Beyond Leverage Ratios: A Strategic Approach to Blended Finance

This study rethinks how blended finance should be assessed, shifting the focus from private capital leverage ratios to net social returns, which consider broader economic impacts and taxpayer costs. 

The first section explores the ultimate objectives of blended finance and its economic justification, emphasizing its role in achieving the Sustainable Development Goals (SDGs). Rather than viewing efficiency solely through financial mobilization, the study advocates aligning blended finance with investments that generate high societal value. 

The second section examines two strategic uses of blended finance: (1) fostering knowledge spillovers that shift market behavior and (2) strengthening weak links in production networks. These approaches aim to direct concessional capital toward projects with substantial public benefit, supporting markets where private capital alone may not reach without strategic public-sector intervention.