Description
Foreign aid budgets have faced sustained retrenchment across OECD donors, creating space for an alternative form of public development lending delivered through national development finance institutions (DFIs). Yet DFIs vary markedly in their resourcing strategies: while some donor governments rely on public resources, others have restructured ownership by incorporating private financiers as shareholders. This paper documents a process of ownership privatization and its distributive consequences for DFI investment abroad. I argue that privatized ownership reshapes bilateral development finance allocation, making DFIs more sensitive to credit risk in recipient countries and less responsive to donor foreign policy motivations. To test this argument, I draw on an original project-level dataset of 7,248 investments extended by 12 DFIs between 1970 and 2024, alongside an original organizational-level dataset on DFI ownership structures. I show that greater private ownership share is associated with reduced financing to countries experiencing sovereign credit downgrades, and find no effect of geopolitical alignment on investment allocation — indicating that privatized bilateral finance behaves differently from traditional aid. These findings shed light on structural changes in Western foreign assistance and the political economy of contemporary development finance.