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This note describes the current purpose and structure of CDC, and discusses its financial performance and contribution to international development.

Since July 2004, CDC Group plc (henceforth “CDC”) has been a public limited private equity company owned entirely by the Department for International Development. It is responsible for providing loan finance to private businesses in developing countries, particularly in those areas and sectors which struggle to obtain investment through conventional channels. Directly, through its investments, and indirectly through mobilising other investors, its aim is to contribute to economic growth and poverty reduction in the developing world.

Until recently, CDC invested solely through a ‘fund of funds’ structure; that is, it did not make its investments directly, but channelled them through intermediary fund managers. Following the agreement between DFID and CDC of a new business plan in May 2011, CDC will begin to make its own investments, though fund-of-funds holdings will continue to form the majority of CDC’s portfolio until at least 2015.

CDC has performed well financially since its restructuring, but assessing its impact on development is a more contentious business. It has been criticised for investing to maximise returns, at the expense of both the neglected ‘high-risk’ sectors it was intended to finance, and the business principles it was supposed to uphold. Government oversight, which has targeted financial performance, and CDC’s structure, which places it a step’s remove from the companies and countries it invests in, have been blamed for this.

On 12 October 2010, the International Development Secretary Andrew Mitchell announced a consultation on the reform of CDC. The consultation closed on 28 February, and on 7 June it was announced that a new business plan had been agreed for CDC. The changes to CDC’s operations and approach as a result of this are also outlined in this note.

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