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Three years after the adoption of the Addis Ababa Action Agenda and the 2030 Agenda for Sustainable Development, there is a consensus that public and private finance will both be needed – at scale – to meet the SDGs, and that official development assistance (ODA) can and should play a role in catalyzing and accelerating those flows, especially in risky and harder to reach local economies.
Official ODA and domestic public finance remain essential. Still, they will not be enough for LDCs to meet the SDGs. Private investment, including FDI, often bypasses LDCs, a reflection of real risks and the perceptions of risk; a lack of investment-ready opportunities; and weak policy or regulatory frameworks. It is therefore important to understand how these countries can best benefit from the full range of financing sources, including blended approaches.
Blended finance is the strategic use of concessional finance to catalyse additional private-sector or commercial investment in SDG-related investments in developing countries. It is receiving increasing attention for its potential to amplify the impact of concessional resources by sharing risks that adjust risk-return profiles and crowding-in private investors for SDG investments they would otherwise overlook.
While blended approaches seek to increase overall financing for the SDGs, there are not without their risks. Given concerns about LDC governments not being fully involved in decisions about the allocation of concessional resources, for instance, concessional finance providers and donors should ensure that blended transactions align with national priorities and respect national ownership.
In the end, blended strategies should be considered carefully and applied as part of a broader SDG financing strategy. Ultimately, project and country characteristics, macroeconomic conditions and national policy priorities should determine which financing model—public, private or blended—is best suited for which SDG investment.
To examine when and how best to apply blended finance strategies, UNCDF prepared the report ‘Blended Finance in the Least Developed Countries’ in collaboration with the Organization for Economic Co-operation and Development, Southern Voice on Post-MDG International Development Goals, Convergence, and the United Nations Foundation. Through a rich evidence base, data analysis, and detailed case studies, the report explores how to implement and adapt blended finance approaches to the LDCs to maximize their effectiveness in crowding in private capital while minimizing their risks. The report also proposes an Action Agenda that seeks to influence decision-makers in their blended finance approaches.
In the past decade or so, the Southern and East Africa has seen many attempts to apply blended finance solutions to address development challenges. Among others, UNCDF has been piloting various blended finance approaches in different sectors, ranging from municipal infrastructure to mobile money and agent banking. Some of them have proven to be successful, others did not bring about the expected results. It is important to understand why some solutions have worked and other have not, what works best in the regional context, and how the LDCs and emerging economies in Africa can best benefit in practice from such solutions in their efforts to meet the SDGs.
These questions will be discussed at the high level regional event co-hosted by Government of Uganda and the United Nations Capital Development Fund (UNCDF) under the theme “Blended Finance and Leaving No One Behind: Opportunities and Challenges in Southern and East Africa”. The event will focus on highlighting how best blended finance strategies can be deployed to support the achievement of the SDGs. It has three interrelated objectives:
- Present the main findings of the UNCDF report and discuss them with a panel of prominent experts and generate support for its Action Agenda.
- Share the case studies of projects/companies from Southern and East Africa that have used blended finance.
- Discuss the opportunities and challenges for deploying blended solutions in the least developed and emerging economies in Southern and East Africa as a way to create jobs for young people and to leave no one behind.
The event will take place on June 18, 2019, at Hotel Africana, Kampala and will bring together approximately 150 officials consisting of government representatives, development partners, the private sector, academia, government institutions, civil society -- all from the region, including Burundi, Ethiopia, Kenya, Lesotho, Mozambique, Rwanda, Somalia, South Africa, Tanzania, Uganda, Zambia, Zimbabwe - to share ideas and exchange knowledge and experiences on blended finance. The high-level event will be presided over by the Rt. Honorable Prime Minister of the Republic of Uganda Dr. Ruhakana Rugunda who is the guest of honour and Ms. Judith Karl, the Executive Secretary of UNCDF. The programme includes high-level panel and three breakout sessions that will delve into particular aspects of blended finance application: for clean energy, for job creation and economic empowerment of women and youth, and for public sector economic infrastructure development. The high-level event will offer multiple opportunities to discuss in-depth good practices in blended finance and identify solutions that work.