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 USD 9.3 billion, or 6%, of private finance mobilised went to least developed countries, whereas over 70% went to middle-income countries.
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.