Convergence Eventbrite

__Wednesday, July 21 2021, 9am – 11:30am Singapore time (GMT +8):__

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This 2.5-hour (150 minutes) interactive training will cover:

- Overview of the role and activity of MDBs/DFIs in the blended finance ecosystem
- The rationale and considerations for MDBs/DFIs to leverage blended finance as a structuring approach
- Case studies on blended finance transactions with MDB/DFI participation
- Recommendations on how best to actively engage and mobilize MDB/DFI capital into transactions  

Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) are amongst the most prominent actors in the blended finance ecosystem, accounting for over a third of all transactions in the Convergence database since 2017. In this training participants will get an overview of how this particular stakeholder group approaches blended finance transactions and learn from real life case studies in which MDBs/DFIs have participated. Convergence members will share their insights, and participants will discuss current initiatives in small groups.

This is the first training in our five-part series “How Investor Types Blend”. 

*The training has limited space to ensure an intensive and practice-driven learning experience. Each Convergence member organization has two complimentary seats in each training, please apply the __discount code__ you received by e-mail. Non-members can register for a fee of USD150.*

How MDBs/DFIs Blend (Asia/West Coast)

'How MDBs/DFIs Blend' is the first training in Convergence's series "How Investor Types Blend".

How MDBs/DFIs Blend, Asia/West Coast

__Tuesday, July 20 2021, 9am – 11:30am Eastern time (GMT -4):__

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This 2.5-hour (150 minutes) interactive training will cover:
- Overview of the role and activity of MDBs/DFIs in the blended finance ecosystem
- The rationale and considerations for MDBs/DFIs to leverage blended finance as a structuring approach
- Case studies on blended finance transactions with MDB/DFI participation
- Recommendations on how best to actively engage and mobilize MDB/DFI capital into transactions  

Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) are amongst the most prominent actors in the blended finance ecosystem, accounting for over a third of all transactions in the Convergence database since 2017. In this training participants will get an overview of how this particular stakeholder group approaches blended finance transactions and learn from real life case studies in which MDBs/DFIs have participated. Convergence members will share their insights, and participants will discuss current initiatives in small groups.

This is the first training in our five-part series “How Investor Types Blend”. 

*The training has limited space to ensure an intensive and practice-driven learning experience. Each Convergence member organization has two complimentary seats in each training, please apply the __discount code__ you received by e-mail. Non-members can register for a fee of USD150.*


How MDBs/DFIs Blend (Europe/East Coast)

*This webinar is happening on May 20, 2021 - 9 PM EST / 9 AM (May 21) SGT, HKT*

Convergence is currently accepting applications for the [Indo-Pacific Design Funding Window](https://www.convergence.finance/design-funding/open-window/indo-pacific-open-window), which funds the design of blended finance structures that target at least one of the following:

1) Climate finance

2) Gender equality

To ensure applicants submit their strongest proposals, we are hosting a webinar to offer insights on this Design Funding window and Convergence's selection process.

Register for the webinar today to:

- Get your Design Funding questions answered
- Get insight into our decision making process

The next submission deadline is __June 30, 2021__, for the Indo-Pacific Window. Complete eligibility & evaluation criteria are [here](https://www.convergence.finance/design-funding/open-window/indo-pacific-open-window).

Convergence's Design Funding program supports the design and launch of new blended finance solutions that aim to catalyze private investment in developing countries and towards the Sustainable Development Goals. Since the establishment of the program, Convergence has awarded nearly USD 7 million in funding to 23 solutions, which have gone on to mobilize over USD 650 million from public, philanthropic, and private investors.


 The Indo-Pacific Design Funding Window - How to Apply (For those based in Asia)

Convergence is currently accepting applications for the Indo-Pacific Design Funding Window, which funds the design of blended finance structures that target climate finance and/or gender equality. 

The Indo-Pacific Design Funding Window

In January 2021, the United Nations published the [Adaptation Gap Report 2020](https://www.unep.org/resources/adaptation-gap-report-2020#:~:text=The%20UNEP%20Adaptation%20Gap%20Report%202020%20finds%20that%20while%20nations,floods%20and%20sea%2Dlevel%20rise.), warning of "huge gaps" in financing climate adaptation. Unfortunately, this gap is even more pronounced for women who are disproportionately impacted by climate change.

The [Women Impact Investment Network](https://www.wiin-network.com/) (WIIN) and Convergence, jointly invite you to a conversation about how this financing approach can address the gender-climate change nexus.

Host: Dipa Sharif-Ahmed (WIIN Co-Founder), Director, AV Ventures

Panelists:

[Andrew Apampa](https://www.convergence.finance/about/team/6vagDS0aL4cusKnOrWB6o), Senior Associate, Convergence

[Ayesha Bery](https://www.convergence.finance/about/team/3u0qeg7AKQCWmoY2QwG0s4), Senior Associate, Convergence

Moderator: Holly Li (WIIN Board Member), Managing Director, Polymer Wealth Management (HK)

Webinar Details:

Date: Wednesday, May 19th, 2021
Time: 12:00pm-1:15pm Eastern Daylight Time

Blended Finance and the gender & climate change nexus

The Women Impact Investment Network (WIIN) and Convergence, jointly invite you to a conversation about how this financing approach can address the gender-climate change nexus.

*This webinar is happening on May 18, 2021 - 10 AM EST / 4 PM CET*

Convergence is currently accepting applications for the [Indo-Pacific Design Funding Window](https://www.convergence.finance/design-funding/open-window/indo-pacific-open-window), which funds the design of blended finance structures that target at least one of the following:

1) Climate finance

2) Gender equality

To ensure applicants submit their strongest proposals, we are hosting a webinar to offer insights on this Design Funding window and Convergence's selection process.

Register for the webinar today to:

- Get your Design Funding questions answered
- Get insight into our decision making process

The next submission deadline is __June 30, 2021__, for the Indo-Pacific Window. Complete eligibility & evaluation criteria are [here](https://www.convergence.finance/design-funding/open-window/indo-pacific-open-window).

Convergence's Design Funding program supports the design and launch of new blended finance solutions that aim to catalyze private investment in developing countries and towards the Sustainable Development Goals. Since the establishment of the program, Convergence has awarded nearly USD 7 million in funding to 23 solutions, which have gone on to mobilize over USD 650 million from public, philanthropic, and private investors.


 The Indo-Pacific Design Funding Window - How to Apply (For those based in North America & Europe)

Hosted by the UN Peacebuilding Support Office, the German Federal Foreign Office, and the Republic of Colombia. 

The financing landscape for peacebuilding, development and humanitarian affairs is increasingly diversified. While an array of innovative financing instruments for the mobilization of private funds – such as blended finance, impact bonds and guarantees – has become available, implementing such instruments towards peacebuilding efforts is particularly challenging in conflict-affected settings. 

Join this event where our CEO Joan Larrea will moderate an expert roundtable on Blended Finance for Peacebuilding, with:

Mr. Bernt Brun, Vice President, Norfund

Ms. Fanta Conde, Deputy Head West Africa Advisory, CrossBoundary

Ms. Zodwa Mbele, Executive Manager, Development Bank of Southern Africa

Mr. Pontus Ohrstedt, Chief of the UN Resident Coordinator’s Office, Colombia

Mr. Jean-Philippe De Schrevel, Founder & Managing Partner, Bamboo Capital

Ms. Kruskaia Sierra-Escalante, Acting Director / Senior Manager, Blended Finance, International Finance Corporation

Innovative Financing for Peace: Finding new solutions to meet local peacebuilding needs

Blended finance and peacebuilding

*Recommendations and a practical agenda for deploying blended finance to scale investments and developmental impact in food and agriculture.*

__About this Event__

In January 2021, the Smallholder and Agri-SME Finance and Investment Network (SAFIN) and Convergence co-published a paper outlining practical steps and recommendations for deploying blended finance to achieve scale both in financial mobilization and in development impact in food and agriculture.

On May 6th, SAFIN and Convergence will discuss recommendations from the paper and a practical agenda for action with a panel of donors, private investors and financial service providers.

