Blended finance

Blended finance aims to mobilize additional finance for sustainable development, typically through (concessional) public development finance supporting financial returns for investors in a range of financial mechanisms. Blended finance thus marks a departure from long-standing conceptualizations of foreign aid. For most development actors and investors, the challenge lies primarily in creating enabling conditions to attract more private investment into the Global South. Yet critics set out a variety of concerns, including limited evidence that blended finance provides significant financial or developmental ‘additionality’ for those furthest behind; transparency and accountability hurdles when using public money to support private investment; the uneven allocation of risks and rewards; the costs of financial intermediaries and profits accruing to investors; and the questionable possibility of a congruence between ‘development’ and financial market rationales. This chapter provides an overview of conceptualizations of blended finance and its possibilities and dangers, from a spectrum of viewpoints.