Blended Finance in the Least Developed Countries 2019

Abstract

The Sustainable Development Goals (SDGs) are all about transformation -transformation driven by partnerships, risk-taking and innovation.Getting the finance piece of the SDGs right is essential.There is a lot of exciting progress being made, with new tools and instruments helping to mobilise resources for sustainable development.But we are still not moving fast enough if we are to get more finance aligned with our collective aspiration to leave no one behind.Too little private finance gets invested in least developed countries (LDCs).As this report suggests, only 6% of private finance mobilised by official development finance benefits LDCs.With the recent downturn in official development assistance to LDCs, too little international public finance is being invested there as well.If current trends persist, development finance will entrench exclusions and inequalities between and within countries, rather than help overcome and transcend them.That is why we need new ways of channelling more and better-quality public and private, domestic and international financial flows to the world's most vulnerable countries, underserved communities, and projects in the "missing middle".An underlying question of this report is therefore not whether we should pursue blended finance approaches, but how and when we can make them work better for LDCs and for those furthest behind.Indeed, as this report highlights through a mixture of hard data and curated guest pieces, where they are appropriate and carefully deployed, blended finance approaches can be an important part of the financing solution for LDCs.They can help to catalyse much-needed additional resources for SDG-aligned projects that private investors would otherwise overlook. Recent trendsLDCs receive a small piece of the blended finance pie.Of all the private finance mobilised by official development finance interventions between 2012 and 2017, approximately USD 9.3 billion, or 6%, went to LDCs, whereas over 70% went to middle-income countries.Gaps in the data mean it is unclear whether this represents a fall relative to the 7% of private finance mobilised for LDCs observed for 2012-2015.On average, blended finance deals in LDCs mobilise less private finance than those in other developing countries.Over 2012-2017, the average amount of private finance mobilised in LDCs was USD 6.1 million per deal, compared to USD 27 million in lower middle-income countries and over USD 60 million in upper middle-income countries.

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