How Blended Finance Works

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Blended concessional finance is growing as an important tool for creating markets and stimulating development.

The strategic use of concessional funds for projects with high development impact can catalyze private financing that would not otherwise be available and support the creation of new markets.

IFC has deployed a total of $1.6 billion in concessional donor funds to support 266 high-impact projects in over 50 countries in the decade leading up to June 2020. Growth of the tool has been substantial, with commitments reaching nearly $500 million in fiscal year 2020. The results have been promising—donor funds have leveraged $6.1 billion in IFC financing and more than $7.1 billion from other private sources. While Blended Finance resources can be instrumental in helping move high risk/high impact projects forward, they must be used :

  • effectively to achieve the intended development impact and tackle specific market failures
  • efficiently to make sure that only the minimum concessionality needed is used to catalyze commercial capital, and
  • transparently to enhance the market creation potential of each transaction.

IFC applies a disciplined and targeted approach to blended finance, following five key blended finance principles: rationale for blended concessional finance; crowding-in and minimum concessionality; commercial sustainability; reinforcing markets; and promoting high standards. These principles are also known as the DFI Enhanced Principles for Blended Concessional Finance for Private Sector Projects.