IFC is a global leader in crowding-in private finance to deliver sustainable impact in the developing world. Blended concessional finance for private sector projects is one of the most significant tools that development finance institutions can use, in cooperation with development partners, to address market failures and to help mobilize private investment in pioneering projects and challenging environments.
IFC defines blended finance as the use of relatively small amounts of concessional donor funds to mitigate specific investment risks and help rebalance risk-reward profiles of pioneering investments that are unable to proceed on strictly commercial terms. Concessional funds are structured as co-investments, with an expectation of reflows for future investments or other uses.
Blended finance solutions at IFC can be structured as debt, equity, risk-sharing, or guarantee products with different rates, tenor, security, or rank. Under select facilities, they can also be performance-based incentive structures. Solutions depend, among other things, on the market barriers and failures that need to be addressed and the requirements of donors.
Blended Finance uses concessional resources strategically and transparently to deliver on impact.
IFC has a well-established, formal, and rigorous approach to blending concessional funds alongside its own capital, including the principles and governance by which it applies such funds.
The use of blended finance allows IFC to fill financing gaps by addressing market barriers and attracting private sector investments to areas of strategic importance with high development impact. As pioneering projects, when successful, blended finance investments pave the way for other investors and help create markets. With increased interest in the use of blended concessional finance in transformative projects, IFC pays particular attention to its ability to measure project outcomes and impact. Read more about IFC’s Anticipated Impact Measurement and Monitoring (AIMM) system.
From fiscal year 2010 to 2020, IFC has deployed $1.6 billion of concessional donor funds to support 266 high-impact projects in over [50] countries, leveraging $5.8 billion in IFC financing and more than $6.8 billion from other private sources.