The event will take place on __May 6 from 9:00 - 10:00AM EDT__. 

__About the hosts__

Convergence is the global network for blended finance, generating data, intelligence, and deal flow to increase private sector investment in developing countries. Convergence’s Design Funding program supports the design and launch of new blended finance solutions that aim to catalyze private investment in development countries toward the Sustainable Development Goals. The Asia Natural Capital Design Funding Window provides funding for the design and launch of blended finance solutions focused on natural capital in Asia.

Convergence accepts applications on a rolling basis, and the next deadline for the window is June 3, 2021. [Click here for more details](https://www.convergence.finance/design-funding/open-window/asia-natural-capital-open-window).

[Smallholder and Agri-SME Finance and Investment Network (SAFIN)](https://www.safinetwork.org/) is an inclusive partnership of actors operating in different parts of the ecosystem for agri-food and rural small and medium enterprise (SME) investment, with a focus on access to finance and complementary services. The network is currently facilitated by a team housed within the International Fund for Agricultural Development (IFAD). It comprises about 50 institutions from the private, public and philanthropic sectors, including governments, different types of finance providers and financial intermediaries, development banks, and farmers' organizations.

Deploying Blended Finance to Scale Investments in Food and Agriculture

Recommendations and a practical agenda for deploying blended finance to scale investments and developmental impact in food and agriculture.

Blended finance for food and agriculture

The Dutch Fund for Climate and Development (DFCD)is organizing interactive events focused on Uganda, Kenya and Bangladesh to discuss the local climate challenges and how the DFCD could support potentially bankable climate projects in scaling successfully, and generating social and environmental development in these countries. 

The Scalable Climate Solutions Challenge is looking for projects that provide climate-resilience and large-scale impact in climate-vulnerable landscapes. One project per country will be provided with a development contribution of up to € 350,000 from the existing DFCD Origination facility, get a chance to present their project at COP26 in Glasgow and become eligible for larger support from DFCD. Do you have or know a project with a scalable business model that contributes to improving the quality and management of water, the resilience of agriculture or the health and diversity of ecosystems in Uganda, Kenya or Bangladesh that would be up for this Challenge and can benefit from our support? Or do you just want to learn more about the Challenge? DFCD encourages all stakeholders to participate.  

*__Please check your own time zone__*

__Uganda: 22 April at 9:00 am CET (or 10:00 Uganda Time)__

__Bangladesh: 28 April at 10:00 am CET (or 14:00 Bangladesh Time)__ 

__Kenya: 6 May at 10:00 am CET (or 11.00 Kenya Time)__

Register yourself and share the link with others:
[https://www.thedfcd.com/challenge/live](https://www.thedfcd.com/challenge/live "DFCD Scalable Climate Challenge")

Want to know more? [Visit www.thedfcd.com/challenge](https://www.thedfcd.com/challenge/ "DFCD Scalable Climate Challenge") or reach out to info@thedfcd.com for further questions. 

To directly apply click on the link below:
[https://airtable.com/shrV3PUGJ6Tmdyvco](https://airtable.com/shrV3PUGJ6Tmdyvco)

DFCD Scalable Climate Solutions Challenge in Uganda, Kenya and Bangladesh

The Dutch Fund for Climate and Development (DFCD)is organizing interactive events focused on Uganda, Kenya and Bangladesh to discuss the local climate challenges and how the DFCD could support potentially bankable climate projects in scaling successfully, and generating social and environmental development in these countries. 

DFCD Scalable Climate Solutions Challenge

Convergence and The Conservation Finance Alliance are co-hosting a webinar to share challenges and opportunities in designing financing structures for nature-based solutions.

Convergence and the CFA are bringing together practitioners to discuss lessons learned and challenges encountered in early stage design work of natural capital and conservation finance structures.

Convergence’s [Asia Natural Capital Design Funding Window](https://www.convergence.finance/design-funding/open-window/asia-natural-capital-open-window "Convergence | Asia Natural Capital Design Funding Window") provides grants for the design and launch of blended finance solutions focused on natural capital in Asia. The CFA’s [Incubator](https://www.conservationfinancealliance.org/incubator "CFA Incubator") program seeks to identify, support, and promote innovative ideas and solutions to conservation finance challenges that have significant positive conservation impacts. The webinar will feature past grant recipients and program participants, who will share their practical insights.

Convergence accepts applications on a rolling basis, and the __next deadline for the Asia Natural Capital Window is June 3rd, 2021__. 

Designing Financing Structures  for Nature-based Solutions (Asia)

Convergence and The Conservation Finance Alliance are co-hosting a webinar on April 22nd to share challenges and opportunities in designing financing structures for nature-based solutions.

Designing Financing Structures  for Nature-based Solutions

Designing Financing Structures  for Nature-based Solutions (US/Europe)

Convergence and The Conservation Finance Alliance are co-hosting a webinar on April 20th to share challenges and opportunities in designing financing structures for nature-based solutions.

The natural world underpins our economies, with more than 44 trillion USD of economic value generation, half the world’s GDP, moderately or highly dependent on this critical asset. Nature is central to supply chains and raw materials, supporting the businesses we finance, invest in and insure - and yet it is increasingly under threat. 

As part of the [Sustainable Investment Forum 2021](https://events.climateaction.org/sustainable-investment-forum-europe/ "Sustainable Investment Forum 2021"), this session will explore how European investors can move from the case for investing in nature to meeting the conservation finance gap at scale. This shift presents many business opportunities for European investors, with the support of blended finance and strategic public investments in accelerating nature finance. 

__Joan M. Larrea, CEO of Convergence, will participate on the panel to discuss how blended finance can help accelerate nature finance.__ 

UNEP FI Panel on Nature & Biodiversity

This session will explore how European investors can move from the case for investing in nature to meeting the conservation finance gap at scale. This shift presents many business opportunities for European investors, with the support of blended finance and strategic public investments in accelerating nature finance. 


The Island Finance Forum brings together senior financiers, development partners and regulators to share and exchange expertise on sustainable and inclusive financial structures in island communities. The Forum aims to highlight the unique financial challenges faced by global island communities and the solutions for sustainable economic recovery and inclusive growth in a post-pandemic world.

The Island Finance Forum will:
1. Bridge the gap between sustainable development practitioners and financial stakeholders.
2. Help island stakeholders access expert knowledge and financial opportunities available to them.
3. Showcase the economic opportunities available from investing in the sustainability sector on islands – particularly impact investing and ESG.

Register now to attend the various online sessions taking place 14-15th April 2021.

 Island Finance Forum 2021

The Island Finance Forum brings together senior financiers, development partners and regulators, highlighting the unique financial challenges faced by global island communities, and the solutions for sustainable economic recovery and inclusive growth in a post-pandemic world.

In March 2021, the United Nations (UN) [Joint SDG Fund](https://www.jointsdgfund.org/) and Convergence announced [$41 million in commitments](https://www.convergence.finance/news-and-events/news/30u4T2V4OOHIImsclOFQ9k/view) through [SDG Invest ](https://sdginvest.jointsdgfund.org/)to catalyze strategic financing to accelerate the Sustainable Development Goals (SDGs). 

SDG Invest provides catalytic grants to UN country teams and their partners to develop and implement innovative blended finance initiatives. In addition to financial support, SDG Invest also provides coaching and mentoring to deal sponsors, investor matching and facilitation, and opportunities for peer-to-peer learning. Over the past year, Convergence led a rigorous process to evaluate and recommend initiatives to receive funding under the first round of SDG Invest. We also worked with SDG Invest to provide technical assistance and support to applicants throughout the process. Ultimately, Convergence recommended proposals from Fiji, Indonesia, Malawi, and Uruguay for funding, which are anticipated to mobilize an estimated $4.7 billion in additional finance from private, public, and philanthropic investors.

