This article first appeared on Impact Alpha
Only a very fortunate few people in this world can afford the luxurious experience of being fitted for a bespoke, tailored suit. It is a very expensive, complex, time-consuming process that can only be overseen by masters of their craft. But the end result fits perfectly—literally tailor-made to the customer’s exacting specifications.
Up until now, the world of blended finance has been like stepping into the tailor’s emporium on Saville Row in London or Madison Avenue in New York.
Blended finance can mean different things to different people. But broadly speaking, blended finance brings together public, philanthropic, and private capital into a single investment structure, with each playing a distinct role and bearing different levels of risk and return. When well-designed, these structures enable private investors to access opportunities that would otherwise fall outside of their risk-return thresholds—unlocking new markets, diversifying portfolios, and generating measurable impact. For public investors like development finance institutions such as British International Investment (BII) in the UK and the International Finance Corporation (IFC) in the US, blended finance could be a force multiplier: it allows scarce concessional resources to catalyse significantly greater volumes of commercial capital for development impact.
Except it doesn’t when it comes to blended finance funds. At least not at the scale that makes a real difference on a global level.
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