Summary
Blended finance has emerged as a pivotal tool to invite private capital to invest in emerging markets and developing economies (EMDEs). Blended finance combines concessional funding from donors with development finance institutions’ (DFIs’) own resources or commercial capital to develop private markets, support broader development goals, and attract private investment. DFIs can deploy blended finance using financial instruments like first-loss guarantees, subordinated loans, junior equity, or currency swaps.
Blended finance catalyzes investments that would not otherwise occur, creating new markets and driving development impact, from energy and food security to job creation and the growth of micro, small, and medium enterprises. It is especially effective in frontier markets where private capital struggles to flow on a commercial basis and works best as part of an integrated, holistic approach that includes strengthening enabling environments and coordinating across donors, DFIs, the private sector, and platforms to boost scale and impact.
This technical note on blended finance was prepared by the World Bank Group, in collaboration with the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), and the Inter-American Development Bank Group (IDB Group), with contributions from other development finance institutions, at the request of the International Financial Architecture Working Group of the G20 Presidency under South Africa to help inform G20 discussions.
Related Links