Convergence was a natural partner for this initiative. Our [Market Acceleration and Design Funding program ](https://www.convergence.finance/design-funding)supports funders in deploying early stage grant capital toward innovative blended finance initiatives. Since its inception in 2016, the program has supported 23 blended finance solutions which have gone on to mobilize over $650 million in additional capital. Convergence also maintains the largest and most detailed database of historical blended finance transactions in the market, which allowed us to perform a comparative analysis of these transactions to the proposals submitted to SDG Invest.

With this perspective, we reflected on some learnings from this first round of funding from SDG Invest.

__SDG Invest can harness the global reach of the UN__

Harnessing the global reach of the UN system, SDG Invest was able to cast a wide net to solicit innovative proposals. Through the first call for proposals, the fund was able to solicit initiatives from countries and regions that are under-represented in blended finance, based on Convergence’s historical deals database, particularly from a range of Small Island Developing States (SIDS). Historically under-represented sectors such as water infrastructure, waste management, health, and tourism were also heavily featured across proposals. SDG Invest’s ability to source initiatives from countries and sectors that have previously struggled to attract blended finance has the potential to contribute to market building and ultimately catalyze additional investment into these regions and sectors. 

__A regional approach may enhance investable transactions__

Nearly half of historical blended finance transactions captured by Convergence have been implemented across multiple countries. On average, these deals have been able to raise more capital than transactions implemented in single countries. For the first round of funding, SDG Invest solicited proposals primarily from single-country initiatives, which leveraged the deep network of UN country teams and highlighted their on-the-ground knowledge of local markets and context. However, taking a regional approach may open the fund up to a broader set of bankable blended finance initiatives and may enhance the investability of initiatives with small target markets, while continuing to benefit from local market knowledge. 

__Focus and standardization are important for scale__

Many initiatives submitted through the first call sought to implement a complex set of interventions, each with bespoke financial and governance structures and implementing agents. While the UN country teams may be correct in identifying a multitude of development finance challenges faced in target markets, taking a focused approach is critical to attract investment. Mobilizing private sector capital to the SDGs at scale requires the participation of investors who crave standardized products that are familiar and accessible. These investors may be incentivized to deploy capital to nascent sectors and regions, but only if they can be presented with blended finance approaches that are straightforward and standardized.

__Support to practitioners is crucial__

Each of the shortlisted UN Country Teams were provided with design funding and technical assistance, support in identifying local consultants to aid in proposal development, and tailored feedback on initiatives. The fund also established investor advisory groups to act as an expert sounding board for applicants. More of this type of support is needed in the market, and the feedback from the teams indicated that both funding and advisory support were highly valued throughout the proposal development process. 

SDG Invest’s first call for proposals resulted in significant learnings that can be taken forward through subsequent rounds, with an opportunity to evolve and continue to support blended finance practitioners globally. Together, Convergence’s unique market position and the UN’s global reach are enablers for catalyzing blended finance solutions to achieve the SDGs.

For a more detailed perspective, please read our technical white paper [here](https://www.jointsdgfund.org/publication/reflections-recommendations-component-2-joint-sdg-fund).


SDG Invest provides catalytic grants to UN country teams and their partners to develop and implement innovative blended finance initiatives.

SDG Invest: Four takeaways from its first round of funding

Tanzania Agricultural Development Bank ([TADB](https://www.tadb.co.tz/)), also known as the Farmer’s Bank, is a national development finance institution (DFI) established in 2015 to finance the country’s agricultural sector. Broadly, TADB’s mandate is to facilitate the transformation of the agriculture sector from subsistence level farming activities to more commercialized modern farming practices and agri-businesses, with the goal of contributing to Tanzania’s economic growth, poverty reduction, food security, and self-sufficiency.

At a macro-economic level, agriculture is significant to the economy of Tanzania, it contributes to 29% of the country’s GDP and provides employment to over 65% of the country’s working population. Despite its importance, private sector lending to the agriculture sector has historically been low, with constrained financing, particularly to smallholder farmers and SMEs, an impediment to sector growth. 

To increase financing in the agricultural sector, TADB utilizes a variety of blended finance interventions, including co-financing arrangements with partner banks, provision of de-risking instruments, matching grant programs, interest rate grants and buy-backs, and provision of liquidity to financial actors.   

We spoke to Japhet Justine, Managing Director of TADB about the agriculture financing gap, capital markets development in Tanzania, their flagship Smallholder Credit Guarantee Scheme (SCGS), and much more. 

__UNCTAD recently estimated that there’s an annual financing gap of USD 260 billion when looking at the investment needs for food and agriculture in developing countries. In concrete terms, how is TADB using blended finance approaches to narrow this gap? __

The bank has developed and deployed several blended finance interventions to narrow the agriculture financing gap. I’ll just mention a couple here. 

First, we have adopted the Integrated Value Chain Financing (IVCF) model, where solutions are being developed and deployed to ensure impact is created along the full value chain, from production to markets. This IVCF model is used alongside blended financial instruments to deliver interventions that create sustainable socio-economic impact. Our model and instruments have resulted in strong partnerships with private sector financial institutions as opposed to competition and/or the crowding out of these institutions from the agricultural sector. 

A good example of this is our [Smallholder Credit Guarantee Scheme](https://www.tadb.co.tz/wp-content/uploads/2020/07/SMALL-HOLDER-credit-Guarantee-scheme.pdf) (SCGS), which catalyzes credit access for smallholder farmers to increase production and livelihoods. The USD 25 million fund is aimed at de-risking and providing liquidity to banks and financial institutions to catalyze financing for smallholder farmers and agri-SMEs. The scheme works by providing commercial banks with a 50% credit risk guarantee to enhance loan collateral, it goes a step further and provides the partner financial institutions with liquidity of up to 50% of the approved loan amount, which they then blend with their own funding and advance as agri-loans to smallholder farmers. 

Additionally, through partnerships with private sector financial institutions, TADB engages in co-financing arrangements. With this intervention, TADB plays a catalytic role by mobilizing resources from its own balance sheet and blending these funds with financing from commercial banks and development partners in the form of debt, equity, and/or grants to support agri-sector projects. The approach works as follows; TADB works with clients to design and structure agri-sector projects with developmental impacts. Thereafter, the bank provides long term debt financing to support the capital expenditure of the project, this financing is usually advanced at concessionary rates hence providing the beneficiaries with affordable credit access that would not be available from conventional financial institutions. We then work with commercial banks by crowding in private sector credit to provide short term working capital facilities required to operate the projects. TADB may also bring in other development partners to provide grants and technical assistance to the project. This approach has helped build credit appetite of conventional banks on projects that would ordinarily not have been able to raise commercial debt financing – which is the result of other financiers finding comfort in TADB’s participation and backing.

Another concrete example is the TADB [Matrekta](https://www.youtube.com/watch?v=QBRDh5X217I&feature=youtu.be) loan product, which is an intervention to reduce drudgery for smallholder farmers through affordable mechanization and equipment loans under the Bank’s [Mechanization  Program](https://www.youtube.com/watch?v=QBRDh5X217I). The product blends TADB funding with interest reduction grants from mechanization suppliers. Through this program, TADB has been able to provide mechanization loans at interest rates of between 12-15% p.a compared to industry interest rates of up to of 30%. The success of this product has led to other commercial banks leveraging TADB’s experience and replicating similar products.

Finally, TADB’s investment philosophy has centered on showing other market actors the potential for financing agriculture, particularly when they see the opportunities as having a high degree of risk. For example, TADB supported the revitalization of the country’s coffee and [cotton ](https://www.youtube.com/watch?v=NBuRJII5rbk)sectors by investing over TZS 114 billion (~USD 49 million) to revive 4 coffee unions and TZS 46 Billion (~USD 19.8 million)  to revive 3 cotton unions positively impacting over 157,000 smallholder farmers. TADB’s intervention ultimately lead to more credit appetite at the commercial bank level.

__Where does the most potential for blended finance lie within the value chain financing model adopted by TADB (e.g., in production, processing, aggregation, storage)? __

In our opinion, the greatest opportunity to leverage blended finance lies in the processing component of the IVCF model. Tanzania still exports a large component of its agricultural output in a raw state, hence exporting jobs and incomes. To positively contribute to the economic growth and job creation potential of the agricultural sector, we see agro-processing as one of the areas that require concerted efforts from development partners, the public sector, and the private sector.  Beyond creating jobs, agro-processing also expands and provides sustainable local markets for smallholder farmers. 

