Hi all, I will keep it short. I am a former IB analyst in LevFin at a BB in London who has long been interested in working in development finance. I did two years at the BB, and then quit to work for an emerging markets boutique remotely whilst learning a foreign language abroad. I am now looking at next steps and am very interested in the DFI world. Would anyone working at any DFI institutions be willing to answer some questions in DM about your experience and tips for moving into this space? Many thanks!
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I’d also be curious to learn more. Seems the perks are very generous, and environment is very stable compared to anything else exposed to emerging markets.
Best friend did this. AVOID LIKE THE PLAGUE!
1. Pay is complete dog shit.
2. You still work long hours. Maybe not as bad as IB but still. And the deals take FOREVER to close because there’s 1000x compliance policies you need to fulfill.
3. Most of the people there because they couldn’t find a real finance role. The people there don’t actually know finance very well. Analysis is not rigorous. People are careless.
4. You think politics is bad in IB? 1000x worse at DFIs. No such thing as merit.
5. If you’re trying to polish your resume for MBA (which is already a horrible end in and of itself), schools care far more about 1) will you be rich one day and 2) what’s your GPA and test score for our rankings. All the life changing stuff they put on their website is just so the public doesn’t hate them for being the greedy bloodsuckers they really are.
6. Other exits opps are shit. No one actually cares that you wanted to “save the world.” You’ve been out of a rigorous environment for some time and it’s presumed you’ve developed bad habits.
7. You’re still VERY removed from the development impact. If you want direct impact, a non profit where you have direct interaction might be best (i.e., big brother, etc.)
I'm already post MBA, working in PE in emerging markets, exit opps are sometimes suboptimal – so some of these comments don’t apply, but I totally acknowledge your frustration.
A few follow-up questions:
Glad to provide some answers to your questions:
1. Indeed, at DFIs, you get benefits can make up for the lower nominal pay in the long run: tax exemptions, (semi-)diplomatic status, accommodation, and schooling allowances to name a few. However, at more junior levels, or in the short run, these perks might not be as attractive.
2. Very dependent on the DFI, your group (investment roles are generally more intense than e.g., advisory or treasury roles), your geography coverage (e.g., now, Africa has more deal flow than, say, Central Asia or the Middle East). Focusing on investment roles, busy periods will be dictated sometimes by internal factors, e.g., tight deadline to submit an investment to the committee (especially before the end of a fiscal year), or by external factors, e.g., your DFI is mandated as co-lender on a project which must reach financial close with tight deadlines. The due diligence process is generally quite thorough, especially on the E&S side (which is conducted by dedicated groups), and can create additional workload, as pointed by others on this forum. Generally, there also is more internal admin and reporting than in the private sector. You will also have the occasional unscheduled official visit from a global MD meeting a government official or attending an investment forum in your region; this will require you to prepare last-minute speaking points / presentations / speeches and gets a bit more political. However, I would say that generally, employees at DFIs enjoy considerably more flexibility in how they manage their time, which allows you to compensate following an overstretched period.
3. Agree. Adding to your comments, if the deal is stuck, you will sometimes entice the client to get into advisory work to explore other potential investment avenues (basically paying external advisors to produce reports), with the hope of being mandated in the future. This is more time-intensive than you’d expect, and the conversion rate (i.e., how often you get mandated for an actual investment following advisory work) is quite low, which can be frustrating. The other touchy point is the dependence on concessional funds to close certain deals. You are basically in competition with other DFIs to get mandated, with the ultimate deciding factor being how much of this concessional finance you can raise versus others. Note that not all deals are dependent on such funds, and that in general you are only looking at deals which make sense from a financial return perspective on a standalone basis.
4. I’ve touched on this in point 2 and can confirm. E&S due diligence is typically done by dedicated groups, not by the investment team. However, they weigh in significantly on the committee’s decision and can make or break a deal. Despite being frustrating at times, it is important to note that DFIs are extremely conservative when it comes to reputational risk. They are backed and funded by member states from all over the world and are ultimately accountable to their voters. DFIs cannot afford losing their credibility, let alone lose access to a given country because of E&S scandals (although this happens).
5. Can’t speak for all DFIs, but in my experience these institutions a mix of very horizontal, decentralized hierarchical structures (for 90% of the staff) reporting to a small subset of hierarchical managers which are more accountable to political decisions. The latter might, e.g., be under pressure from HQ to deliver deals in a particular country, or under pressure from a local government to provide financing to a given privatization program. In general, this does not affect your day-to-day business, but might be felt as you climb up the ladders.
6. Agree with your assessment.
1. Yes, pay blows. The hours are not worth it given the pay.
2. I don’t know. I’m assuming that different points in the lifecycle of a deal can be a sprint. This should be obvious. Probably something bureaucratic.
3. It takes a long time because various government stakeholders are slow and dumb. A complex deal in the private sector wouldn’t take as long. Many EM deals have government involvement which makes it a complete shit show because government people are incompetent.
4. Idk. Just know ESG/diligence takes a long time.
5. Bureaucracy. Simple at that. Rank matters more than merit.
6. Pension - why rely on a pension when you can make way more in the private sector?
One other point to add is that the people you would work under at a DFI are enormously less competent than an MD at a bank/PE fund. So you’re not surrounding yourself with winners. Large impact on growth/development.
Bottom line is that DFIs aren’t a good early career move
Totally understand and agree that this is sub-optimal for early move for many. Admittedly, I am at a later stage and living in a geography where career stability can be quite valuable. I have a few more questions:
1) What does semi-diplomatic status actually mean? Are there any specific benefits?
2) Does anyone have experience working overseas with a DFI as a United States citizen? I am curious if working with a DFI (outside of the US) would limit my ability to continue receiving the US "foreign earned income exclusion"? (This allows my first c. US$ 120k to be tax free, which is a very significant for US taxpayers living overseas).
3) I am also curious, how difficult is it to go on business trips within DFIs? One of the interviewers mentioned that the client needs to cover business travel costs. Does that mean that business travel has been replaced by Zoom? Does anyone have recent perspectives on this?
4) Does anyone have specific comments on some of the perks provided for working in a field offices? I have heard from a few sources that this is a way to earn slightly higher salary. For me, I would actually prefer to live in a field office.
Came across your comment on this post and was wondering what post-IB alternatives you think exist that are kind of an intermediate point between PE and the kind of development finance you're describing (if any come to mind)
Thanks for sharing this honest feedback. Any insights on your friend's path post-DFI (assuming he/she left)?
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