like the U.S. is not only inconvenient but also costly.