To this end, we see opportunities in increasing support for both SMEs and large corporates in agro-processing through a multitude of instruments along the debt-equity spectrum. On the debt front, we see opportunities for more banks to actively finance agri-SMEs and link agri-SMEs to large corporate off-takers with financial products such as short-term loans, supply chain financing, and factoring and invoice discounting solutions. Smaller enterprises still struggle with collateral, so credit guarantees from DFIs can also be powerful instruments to support this segment. 

On the equity front, we note that many SMEs still rely on bootstrapping as a form of funding in the early stages of operations, with debt financing being used once the company has built a sufficient track record and collateral. However, debt financing is limited by regulations and the credit risk appetite of the financial institutions concerned. This presents opportunities for equity funding from venture capital, private equity (particularly permanent capital vehicles (PCVs) that have long investment horizons), and public share issuances to provide patient capital to scale operations. The local private equity and venture capital space is still highly underfunded. Tanzania receives only 2% of private equity and venture capital financing that flows into East Africa, despite being the second largest economy in the region. 

Lastly, to achieve the necessary impact and scale to transform and grow agro-processors, development partners have a key role to play by increasing access to concessionary wholesale funding to financial institutions.

__Can you tell us more about the Smallholder Credit Guarantee Scheme (SCGS)? To date, how much additional financing was extended by partner financial institutions? Can you share any numbers/data on the development impact?__

The SCGS has led to new financing in excess of USD 33 million to support smallholder farmers and small enterprises with strong linkages to smallholder farmers. The socio-economic impact has been extensive. To date the scheme has supported over 11,200 direct beneficiaries and 755,000 indirect beneficiaries through 10 partner financial institutions. Farmers have been able to increase acreage and production, thereby improving their household incomes. Additionally, the scheme has supported the financial inclusion agenda, as all beneficiaries are required to maintain bank accounts to facilitate access to the supported products.  Furthermore, because of the scheme, financial institutions that previously shied away from agri-lending have started offering agri-loans to farmers.

An interesting outcome of SCGS has been how it has used its concessionary liquidity component to mandate partner financial institutions to reduce interest rates to smallholder farmers, from prior interest rates of 19-30% to current interest rates ranging between 14%-19%, thereby reducing the debt burden and improving affordability for smallholder farmers. 

Finally, the SCGS also supports [women smallholder farmers and enterprises](https://www.youtube.com/watch?v=c1ETbGagIzo), with 20% of the directly impacted beneficiaries being women.  

__Where do you see the opportunities in leveraging blended finance-based approaches to mobilize additional private investment in the sector?__

At an instrument level, we see opportunities for greater participation of development partners in providing concessionary financing, more private equity and venture capital financing, and grants aimed at supporting research and development and technical capacity building at farm, agribusiness, and financial institution levels.

However, what I want to focus on, which is specific to Tanzania, is increasing access to equity capital and strengthening and deepening capital markets. 

Currently, Tanzania’s capital markets are still at a nascent stage with a total market capitalization of TZS 16.5 trillion (~USD 7.1 billion). The Dar es salaam Stock Exchange (DSE) can be utilized to raise equity and debt financing through public share and bond issuances with raised financing blended with development and commercial bank financing.  The DSE has established the Enterprise Growth Market window which has less onerous listing requirements in efforts to attract SMEs (important actors in the agriculture sector). There is potential for agriculture sector actors, particularly emerging corporates, to utilize such windows to raise funds. 

To spearhead this, development partners that provide long term concessionary financing can support capital markets fundraising by providing technical assistance support and introducing covenants that require beneficiaries to access a portion of their financing through capital markets to be eligible for additional concessionary financing. 

The beauty of capital markets development, especially in the blended financing ecosystem, is their catalytic role in crowding in financing from various investors and in providing investors with exit options at the end of their preferred investment horizon, which is a prerequisite for many private equity and venture capital investors. Furthermore, capital markets can be used to mobilize private savings of Tanzanians in the country and the diaspora to become indirect participants in the country’s agri-industrial transformation.

Additionally, we would like to see the use of more blended financing models to scale financing solutions for women beneficiaries, as they face more hurdles in accessing finance, for many reasons, including inadequate collaterals.


An interview with Japhet Justine, Managing Director at Tanzania Agricultural Development Bank, on their use of blended finance. 

Blended finance at Tanzania Agricultural Development Bank

Member spotlight with Japhet Justine, Managing Director of Tanzania Agricultural Development Bank (TADB)

__Toronto, June 3 2021__ - Convergence awards a feasibility study grant to the Wildlife Conservation Society (WCS) to develop a blended finance solution in Indonesia that increases access to credit and training for smallholder coffee farmers to engage in sustainable agriculture — with the end goal of strengthening smallholder livelihoods while protecting critical habitat and preserving biodiversity. This grant is awarded through the [Asia Natural Capital Design Funding Window](https://www.convergence.finance/design-funding/open-window/asia-natural-capital-open-window), co-designed with and funded by the [RS Group](http://www.rsgroup.asia/), a Hong Kong based family office. 

Commodity driven deforestation is an important driver of tree cover loss in Indonesia. Major gains have been made in reducing deforestation within commodity supply chains in recent years, and the development of new initiatives that support smallholder farmers to transition to sustainable production models are critically important in maintaining this momentum. Investments at the forest frontier, with the right management measures in place, can also play a major role in reducing deforestation and forest degradation. However, these investments are often deemed high risk, meaning they exist outside the scope of traditional investments. 

The grant to WCS will explore the feasibility of establishing the Bukit Barisan Selatan (BBS) Landscape Fund, a blended finance fund tied closely to conservation outcomes that provides targeted technical assistance and capacity building to smallholder farmers adjacent to the Bukit Barisan Selatan National Park in Sumatra. To mobilize domestic lending to smallholder farmers, the Fund will also seek to develop a credit enhancement mechanism for local financial institutions.

“What got us excited about the BBS Landscape fund was that it offered an elegant solution to a tricky development challenge,” says Joan Larrea, CEO at Convergence. “The blended fund model proposed will first tackle the social dimension of deforestation, namely the marginalization of smallholders in sustainable/deforestation-free supply chain efforts, which then leads to preserving and protecting these priceless habitats. It really gets to the root of the problem.”

The BBS Landscape Fund, once fully mobilised, will have the potential to support the livelihoods of over 20,000 farmers by increasing the productivity of their coffee production, providing access to markets, and building their technical, financial, and organizational capacities. These investments in turn could catalyse a reduction in over 20,000 hectares of deforestation, avoiding over 13 million megatonnes of CO2 emissions through 2050, and supporting the protection of the BBS National Park, a critical habitat for iconic species such as the Sumatran tiger. 

“With this grant we have an exciting opportunity to demonstrate both the business case and the conservation benefit of carefully targeted investments in sustainable agriculture at the forest and farm frontier in Sumatra. By exploring the feasibility of this Fund in the Bukit Barisan landscape we’re also able to build upon a longstanding partnership with the National Park and local communities in the area, giving us the best possible chance for success.” says Matt Leggett, Associate Director, Sustainable Commodities at WCS.

“For over 20 years, WCS has been partnering with the Ministry of Environment and Forestry to conserve Indonesia’s unique forest and biodiversity, including in the Bukit Barisan Selatan National Park. We’re excited to see how this feasibility study could support coffee farmers at the forest frontier, protect wildlife habitat, and provide much needed financing in support of conservation”, says Noviar Andayani, Country Director of WCS’s Indonesia Program.

