There are different definitions of blended finance. The Addis Ababa Action Agenda refers to blended finance as combining concessional public finance with non-concessional private finance. The OECD employs a broader definition that extends beyond concessional finance, as follows: “The strategic use of development finance for the mobilization of additional finance towards the SDGs in developing countries”, where “additional finance” refers primarily to commercial finance that does not have an explicit development purpose.
While international and domestic public finance remains essential to meet the SDGs, public resources alone will not be enough. The challenge is particularly acute in the least developed countries (LDCs), which have experienced a recent decline in official development assistance (ODA). LDCs also often find it difficult to attract private investment, including foreign direct investment. Blended finance offers potential opportunities to increase the resources available to LDCs. But such approaches are not without limitations or risks, and need to be deployed carefully.
This report outlines the latest trends in blended finance approaches in LDCs:
The report also features seven guest pieces by practitioners and experts working in the blended finance space, which showcase the opportunities and challenges of applying blended finance solutions in LDCs. It concludes with a review of the next steps for the blended finance and development communities, and flags some emerging issues revealed.