Using Blended Concessional Finance to Invest in Challenging Markets
The Blended Finance Facility (BFF), part of the IDA Private Sector Window, combines concessional IDA funds with IFC financing to support high-impact, commercially challenging private sector projects.
It targets underserved sectors such as SMEs, agribusiness, education, health, affordable housing, infrastructure, and climate-related investments. BFF mitigates financial risk and enables longer tenors and flexible structuring to catalyze pioneering investments in IDA countries. Financial instruments include senior and subordinated loans, equity, and guarantees.
The BFF builds on IFC’s blended finance platforms like GAFSP and climate finance facilities, expanding IFC’s reach into new markets. It is designed to unlock development impact in fragile and low-income settings while limiting financial exposure to allocated IDA resources. The BFF plays a critical role in enabling private capital mobilization in challenging markets.
This report contains four chapters that had been previously published as the following EM Compass Notes:
Chapter 2, Blended Concessional Finance—Transparency, Access and Governance was published previously as Sierra-Escalante,
Kruskaia, Arthur Karlin and Morten Lykke Lauridsen, Blended Concessional Finance: Governance Matters for Impact,
EM Compass Note 66, IFC, March 2019 and has been updated significantly for this report.
Chapter 3, Selecting and Structuring Projects for Blended Concessional Finance was published previously as Gregory, Neil,
Kruskaia Sierra-Escalante, Blending Public and Private Finance—What Lessons Can be Learned from IFC’s Experience?,
EM Compass Note 3, IFC, April 2016 and has been updated significantly for this report.
Chapter 4, Blended Concessional Finance: Scaling Up Private Investment in Lower-Income Countries was published previously
as Sierra-Escalante, Kruskaia, Arthur Karlin and Morten Lykke Lauridsen, Blended Concessional Finance: Scaling Up Private
Investment in Lower-Income Countries, EM Compass Note 60, IFC, November 2018 and has been updated for this report.
Chapter 5, Blended Concessional Finance—The Rise of Returnable Capital Contributions was published previously as Karlin,
Arthur, and Kruskaia Sierra-Escalante, Blended Concessional Finance—The Rise of Returnable Capital Contributions,
EM Compass Note 72, IFC, September 2019 and has been updated for this report.
ABOUT THE AUTHORS
NEIL GREGORY, Chief Thought Leadership Officer, Thought Leadership, Economics and Private Sector Development, IFC (Chapter 3) ARTHUR KARLIN, Consultant, Blended Finance—New Business and Portfolio, Blended Finance, Economics and Private Sector Development, IFC (Introduction, Chapters 2, 4, 5)
MORTEN LYKKE LAURIDSEN, Principal Economist, Thought Leadership, Economics and Private Sector Development, IFC (Introduction, Chapters 2, 4)
EMELLY MUTAMBATSERE, Senior Sector Economist, Sector Economics & Development Impact: Infrastructure, Economics and Private Sector Development, IFC (Chapter 1) PHILIP SCHELLEKENS, Senior Economic Adviser, Economics and Private Sector Development, IFC (Chapter 1)
KRUSKAIA SIERRA-ESCALANTE, Senior Manager, Blended Finance—New Business and Portfolio, Blended Finance, Economics and Private Sector Development, IFC (Introduction, Chapters 1, 2, 3, 4, 5) MARTIN SPICER, Director, Blended Finance, Economics and Private Sector Development, IFC (Foreword)