*The Asia Natural Capital Design Funding Window is currently accepting applications, with an upcoming deadline of September 24th, 2021. Please visit our [website](https://www.convergence.finance/design-funding/open-window/asia-natural-capital-open-window) for more details. *

__About Convergence’s Design Funding Program__

Convergence’s Design Funding Program provides early-stage capital to support blended finance solutions in frontier markets and nascent sectors in order to accelerate the number of investible transactions targeting the SDGs. Initiated, co-designed, and funded by the [RS Group](http://www.rsgroup.asia/) with $3 million in funding, the [Asia Natural Capital Design Funding Window ](https://www.convergence.finance/design-funding/open-window/asia-natural-capital-open-window)supports blended finance solutions that find new ways to enhance and protect the world's stock of natural assets, including water, land, soil, air, plants, and animals, by attracting private investment at scale. This design funding program is the first of its kind focused on the Asia and Pacific. Please visit Convergence’s [Design Funding page](https://www.convergence.finance/design-funding) for submission deadlines as well as other open windows. 

__About Convergence__

Convergence is the global network for blended finance. On top of market acceleration through its Design Funding program, Convergence generates blended finance data, intelligence, and deal flow to increase private sector investment in developing countries. Convergence’s global membership includes over 200 public, private, and philanthropic investors as well as sponsors of transactions and funds. To learn more, visit [www.convergence.finance](https://www.convergence.finance/).

__About the Wildlife Conservation Society (WCS)__

[WCS ](https://www.wcs.org/)is a US non-profit established to save wildlife and wild places worldwide. WCS currently works in more than 60 countries and has helped to establish over 150 protected areas across the globe. WCS has been working to protect biodiversity in Indonesia since 1965 and has been active in the Bukit Barisan Selatan landscape for over 20 years. 

__Media Contact__

Sijia Yi 
Head of Communications 
Convergence Blended Finance 
Tel.: +1 647-573-5993 
sijia.yi@convergence.finance

Convergence awards a feasibility study grant to the Wildlife Conservation Society (WCS) to develop a blended finance solution in Indonesia that increases access to credit and training for smallholder coffee farmers to engage in sustainable agriculture.

Grant for Sustainable Agriculture in Indonesia

Convergence Provides Funding to Protect Critical Habitat and Advance Sustainable Agriculture in Indonesia

Investing in agriculture is central to achieving the UN Sustainable Development Goals (SDGs). Agriculture is a major component of national GDP in many developing countries; the vast majority of the world’s poor live in rural areas and increased productivity in agriculture has an outsized impact on reducing extreme poverty. However, high transaction cost/return ratios and information asymmetries are some of the challenges the sector faces in attracting financing. Blended finance can help [de-risk](https://www.convergence.finance/resource/5ecd4fe4-53ca-4b56-a3ca-5510e8fb8df5/view) agricultural transactions, reducing transaction costs and attracting private financing by improving the risk-return ratios of near-bankable transactions.

Convergence’s latest [Data Brief](https://www.convergence.finance/resource/0fdfc957-abd8-4a55-a315-36ac28cb1559/view) explores how blended finance approaches have been deployed in agriculture to date, presenting insights from interviews conducted with key industry stakeholders. The Convergence database has recorded 146 blended finance transactions targeting the agriculture sector and/or SDG 2 (Zero Hunger). As Figure 1 shows, this represents aggregate committed financing of USD 13.4 billion. Agri-transactions most often target agricultural inputs / farm productivity (36% of agri-transactions) and agri-finance (35%), although our interview respondents noted the increasing importance of climate-resilient / sustainable agriculture (18%), with agribusinesses under increased pressure to ensure sustainability within their supply chains, down to the primary farmer. 

Below are some key takeaways from the Brief.

__Funds are the most common vehicle type in blending for agriculture:__
Funds account for 53% of agri-transactions (vs 39% of all blended finance transactions in our database), while projects are less prominent compared to the wider blended finance market (12% vs 24% of all). This is because [standardized funds](https://www.convergence.finance/resource/1qEM02yBQxLftPVs4bWmMX/view) can better mobilise at scale, with our respondents also noting that funds can make their facilities available to local banks with retail distribution networks to better reach local farmers. 

![Screen Shot 2021-05-05 at 9.04.41 PM](//images.ctfassets.net/4cgqlwde6qy0/6cV7KFCN5eTnNdHtIuTOxO/d8b0d442fcb9de4ea5d62d8bdc49487e/Screen_Shot_2021-05-05_at_9.04.41_PM.png)

__Agriculture transactions are typically smaller in size compared to the rest of the blended finance market:__ Agri-transactions have a median size of USD 38 million (compared to USD 57.1 million for all transactions); a plurality of agri-transactions (26%) have been in the USD 10-25 million range, with over half (57%) being below USD 50 million in size, compared to 44% for all transactions. 

__Rural communities & smallholder farmers targeted as end beneficiaries:__ Rural communities and smallholder farmers appear more as end beneficiaries than as direct beneficiaries in blending for agriculture, constituting the intended end beneficiary of 86% of agri-transactions (versus 34% of the overall market). In contrast, rural / smallholder farmers were the direct beneficiary of only 7% of agri-transactions, with nearly half of agri-transactions targeting MSMEs (49%) as direct beneficiaries.

![Screen Shot 2021-05-05 at 8.59.55 PM](//images.ctfassets.net/4cgqlwde6qy0/3DwR1fNUa6xLOKln7MJb0/911eea45f78d16afd0c67f50d770ebe0/Screen_Shot_2021-05-05_at_8.59.55_PM.png)

__With the agriculture space being highly intermediated and blending occurring mainly at the fund level, achieving scale will require investments in funds supporting innovative busines models in food and agriculture:__ Innovation in agricultural investment strategies must be balanced against finding what works and creating simple, replicable structures to achieve scale. Achieving scale will also be helped by investing in funds that support innovative business models in food and agriculture, especially by targeting key nodes within the sector or specific value chains that can de-risk the entire sector and signal possibilities for the wider market.

Become a [member](https://www.convergence.finance/member) and read the [full brief](https://www.convergence.finance/resource/0fdfc957-abd8-4a55-a315-36ac28cb1559/view).

How can blended finance help fill the agriculture financing gap?

*Source: Convergence (2020) [State of Blended Finance Report 2020](https://www.convergence.finance/resource/3902657f-693e-453a-ba75-ca3bf7d2448e/view)*

Earlier this month, Convergence concluded its second series of virtual seminars designed to build capacity in institutions eager to employ blended finance. While the [first set of seminars](https://www.convergence.finance/news-and-events/news/4uybIuW7U5mhONPIuvECEs/view) focused on popular blended finance instruments, Convergence’s second series of 10 seminars addressed the role of blended finance in select sectors, specifically in water and sanitation, climate and the environment, agriculture, financial inclusion, and health and [education](https://www.convergence.finance/news-and-events/news/2j6ZqZWOFCdDRLyI2bfOQm/view). The sessions attracted over 450 attendees from across Convergence’s global network, and beyond, including development agencies, financial intermediaries, and commercial investors. 

Despite the unique development challenges facing each sector, Convergence did note a few reoccurring observations and recommendations to improve blended finance activity and increase private capital flows: 

__Observation: Timelines of blended vehicles and expected impacts do not always match__

__Recommendation: Deal sponsors should prioritize stakeholder feedback and educate investors on realistic timelines for impact assessment__ 

Even with the best output and outcome indicators, impact evaluation on the full benefits of an intervention can often only be realized after a solution has been implemented. Consider changes in cultural norms for gender and increases in the resilience towards [climate-related risks](https://www.convergence.finance/resource/81d5bab7-3569-4959-a79b-4aae253277b5/view), which present over generations, and some impacts of sanitation, health, and education interventions, which display decades later. However, funders demand tight timelines for evaluating the social and environmental impacts of an intervention to match the term of the blended transaction. Consequently, deal sponsors should: 

1) *Discuss realistic impact indicators and timelines with investors to avoid over promising and under delivering.* Closed-end blended funds – often 6 to 10-year fund terms with regular reporting processes – do not have the time to assess the longer-term social and environmental impact of their solutions. In such cases, deal sponsors should be very clear about what impact reporting is achievable during the implementation of a solution, and what data and insights can only be shared ex-post to convey the longer-term benefits of an intervention. 

2) *When possible, create investment vehicles with longer time horizons.* Permanent capital vehicles, or ‘evergreen’ funds, are well positioned to report over longer time periods and see long term impacts materialize over time. One example is Finance in Motion’s [eco.business fund](https://www.ecobusiness.fund/en/), which provides debt financing to local financial institutions and businesses engaged in advancing biodiversity conservation, sustainable land use and climate change mitigation. In Nicaragua and Panama, the eco.business fund has financed measures to support the uptake of sustainable practices by cattle producers. 

__Observation: Blended finance shows increased appetite for technology-enabled solutions__

__Recommendation: Identify where technology-enabled solutions may already be a part of your portfolio of investees – if not, consider integrating it.__

Digitalization has helped significantly scale access to and affordability of essential goods and services. The COVID-19 pandemic further proved that technology-enabled solutions are important to uphold critical services (whether financial services, health, or education) in times when in-person services may be restricted. As a result, there has been a noticeable boom in fin-tech, ed-tech and health-tech companies during a period of general economic slow-down because technology solutions are (i) more familiar to private investors from a cost perspective, and (ii) signal an intervention will not be dependent on public funding, further incentivizing private investors to put their capital to work. 

Convergence’s membership features many institutions that support technology-enabled models, such as Impact Credit Solutions, Sakhiwo Health Solutions, Aiim Partners and EarthSpark International. In Convergence’s training seminar on financial inclusion, Lendable, another Convergence member, shared its experience investing in fintech companies across frontier and emerging markets. Participants learned that the high volume of financial data being collected by each of these companies is being used to facilitate credit risk assessments and ensure additional transparency. Whether as an investor or a deal sponsor, screening your portfolio for technology-enabled solutions may be worthwhile. 

__Observation: Too often, the most vulnerable borrowers have to bear foreign exchange risks __

__Recommendation: Engage in peer-to-peer conversations on using blended finance instruments to shift the foreign exchange risk to those who can bear it__

How to manage foreign exchange risk was a topic that participants raised in almost all trainings.  Convergence has long been advocating for increased local currency financing in international investments. However, most foreign investment, whether from impact investors, development agencies or development banks, continues to be denominated in hard currency (e.g., US dollar or Euro), placing the burden of managing foreign exchange risk on the enterprise or project itself or, even worse, on its ultimate end users, customers and beneficiaries. 

Blended finance solutions can mitigate foreign exchange risk, shifting it from the most vulnerable parties to well-capitalized organizations that can best bear and manage the risk.
But it will take concerted efforts to normalize the issuance of local currency debt and scale and replicate existing models. In these most recent virtual trainings, participants learned about to two specialized entities that are dedicated to hedging foreign exchange risks: __The Currency Exchange Fund (TCX)__ and the currency hedging facility __MFX__. [TCX](https://www.tcxfund.com/about-the-fund/), a Convergence member, provides swaps and forward contracts to investors and clients to help them provide their borrowers with local currency financing, while shifting the currency risk to TCX. TCX’s model is based on diversification (i.e., pooling the currency risks from lending activities globally) and a strong capital base. TCX is backed by numerous multilateral and bilateral development finance institutions and microfinance investment vehicles, and the Dutch and German governments. MFX is a credit intermediary that gives development lenders access to a range of hedging markets. Because MFX is backed by guarantees from the U.S. government and the Dutch government (FMO), it can hedge with very low collateral requirements. 

From a market-builder perspective, Convergence sees a need for investors and deal sponsors to exchange information and data on portfolio diversification, hedging, guarantees, and other blended finance structures that can help shift the foreign exchange risk away from the most vulnerable. There is no need to re-invent the wheel; deal sponsors should learn from approaches others have taken. Peer-to-peer conversations are one way to facilitate knowledge sharing and move the needle.

*__Having concluded this seminar series, we are gearing up for our next series, which will start in June. Which seminar topics should we prioritize? Let us know your thoughts via [this survey](https://www.surveymonkey.com/r/6HTN5FX).__*


The role of blended finance in select sectors, including in water & sanitation, climate & the environment, agriculture, financial inclusion, and health & education

Blended Finance in Select Sectors

Key observations and recommendations from “Blended Finance in Select Sectors”

*By [Nick Zelenczuk](https://www.linkedin.com/in/nick-zelenczuk-35731b179/), Content Associate at Convergence*

Despite a recent rise in public spending and development aid towards education, few low- and middle-income countries are on track to meet the basic requirements for quality education under [Sustainable Development Goal (SDG): 4](https://www.un.org/sustainabledevelopment/education "UN Sustainable Development Goal (SDG): 4"). The COVID-19 pandemic has steadily [broken the momentum](https://www.convergence.finance/resource/5yXvqLdOtb2w9fgM7e5ch8/view "USAID | Blended Finance in the Non-State Education Sector") of many developing countries in improving access to quality and affordable education, and the ongoing capital flight from developing countries across Sub-Saharan Africa, South and Southeast Asia and Latin America is contributing to this threat.

The precarious economic outlook for emerging markets is also building hesitation within new investors to financing education opportunities targeting underserved communities. Alternative financing approaches like blended finance are offering a pathway to attract investors and engage private capital on market terms. Some of this activity was recently highlighted in Convergence’s virtual training on health and education, which explored the role of blended finance in mobilizing capital to education interventions. The training drew on perspectives from leading stakeholders in the field, including USAID Catalyze, Palladium and BlueOrchard Finance. 

Here are some key reflections based on historical and current market activity:

 

## There is increasing momentum in blended finance for education

 

Based on all data captured on the blended finance market today by Convergence, especially since 2010, of the total USD 152 billion mobilized towards sustainable development in blended finance, financing for education has accounted for USD 1.4 billion. Despite the low proportion, Convergence has observed continuous growth in both annual transaction count and aggregate financing; about USD 115 million in average market growth per year. Looking forward, around [18% of deals](https://www.convergence.finance/blended-finance/2020 "https://www.convergence.finance/blended-finance/2020") currently fundraising on Convergence’s Deal Platform are interventions for education. 

 

## Proven instruments to increase education finance exist, so there are models to replicate

 

Approximately 51% of blended transactions for education are structured as funds, reflecting overall market trends. This includes funds where education is the sole focus (39% of education funds), and multi-sector funds where education serves as one priority area within a broader portfolio (61% of education funds). [BlueOrchard’s Regional Education Finance Fund for Africa (REFFA)](https://www.reffa.org/reffa "BlueOrchard’s Regional Education Finance Fund for Africa (REFFA)") is one example of an education exclusive fund. REFFA has a multi-layer structure that leverages first-loss capital from the German Federal Ministry of Economic Co-operation and Development (BMZ) to entice private investment. Funds like REFFA offer institutional investors first-time exposure to education-based investments to build investor knowledge and comfort levels. Generalist funds also provide aggregation benefits for education finance by bringing together various types of investors and offering them portfolio diversification advantages. 

The second most popular instrument is social and development impact bonds (DIBs). This pattern sets education apart from all other sectors Convergence tracks: about 42% of DIBs are focused on education development. With DIBs, investors provide upfront capital for an initiative (i.e., an intervention to improve learning outcomes), and are then repaid with interest by public or philanthropic outcome funders __upon achievement of predetermined results__. DIBs effectively link payments to specific and measurable outcomes while reducing investment risk for public and philanthropic investors. We have seen wide application of these pay-for-success models across education sub-sectors. For example, the [Educate Girls India DIB](https://www.convergence.finance/resource/c49a8350-b904-4a75-a7ba-b10d3724a20e/view "DFID | Educate Girls India DIB") (USD 11.2 million) aims to improve numeracy and literacy among primary school-aged girls in India, while [Social Finance’s UP Fund](https://socialfinance.org/up-fund/ "Social Finance’s UP Fund") (USD 40 million) takes an innovative approach to reducing unemployment by exclusively investing in Career Impact Bonds (CIBs). CIB investor returns are linked to premiums on future student salaries that are gradually repaid overtime. Structuring and implementing DIBs can be expensive and time consuming, which restricts the potential for scaled results. For example, outcomes must be determined and agreed upon by all the parties involved prior to launch. Hiring necessary third-party verification organizations to assess the intervention’s progress also increases costs. For these reasons, other vehicles, like funds, are better suited to investors looking for larger ticket sizes and are more likely to reach a larger number of beneficiaries.

 

## There is an understanding of the types of solutions blended finance can support

 

Affordability of schooling is a central issue that blended finance can help address. For example, [USAID’s Catalyze Edufinance platform](https://www.convergence.finance/resource/f200b666-63fe-42f2-849a-15d232142ade/view "USAID’s Catalyze Edufinance platform") aims to boost schooling affordability by mobilizing private capital for non-state (private) schools in emerging markets. Once reserved for wealthy households, non-state schools have become increasingly accessible for low-income students. Increased demand has created greater access for private financing. Blended finance is also emerging in the Ed-tech sector and in education-related infrastructure. In one example, blended finance is helping advance the construction of six environmentally sustainable student accommodations in Nairobi, Kenya led by Acorn, [a local developer](https://guarantco.com/portfolio/acorn/ "Guarantco | Acorn"). The project is backed by a USD 30 million GuarantCo guarantee and provides low-cost residence for eligible students, contributing to increased affordability and attendance in higher education.

 

## Blended finance can help pave the road ahead for education finance

 

Blended finance for education is undoubtedly still in a formative stage. We know it is not a panacea for solving the education funding gap. But historical deal data and ongoing activity captured in our pipeline tell a story that should inspire and encourage a deeper dive into how blended finance can crowd in private sector investors and mobilize this largely untapped pool of capital.

At Convergence, we encourage practitioners to focus on instruments and areas of education development where blended finance has already experienced success, like leveraging impact bonds and supporting tech-based approaches. Scarce catalytic and concessional capital should be invested strategically, with additionality front of mind. DFIs and impact investors with flexible capital are well positioned to enable institutional investor participation by taking on subordinated positions to help lower investor risk. They also have an important role to play in ensuring equity and equality remain central building blocks of education investments. Originators of blended transactions active in the education sector should prioritize gender-based outcomes as an essential component of their interventions. Doing so promises to attract new interest from both public and private investors and shorten fundraising timelines to deliver services more rapidly where they are needed most.

While public funding remains critical to achieve quality education for all, there is plenty of space for solutions backed by private investment. 

 

*If you are working on a blended transaction that targets the education sector, contact us to learn more about listing your transaction on our Live Deal Platform. This can help you gain additional visibility with potential funders and investors to secure additional capital.*

Convergence addresses how blended finance is offering a pathway to attract investors and engage private capital on market terms, citing activity highlighted in Convergence’s virtual training seminar on Blended Finance for Health and Education.

Unlocking Financing for Investment into Education

__Toronto, April 20, 2021 –__ Today, with support and funding from The Government of Australia, Convergence will now be seeking to fund the design of blended finance structures focused on climate mitigation and adaptation through the [Indo-Pacific Design Funding window](https://www.convergence.finance/design-funding/open-window/indo-pacific-open-window "Convergence | Indo-Pacific Design Funding Window"), in addition to gender equality. 

With this expanded focus Convergence will look to provide design stage grants of up to USD 350,000 for the development and launch of blended finance structures that enhance private sector investments in climate mitigation and adaptation in the Indo Pacific region. The focus on gender equality remains unchanged, and Convergence will continue to review proposals that make a significant contribution to gender equality outcomes. All proposals funded through this design funding window will align with one or more of the following UN Sustainable Development Goals (SDGs), specifically, SDG 5 (Gender Equality), SDG 7 (Clean Energy), SDG 11 (Sustainable Cities), SDG 12 (Responsible Consumption), SDG 13 (Climate Action), SDG 14 (Life Below Water) and SDG 15 (Life on Land).

The annual investment needs for climate and environment projects in developing countries are estimated by UNCTAD at USD 1.2 - 2 trillion. Despite at least 35% of current development finance and blended finance flows targeting climate action, there is strong consensus that blended finance remains an underutilized tool to mobilize private investment to climate finance in developing countries. While a majority of blended finance for climate action has been targeted towards climate mitigation, the current annual investment gap for climate mitigation is estimated at USD 380-680 billion. Annual climate adaptation costs in developing countries are expected to reach USD 140 - 300 billion by 2030.

“Our partnership with the Government of Australia aims to introduce more investible transactions into the market. With many developing countries being on the frontlines of the climate crisis, we are pleased to create this pathway for innovative structures that will attract capital into climate finance” says Joan Larrea, CEO of Convergence.

Most recently, Convergence awarded a design grant to the Basel Agency for Sustainable Energy (BASE) in partnership with Oxfam in the Pacific for a feasibility study for a remittance-based financing mechanism to improve household infrastructure and resilience in the Pacific Islands. The inaugural grant under this window was to Allotrope Partners, an international clean energy advisory firm specializing in emerging markets and technologies, to explore the feasibility of a blended finance vehicle to advance affordable and clean energy in the Philippines.

Convergence is accepting applications until June 30th for its third application cycle. Preference will be given to proof of concept proposals that can launch within 12 months of receiving the design grant and attract private sector applicants at scale. For climate finance, in particular, Convergence will pay special attention to applications focusing on sustainable and resilient infrastructure, climate-smart agriculture and climate insurance. 

 

__About Convergence__

Convergence is the global network for blended finance, generating blended finance data, intelligence and deal flow to increase private sector investment in developing countries. Convergence’s global membership includes over 200 public, private, and philanthropic investors as well as sponsors of transactions and funds. Convergence’s Design Funding Program is the only funding program exclusively providing design stage grants for innovative blended finance solutions. Since the establishment of the program, Convergence has awarded nearly USD 7 million in funding to 21 solutions, which have gone on to mobilize over USD 600 million from public, philanthropic, and private investors. 

__[The Indo-Pacific Design Funding window](https://www.convergence.finance/design-funding/open-window/indo-pacific-open-window "Convergence | Indo-Pacific Design Funding Window") is currently accepting applications until June 30, 2021.__ Please email design.funding@convergence.finance for any question or visit www.convergence.finance/design-funding for more information about eligibility requirements and application process.

 

__Media Contact__

Namrata Narayan

Head of Communications

Convergence Blended Finance

Tel.: +1 647-886-7179

namrata.narayan@convergence.finance

With support and funding from The Government of Australia, Convergence will now be seeking to fund the design of blended finance structures focused on climate mitigation and adaptation through the Indo-Pacific Design Funding window.

Indo-Pacific Design Funding Window Now Seeks Climate Finance

Convergence Further Expands Scope of The Indo-Pacific Design Funding Window Including Climate Finance as a Thematic Focus 

__Toronto, April 15, 2021 -__ Today, blended finance network Convergence awards a feasibility study grant to PT. Kandelia Alam (KLIA) to explore a blended finance solution in Indonesia focused on __Sustainable Development Goal (SDG) 15 – Life on Land__. This grant is awarded through the [Asia Natural Capital Design Funding Window](https://www.convergence.finance/design-funding/open-window/asia-natural-capital-open-window%5D "Convergence | Asia Natural Capital Design Funding Window"), funded by the RS Group.

The blended finance vehicle will aggregate financing opportunities for forestry concessions and allow concessionaires to work together on sustainable landscape development. Activities include sustainable forest management, ecosystem services, building biodiversity corridors, developing non-timber forest products, and promoting ecotourism in Kubu Raya. KLIA is a partner of IDH - The Sustainable Trade Initiative and part of IDH’s ‘Production, Protection, Inclusion’ Compact in the Kubu Raya District, West Kalimantan, Indonesia. 

“This is a solution from Indonesia for Indonesia. We are delighted to fund a feasibility study grant toward a solution that aims to foster increased private sector financing for natural capital preservation, and that will set a strong example for sustainability and ecotourism in the country,” says Robert van Zwieten, Managing Director for the Asia-Pacific region at Convergence.

