New UNCDF/OECD report Explores Trends and Strategies on Making Blended Finance Work for Least Developed Countries

  • July 15, 2019

  • New York, United States


Blended Finance has the potential be a win-win for the 2030 Agenda - delivering returns on investment with returns on development.

Jorge Moreira da Silva
Director of the Development Co-operation Directorate, OECD

Only 6% of Private Finance Mobilised through Development Finance Reached LDCs, According to New Data Analysis

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 today 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.”

“As more private finance is invested in solving global challenges like climate change and growing inequality, donor countries have a special responsibility to make sure people living in poverty are lifted up as a result. This means not only increasing public finance to least developed countries, but also using aid to attract additional private finance to these contexts,” said Jorge Moreira da Silva, Director of the OECD Development Co-operation Directorate. “Blended Finance has the potential be a win-win for the 2030 Agenda - delivering returns on investment with returns on development - but success will be defined by how far the furthest behind have moved, and the 6% of blended finance currently going to LDCs is a mismatch with this goalpost.”

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.

The twin 21st century challenges of climate change and growing inequality require us to rethink how we finance development and the Sustainable Development Goals.

Achim Steiner
Administrator, UNDP

The twin 21st century challenges of climate change and growing inequality require us to rethink how we finance development and the Sustainable Development Goals,” said Achim Steiner, UNDP Administrator. If this work on blended finance has one message, it is that we cannot get comfortable: we need to forge partnerships, take risks, and challenge ourselves to mobilize sufficient financing for the poorest and most vulnerable countries.”

Other insights and data from the report include:

On average, blended finance deals in LDCs mobilise less private finance than those in other developing countries: Over the 2012-2017 period, the average amount of private finance mobilised in LDCs was $6.1 million per deal, compared to $27 million in lower middle-income countries and over $60 million in upper middle-income countries.

Some LDCs benefit more than others: The top five recipients - Angola, Senegal, Myanmar, Bangladesh, and Zambia - together received approximately 44% of the total volume of private finance mobilised and almost 22.5% of all deals in the LDCs between 2012 and 2017.

Energy as well as banking and financial services are the largest, and growing, sectors: Representing 23% and 19% respectively of the private finance mobilised over the six years analysed. Data for 2016-2017 indicates this share is growing. Education and healthcare are scarcely addressed.

Most mobilised private capital reaching LDCs comes from high-income countries: While LDCs themselves remain a significant source of additional capital, their importance has diminished from 42% of finance mobilised in 2012 to 14% in 2017.

The report goes on to provide specific steps for how to make blended approaches work for LDCs. Such steps include:

Having blended finance solutions respect national ownership, be aligned with national priorities and applied as part of a broader national SDG financing strategy;

Ensuring that blended approaches are transparent and accountable while also avoiding the harm of widening disparities, particularly in crisis-affected contexts;

Utilizing technical assistance to put in place the right capacities and institutions to identify, analyse, and structure blended operations.

While the support required will vary by project type and sector, a flexible and hands-on approach is necessary for blended finance transactions in LDCs; such transactions typically also require greater levels of concessional support than in other developing countries.

“We have documented an extensive pattern of blended finance in lower middle-income countries, and we should plumb that knowledge for solutions that could work in LDCs,” says Joan Larrea, CEO of Convergence, the global network for blended finance, which provided data for the report. “We do know that catalytic funders are going to need to experiment more and take more risks if they are going to attract private sector investors to join them in challenging environments, such as the LDCs.”

Blended Finance in the Least Developed Countries 2019

The research in this report can also help to build bridges between the development and private finance communities. Identifying how best we can achieve our shared objectives, including through blended transactions, is an essential prerequisite for achieving the vision enshrined in the 2030 Agenda.

To access the full report, go to or download below: