New UNCDF/OECD report explores trends and strategies on making blended finance work for least developed countries

The world’s least developed countries (LDCs) receive only a small fraction of resources leveraged through blended finance transactions. Of all the private finance mobilised by official development finance interventions between 2012 and 2017, approximately USD9.3 billion, or 6%, of private finance mobilised went to least developed countries, whereas over 70% went to middle-income countries.

This is one of the major findings of a new report launched by the United Nations Capital Development Fund (UNCDF) and the Organisation for Economic Co-operation and Development (OECD): “Blended Finance in the Least Developed Countries 2019.”

The world’s poorest and most vulnerable countries face a massive financing gap to achieve the Sustainable Development Goals (SDGs) by 2030. These countries typically find it difficult to attract private finance, while the recent downturn in official development assistance to LDCs has resulted in too little international public finance being invested in these markets as well. Against this backdrop, there is a growing focus on blended finance – using small amounts of aid money to crowd-in private investors to support projects with development impact they would otherwise overlook. In these settings, blended finance offers potential opportunities to increase the resources available for development. But such approaches are not without limitations or risks and need to be deployed carefully.

“With a decade left before the 2030 deadline, we still have enough time to align our financing flows with our development ambitions. But we need to act now,” said Judith Karl, UNCDF Executive Secretary. “Even with all the renewed focus on development finance and blended finance solutions, the data in this report suggests that the deal for least developed countries, for poor communities, and for the missing middle is not changing. Public and private financial flows risk hardening exclusions between and within countries, rather than overcoming them. If we are to leave no one behind, then we need bold action, partnerships, innovation, and risk-taking to get finance — public, private, and blended — working for those who need it most.”

This report, the second in a series, outlines the challenges and opportunities in making blended finance solutions work for the least developed countries. The report presents the latest available data, which now covers the six years spanning 2012 through 2017, and also offers curated guest pieces from experts and practitioners. Overall, it is intended to challenge the development community to apply blended finance solutions effectively and efficiently in a broader range of countries.

Read and download the report: Blended Finance in the Least Developed Countries 2019

Original source: UNCDF
Published on 15 July 2019