What is blended finance?
Blended finance brings additional commercial money into sustainable development projects in developing countries. Under the OECD definition, development finance may be concessional or non-concessional; what matters is mobilising commercial finance without a development mandate.
Why does blended finance matter to you?
If your company joins such a project, a development bank, fund manager or lender may ask who is providing each layer of finance and on what terms, why development finance is needed, how much commercial finance it mobilises, which party bears each risk and what development result the project is meant to achieve. A public loan on below-market terms does not by itself prove additionality, meaning that it caused commercial investors to provide finance they otherwise would not have provided.
How does blended finance work?
Development finance can be debt, equity, a guarantee, insurance or a grant. It changes a specific risk or return so commercial investors can participate. OECD Guidance 2025 Principle 1 requires a development rationale; Principle 2 requires additionality and more commercial finance. For blended concessional finance in private-sector projects, IFC's enhanced principles also call for minimum concessionality, commercial sustainability and protection against market distortion.
What mistakes should you avoid?
- Calling any public-private funding mix blended finance without showing additional commercial finance.
- Counting a development finance institution's own development-mandate capital as the commercial amount mobilised under the OECD definition.
- Using more subsidy than the identified financing barrier requires.
- Reporting only money committed, with no agreed development result or exit from support.
Is blended finance the same as concessional finance?
No. Concessional finance offers terms more favourable than the market and can be one part of a blend. The OECD definition also allows non-concessional development finance if it mobilises additional commercial finance.
How do you test whether a deal is genuinely blended finance?
Record the financing available without the intervention, the instrument and terms used, the commercial amount claimed as additional, the evidence that the intervention caused that amount, the development result and the planned exit of development support. A commercial-to-development ratio describes the funding mix; it does not by itself establish the causal link.