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Digital Subscriptions > > Blended finance: a distorting reality?

Blended finance: a distorting reality?

Development finance institutions have finally come together to lay out the principles of blended finance with the aim of taking public and private investment in the poorest countries from billions to trillions. The challenge now is to keep the market stable.
© Lane Erickson | Dreamstime

The week in development finance many will remember this year is that which set the agenda for blended investment.

At the World Bank’s Paris office on 7 September, officials from development finance institutions and multilateral development banks began the last of three meetings to lay the foundations for policy on this financing mechanism.

Present were members of the European Development Finance Institutions (EDFI), who nine months earlier had drawn up guidance for how to deal with the risks involved in using soft money from donors to mobilise both public and private capital for sustainable development. Under the orchestration of International Finance Corporation (IFC), the meeting ended with a fresh permutation of these principles. Only days later the DFI officials were joined by a much broader group of stakeholders in a senior advisory group of the Organisation for Economic Co-operation and Development (OECD). The advisory group has since brought a new set of high-level policy principles for blended finance to its member states through the Development Assistance Committee.

Soren Andreasen, the general manager of EDFI, who sat through all three sessions, told Development Finance shortly afterwards that he felt confident EDFI had achieved its goal of elevating blended finance on to the agenda of international policymakers.

“My expectation is that we more or less have an agreement there. The meetings build on what EDFI proposed at the end of last year, but now we have a very wide range of institutions supporting this,” Andreasen said. “We had a lot of discussions and shared a lot of experiences. The IFC has been the secretariat for the exercise and has done a really good job.”

Multilateral banks convened again on 15 October to endorse the consensus. Two weeks later, the Development Assistance Committee approved new guidance measures for blended finance, cementing its place in the development finance architecture.

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