This Brief analyzes the use of blended finance for financial inclusion, leveraging data from Convergence’s historical deals database. Financial inclusion is a cross-cutting theme, which applies to blended finance deals across multiple sectors. One quarter of blended finance deals have provided financing to domestic banks, microfinance institutions (MFIs), or alternative financial service providers (FSPs) to support greater financial inclusion. While the majority of blended finance deals for financial inclusion have focused on access to microfinance (40%) or access to traditional commercial finance (29%), agriculture finance and pay-as-you-go energy (PAYGO) have also been common.
Blended finance for financial inclusion can serve a ‘demonstration effect’ role for impact themes, given its track record and market development. Blended finance should be used to build financially inclusive markets, and practitioners should strive to reduce the amount of concessional capital required over time as the market ‘graduates’ and can attract traditional sources of finance.