Leading a Development Finance Institution is Not for the Faint of Heart: a follow up to the 2019 CEO Forum for African DFIs
By Greg Eidsness, Director, International Financial Consulting Ltd.
On November 4-7, 2019 I had the opportunity to represent International Financial Consulting Ltd. (IFCL) at the 2019 CEO Forum for African DFIs in Durban, South Africa. It was an honour to be invited, and an even greater one to be asked to participate in a panel discussion on the 4th Industrial Revolution and the implications for DFIs.
I found the discussion highly engaging and I was pleased to hear the same from a number of DFI executives in attendance. In fact, following the session, a few asked if our firm had written on the subject of leading a DFI in such challenging circumstances, which was the focus of my comments on the panel. This short article is meant to summarize our firm’s approach to the subject and, as you will find at the conclusion, includes a call to action and our offer of support.
Leaders of Development Finance Institutions can be forgiven if they found the call to embrace the 4th Industrial Revolution (4IR) more than a little jarring. Over the course of the 2019 AADFI forum, the case was made, and convincingly, that leaders risk being left behind by the dramatic technological innovations that will transform every aspect of our personal and professional lives. In this light, DFIs must reconsider all aspects of their internal operations, as well as their basic business model and product offerings.
For DFI leaders, this challenge is placed atop a high pile of other concerns. DFI leadership and management has become increasingly complicated. In addition to the fundamental challenge of balancing public policy and fiscal mandates, leaders must contend with everhigher public expectations that socially and environmentally responsible practices will be adopted, with regular public reporting and engagement on those practices. DFIs are also required to quantify their development impact and tie performance measurement to it.
IFCL has worked with DFIs in over 50 countries across the development landscape, in every region of the globe. As an advisor, we know we cannot take an approach from one country and then “cut and paste” into a different set of local circumstances and expect to be successful. However, when it comes to addressing these challenges, in our experience there are some common themes that have emerged working with institutions around the world.
Effective DFIs have leaders with qualities beyond just financial or credit skills; they demonstrate courage, imagination, social awareness and resilience. Indeed, as we heard throughout the forum, the 4IR will require courageous and imaginative leadership to take the bold steps necessary to embrace new business models and abandon old ways of thinking.
Effective DFIs also have a strong strategy in place that is based on a deep understanding of the market in which their organization is meant to address (be it small business, entrepreneurship, trade, infrastructure, housing, etc.) and the associated market gap, or gaps, which their institutions should attempt to fill. These gaps should be regularly reviewed and updated to take account of industry changes. It also requires investment in the research and strategy function; a recommendation we regularly make when working with DFIs. For example, we recently celebrated with a client development bank in the Caribbean region the fact they needed to shift their focus out of a sector that they helped incubate. Their presence in this nascent industry had catalysed sufficient private sector interest and they were no longer required. That the institution had both the intricate understanding of the economy necessary to update their business model, and the fact that they had the confidence and fortitude to make the shift, are reasons for applause and celebration.
Finally, as Jim Collins says in the book “Good to Great”, effective leaders ensure the right people are in the right seats. We have been asked to work with institutions on policies and procedures, and in many situations, we find that the main challenge has to do with people and capacity. An effective leader has to have a team they can rely on, and that takes a great deal of time and attention to make sure you have it right.
One challenge many DFI leaders face is that they spend a huge amount of time coaching and training up their own people, however they don’t often have a learning plan of their own. This type of coaching is commonplace with private sector institutions of a similar size, but DFIs tend not to make these investments in leadership development.
A Call to Action
The decisive role of leadership in taking on the challenges facing DFI means that executives must proactively pursue their own professional development. We have experienced great improvements working with senior executives who have taken the time to invest in themselves. In fact, we recently released a new exclusive and confidential service offering focused exactly on this named Experts on Call for executive leaders of DFIs.
As a direct follow-up to the 2019 Global Forum for African CEOs, we would like to offer DFI leaders an opportunity to experience this service. IFCL would be pleased to arrange a complimentary session for DFI executives with our President, Diana Smallridge. The session will provide an opportunity to explore your challenges and opportunities for professional growth. This is a limited time offer which expires on January 31, 2020. Of course, there is no obligation to follow up with an additional session. To confirm your appointment, please email me at Greg@i-financialconsullting.com.
International Financial Consulting is a Canadian-based consultancy with extensive experience working with Development Banks, Export Credit Agencies, ExIm banks and governments around the world to help them strengthen their institutions, programs and products, and fulfill their public mandates to deliver broad benefits to their countries and regions. We have worked with client institutions in over 65 countries on hundreds of projects, honing our cross-cutting expertise in financial consulting and our deep understanding of our clients’ need for thoughtful, customized, and data-driven solutions to their unique challenges.