Blended Finance: What it is, how it works and how it is used | Finance

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In recent years, ‘blending’ has become a common development finance term. The practice combines official development assistance with other private or public resources, in order to ‘leverage’ additional funds from other actors. There is some confusion about its meaning, how it works, and how it fosters development, as well as a significant lack of project data. Blending can be problematic: it does not necessarily support pro-poor activities, often focuses on middle-income countries, and may give preferential treatment to donors’ own private-sector firms. Projects may not align with country plans, and commonly fail to incorporate transparency, accountability, and stakeholder participation. This report aims to clarify what blending is, how it works and how it is used, to foster greater understanding of this increasingly prominent development finance mechanism.
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  RESEARCH REPORT FEBRUARY 2017 www.oxfam.org   Port de Pointe-Noire in the Republic of the Congo (Brazzaville), supported by a €328m blended finance package. Photo: Congo Terminal Pointe-Noire.   BLENDED FINANCE What it is, how it works and how it is used JAVIER PEREIRA Independent consultant In recent years, ‘blending’ has become a common development finance term. The practice combines official development assistance with other private or public resources, in order to ‘leverage’ additional funds from other actors. There is some confusion about its meaning, how it works, and how it fosters development, as well as a significant lack of project data. Blending can be problematic: it does not necessarily support pro-poor activities, often focuses on middle-income countries, and may give preferential treatment to donors’ own private-sector firms. Projects may not align with country plans, and commonly fail to incorporate transparency, accountability, and stakeholder participation. This report aims to clarify what blending is, how it works and how it is used, to foster greater understanding of this increasingly prominent development finance mechanism.  2 Blended Finance CONTENTS   List of acronyms 3   Executive summary 5   Introduction 6   1   Blending as a global phenomenon 8   2    Analysis of the sample blending facilities 22   3   Concluding remarks 43    Annex I: Methodology 45    Annex II: Ex ante additionality assessment in EC blending projects 46   Notes 47    Acknowledgements 51    Blended Finance 3 LIST OF ACRONYMS  AECID Spanish Development Cooperation Agency  ADF French Development Agency  AfDB African Development Bank  AfIF Africa Investment Facility  AIF Asia Investment Facility CDB Caribbean Development Bank CEB Council of Europe Development Bank CIF Caribbean Investment Facility CRS Creditor Reporting Service DAC Development Assistance Committee DEG German Investment Corporation DFI Development finance institution DG DEVCO Directorate-General for International Cooperation and Development DGGF Dutch Good Growth Fund EBRD European Bank for Reconstruction and Development EC European Commission ECA European Court of Auditors EU European Union EIB European Investment Bank GFF Global Financing Facility in Support of Every Mother, Every Child HRITF Health Results Innovation Trust Fund IBRD International Bank for Reconstruction and Development IDA International Development Association IDB Inter-American Development Bank IFCA Investment Facility for Central Asia IFP Investment Facility for the Pacific ITF EU-Africa Infrastructure Trust Fund KfW Reconstruction Credit Institute (Germany)  4 Blended Finance LAIF Latin America Investment Facility M&E Monitoring and evaluation NIF Neighbourhood Investment Facility NORAD Norwegian Agency for Development Cooperation ODA Official development assistance OECD Organisation for Economic Co-operation and Development PIDG Private Infrastructure Development Group PPP Public-private partnership PwC PricewaterhouseCoopers RMNCAH Reproductive, maternal, newborn, child, and adolescent health SCDB Seed Capital & Business Development Programme SIMEST Società italiana per le imprese all'estero (Italian DFI) SMEs Small- and medium-size enterprises TA Technical assistance TOSSD Total Official Support for Sustainable Development WEF World Economic Forum
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