IFC’s Blended finance practice uses concessional resources strategically and transparently to deliver on impact. This means taking a disciplined and target 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.
IFC has developed strong governance processes to ensure that blended concessional finance principles are consistently applied, including an independent decision-making for allocating development partners’ scarce concessional resources. These processes ensure that that concessional resources are used only when they are truly needed to ensure that a high-impact investment can move forward.
Disclosing Concessionality Levels
In 2019, IFC announced it would hold itself to the highest standards of transparency when deploying concessional resources: IFC now discloses in its Summary of Investment Information, the subsidy levels for each proposed project along with justification for why it is necessary. IFC is the only DFI or blended finance implementer taking this step to date.
Members of IFC’S internal Blended Finance Committee, consisting of senior leadership, are accountable for ensuring that all projects requesting concessional resources adhere to the DFI Enhanced Blended Concessional Finance Principles for Private Sector Projects. Particular attention is paid to calibrate the level of concessionality that a project supported by concessional finance is receiving. The use of blended concessional finance starts with a case by-case analysis to determine the appropriateness of blending concessional public with private finance, specifically, the link to market failures and the effort to avoid undue subsidies to the private sector and undue risk for the public sector.
Read about how concessionality is calculated.