Banner: An employee of an Internet broadband service provider providing internet connections in West Bengal, India, on 15 June 2021. (Source: Reuters via Soumyabrata Roy/NurPhoto)

The US Development Finance Corporation (DFC) reauthorization is finally here as an amendment to the FY2026 National Defense Authorization Act (NDAA). Reauthorization of the agency matters for global connectivity: deploying the right kind of capital to the right places, and to the right recipients, remains the binding constraint on building affordable networks that bring high-speed internet to all. China has used its state-led industrial model to do exactly that, often at the expense of US economic and security interests. The reauthorization takes several important and concrete steps to counteract this trend, but a few outstanding gaps and questions remain.

In March, we outlined a set of recommendations to make DFC more fit for this challenge. Below, we assess the changes Congress passed and benchmark them against our connectivity-focused proposals. We look at where those recommendations were met, and the gaps that still exist, and then put forward concrete signals to look for down the line to assess if US actions will meet the needs of the moment.

In March, we recommended increasing DFC’s investment capacity (then capped at $60 billion) and allowing the agency to reinvest the profits it generates, which at the time were returned to the US Treasury. The reauthorization delivers a major step forward on capacity: DFC’s maximum contingent liability rises to $205 billion. This expansion is particularly important for higher-risk but strategically critical connectivity projects, including last-mile networks and undersea cables, which are highly capital-intensive. That said, a higher cap is a necessary—but not sufficient—condition for success.

The new DFC reauthorization also expands country eligibility, authorizing DFC to operate in many more parts of the world, including in some high-income countries subject to spending caps, cost-share limits, and national-security certification. ICT-related deals are explicitly called out as a priority, exempting these transactions from some requirements. We previously argued that DFC needed the flexibility to operate in a broader set of geographies, including middle- and high-income countries in certain circumstances. Under the prior framework, DFC could operate in only a handful of higher income countries (just four in Latin America and the Caribbean) without a bureaucratic and ineffective national security waiver process.

Next, the reauthorization emphasizes “catalytic” investments and requires reporting on risk appetite in less-developed markets and low-return sectors, including new authorities around subordinated debt and 100% loan guarantees. This is a positive signal in response to our call for DFC to shift toward more patient, concessionary financing, which many connectivity projects require. However, questions remain about who will ultimately receive this financing and, critically, how much greater risk appetite DFC will have in practice. In our March article, we argued that DFC investment should prioritize investment in specialized intermediaries and community-focused internet service providers (ISPs), which consistently deliver faster speeds, better service, and lower costs than large multinational telecom firms, and recommended DFC offer concessionary terms (e.g., lower rates of return and/or taking more junior positions in capital stacks) where appropriate.

Lastly, we recommended that to accelerate dealmaking, DFC should be allowed to rely on the due diligence and underwriting of trusted specialized intermediaries and capital partners. These intermediaries are better positioned to pool DFC capital with other sources, originate and diligence connectivity investments, deploy appropriately sized financing to local ISPs, and provide pre- and post-investment support that improves project success and returns for taxpayers and co-investors.

The reauthorization allows DFC (with board approval) to create holding companies or investment funds where DFC can act as manager for national security needs. It also addresses secondary lending via intermediaries with safeguards. This could serve as a meaningful enabler for connectivity-focused blended finance vehicles and specialized intermediaries.

The biggest question marks in the DFC reauthorization are around the new equity investment revolving fund. Congress has now authorized a $5 billion equity revolving fund at the Department of the Treasury to provide a dedicated capital stream for equity investments and will now allow DFC to consider and keep the returns of those investments to fund investments in the future, technically closing the “equity loophole”. As we noted in our previous article, federal budget rules require the DFC to treat all equity investments as an immediate and 100 percent loss, with any returns that were realized returned to the Treasury.

On one hand, equity investments can be a useful tool for the DFC to have in its toolbox, even if the cashflows of many connectivity projects can support reasonably priced debt financing. On the other hand, Congress did not actually provide an appropriation for this new equity revolving fund. Moreover, because returns from equity investments will be returned to the DFC to be redeployed in future investments, there’s a risk that the agency will be incentivized to chase high-return investments rather than using equity as a truly catalytic tool. Nevertheless, if Congress actually provides funding for the use of equity investments, this will be helpful in enabling the DFC to demonstrate that it knows how to craft an investment approach that doesn’t lose money and will hopefully build a track record of appropriately assessing risk-return potential that it can score against in the future.

Another concern is the bureaucratic red tape we flagged in our earlier article. DFC has long been required to notify Congress for transactions above $10 million, slowing deal execution, and it remains subject to burdensome Federal Credit Reform Act requirements on insurance products that further delay transactions and limit its ability to crowd in private co-investment.

With the new authorization, the project notification threshold does increase to $20 million, but the statute also adds new notification and reporting requirements for equity investments, which could lengthen—rather than streamline—approval processes. Moreover, the legislation does not clearly resolve the FCRA/OLC insurance scoring issue we identified. Whether these changes ultimately reduce or increase friction will only become clear as implementation unfolds.

Next, on personnel: we argued that the DFC should be restructured around specific regions and sectors (including internet infrastructure) and that staff should be incentivized to take prudent risks to catalyze investment from other capital providers. The reauthorization makes some directionally positive changes by adjusting internal roles, planning requirements, and senior leadership structures. However, these structural changes do not yet address a core constraint on connectivity lending: the lack of sector-specific investment expertise. The legislation includes no authority for private-sector detailees, no mandate for sector-focused teams, and no alignment of incentives or bonus structures around catalytic capital or capital additionality.

Next, we recommended expanding the DFC’s technical assistance grantmaking to improve the investment readiness of local internet service providers (ISPs) and build deal pipelines. The new bill authorizes post-investment technical assistance through special projects, which is a meaningful and positive step. However, the focus is on execution after deals close rather than on readiness beforehand. Many high-potential connectivity projects will still require pre-investment support and training to become viable candidates for DFC-led financing.

Lastly, we recommended including dedicated demonstration capital for connectivity innovation to serve as proof of concept and attract greater private investment. The reauthorization does not include explicit authority for pilot or demonstration capital, relying instead on indirect enablement through a larger investment cap and expanded equity tools. This represents a missed opportunity to validate new connectivity models and lay the groundwork for a scalable investment approach. While Congress will likely be reticent to touch anything around the DFC so soon after passing the reauthorization, Congressional appropriators could and should include more funding and authority for the State Department to provide this kind of demonstration capital and technical assistance funding through a targeted increase in the Function 150 Account. 

Congress has given the DFC significantly more capacity and several new tools that align well with building a credible alternative to Chinese digital infrastructure finance. This is an important and positive step. However, key gaps remain if the agency is to become fully fit for purpose in enabling the United States to compete with China in wiring the world.

Over the next few years, the best signal that the reforms contained in the reauthorization are translating into a credible alternative to Chinese connectivity finance would be progress on the following fronts:

The DFC reforms contained in the reauthorization are a major opening. It gives the DFC more capacity and some of the right tools to become a leader in global connectivity finance. Whether it becomes a true counterweight to Chinese state-backed capital now depends on whether the US can translate these principles into action, expand its toolbox, and seize the moment through more dealmaking to finance the end of the digital divide.

Kenton Thibaut and Jochai Ben-Avie, “DFC reauthorization is here: The good, the bad, and the next steps for connectivity,” Digital Forensic Research Lab (DFRLab), January 23, 2026.