The Why and How of Blended Finance

Blended concessional finance (BF)—the use of catalytic public or philanthropic capital to attract private investment—is playing a growing role in advancing the 2030 Sustainable Development Agenda. 

This IFC paper, co-authored by Mutambatsere and Schellekens, emphasizes the need for a clearer rationale when using BF, focusing on three pillars: development impact, additionality, and appropriate concessionality. The authors argue that BF should be deployed only when these criteria are met and clearly articulated. They also outline strategies to improve the efficiency of concessional resource use once justified, including aligning instruments with risk, market gaps, and project needs. The COVID-19 pandemic is framed as both a stress test and a unique opportunity for using BF within existing portfolios. 

The paper builds on established DFI standards and offers practical guidance to ensure that concessional finance is targeted, effective, and does not distort markets.