Agricultural croplands and rangelands represent the biggest challenge to biodiversity, and demand [55–69%](https://globalcanopy.org/wp-content/uploads/2021/01/LBIN_2020_EN.pdf "Canopy | The Little Book of Investing in Nature") of global conservation financing needs. Yet, few investable projects in the market exist that focus on protecting biodiversity, restoring forests, and reducing deforestation and degradation, making it difficult for commercial investors to participate. Regulatory complexities, challenging repayment models, and small ticket sizes further limit the participation of private investors.

KLIA, in collaboration with IDH, will lead a coalition of concessionaires in managing forests sustainably, which will be made investable through aggregation. The vehicle is expected to advance reforestation of over 5,000 hectares of degraded area, protection of over 40,000 hectares of mangroves, peatland, and forests, and support the livelihoods of nearly 25,000 people. Its success will also protect key species, such as the proboscis monkey native to Borneo.

PT. Kandelia Alam (KLIA) is an Indonesian private entity with significant experience in sustainable forestry in Indonesia and is a concession holder in Kubu Raya District, West Kalimantan. “Managing forests sustainably requires commitment and consistency” say Fairus Mulia, KLIA. KLIA has done significant work in partnership with IDH to establish the groundwork for this project. IDH brings together businesses, governments, farmers, and communities to build sustainable governance models in landscapes. Through the ‘Production, Protection, and Inclusion’ approach, IDH creates areas where agricultural products are grown sustainably while protecting and restoring natural resources and helping communities thrive.

“Innovation and investment are crucial to support sustainable landscape management. Convergence can help forestry concessions in Indonesia towards sustainable forest management that benefits the environment, economy and social inclusion”, says Fitrian Ardiansyah, Global Envoy for Nature-based Solutions at IDH – the Sustainable Trade Initiative and IDH’s Executive Chairman for Indonesia. This solution builds on achievements by IDH – the Sustainable Trade Initiative and partnerships between government, businesses, and civil society in Indonesia to improve sustainability in trade and value chains.

Protecting and restoring natural capital is an essential component of sustainable development for the private sector, local communities, and government. This work demands sponsoring and enabling innovative solutions that prioritize scale and private participation. Convergence’s Design Funding Program supports organizations to design and launch blended finance solutions that address these priorities. 

__About Convergence’s Design Funding Program__

Convergence’s Design Funding Program operates as a market acceleration tool providing early-stage capital to support blended finance solutions in frontier markets and nascent sectors to accelerate the number of investible transactions targeting SDGs. Funded by the RS Group, [The Asia Natural Capital Design Funding Window](https://www.convergence.finance/design-funding/open-window/asia-natural-capital-open-window "Convergence | Asia Natural Capital Design Funding Window") supports blended finance solutions that find new ways to enhance and protect the world's stock of natural assets, including water, land, soil, air, plants, and animals, by attracting private investment at scale. This design funding program is the first of its kind focused on the Asia and Pacific, anchored by RS Group at USD 3 million. The window is currently accepting applications. The next deadline is June 3, 2021. 

__About Convergence__

Convergence is the global network for blended finance. On top of market acceleration through its Design Funding program, Convergence generates blended finance data, intelligence, and deal flow to increase private sector investment in developing countries. Convergence’s global membership includes over 200 public, private, and philanthropic investors as well as sponsors of transactions and funds. To learn more, visit [www.convergence.finance](https://www.convergence.finance "Convergence | Home").

__Media Contact__
Namrata Narayan
Head of Communications
namrata.narayan@convergence.finance

Convergence awards a feasibility study grant to PT. Kandelia Alam (KLIA) to explore a blended finance solution in Indonesia focused on SDG 15 – Life on Land.

Convergence Funds Sustainable Forestry in Indonesia

Convergence Awards Design Funding to Accelerate Sustainable Forestry and Ecosystem Restoration in Indonesia

[Ceniarth](https://ceniarthllc.com/ "Ceniarth | Impact Investor"), the single-family office of Diane Isenberg, is focused on funding enterprises and intermediaries delivering products, services and support that reach marginalized, primarily rural, populations. As an impact-first investor, Ceniarth deploys low cost capital in markets where more commercial returns are not feasible. While operating with a more modest return expectation, Ceniarth is focused on capital preservation, underwriting investments to a risk standard of returning capital from all investments. The organization also provides programmatic funding to support high-risk projects and pooled interventions such as early stage pilots to support market building.

Ceniarth has invested in 29 blended finance deals with an average investment size of USD 2-5 million. As Ceniarth is one of the few family offices in the global blended finance market, we connected with Greg Neichin, Director of Ceniarth, to learn more about their impact investing approach and what makes blended finance an attractive tool to build their investment portfolio and meet their impact objectives.

 

## As an asset owner, why does Ceniarth find it valuable to engage in blended finance?

 

Blended finance is the most valuable tool that we have to increase the scale of our impact as a stand-alone family office. Ceniarth manages approximately USD 450 million to advance sustainable development that reaches marginalized, primarily rural, populations. It is a small amount of money in comparison to the scale of the challenges at hand affecting global poverty, racial and social injustice, and climate change. However, blended finance allows us to achieve significant leverage from our commitments by incentivizing others, such as development finance institutions (DFIs), foundations, and impact investors, to participate in below market-rate transactions to increase the investments towards SDG related projects in developing countries.

 

## From Ceniarth’s original three investment approaches, one of which was a more traditional market-rate impact mandate, the firm is now focused on impact-first investments and supporting higher risk projects and pooled interventions. What inspired this decision, and how does blended finance enable this? 

 

When Ceniarth launched 8 years ago, Diane Isenberg, our founder, was steadfast in wanting our capital to have a demonstrative impact on the people living in rural poverty but was open-minded as to how we went about this. As a result, Ceniarth built a portfolio with a wide range of impact investing modalities from more conventional public equity and private equity commitments to our higher risk Program Related Investment (PRI) offerings.

Over time, we saw our conventional impact investments do well financially. But, when we asked ourselves, “Are we doing the most we can with our capital?” we realized there was more we could do to increase investment into vulnerable communities. Similarly, our PRI making was highly impactful in delivering pilot loans to early stage enterprises in developing economies, but it came with significant risks of capital impairment, which conflicted with one of our objectives, which is to recycle most of our money over time.

We found that our most successful impact-first investments fell between the ends of this continuum. This includes funds and enterprises that have lower risk profiles but need a lower cost of capital. For example, we have a USD 5 million investment in MCE Social Capital, a non-profit impact investment fund that focuses on lending to high impact microfinance institutions and small, growing social enterprises. MCE has a long track record of successfully returning capital to investors but does require a below-market cost of capital to on-lend at reasonable rates.

So, we are in the process of transitioning our portfolio towards 100% impact orientation. Our experience has told us we can be impact-first while earning modest returns and being catalytic, using blended finance to incentivize other public and private investors to participate in transactions by leveraging our investment. We aim to continue to deliver capital at a cost that allows fund managers and enterprises to stay focused on the most underserved communities without feeling pressured to drift up-market. 

 

## Ceniarth [has participated](https://www.convergence.finance/institution/556a8e54-d228-4db4-81b1-acc31ea14ae0/view/historical-deals/investments "Convergence Member | Ceniarth") in large and small deals, ranging from USD 4 million to upwards of USD 200 million in blended finance. What are some lessons and insights gained from participating in transactions that vary in size?

 

For investors, irrespective of deal size, transactions tend to take the same amount of effort for monitoring and underwriting a deal. This is a big reason why Ceniarth deploys much of its capital via funds and intermediaries. It would be inefficient for us to try and build a substantial book of smaller, direct loans to enterprises. We do this to some degree for the learning value and because capital is so scarce for pilot debt, but it is a sub-optimal approach. In general, our sweet spot is supporting impact fund managers with their earliest funds or supporting niche managers with specialized mandates. Our check size can be meaningful and catalytic for a fund trying to raise USD 20-100 million but is less valuable for more established managers seeking to close funds much larger than that. 

 

## Ceniarth has deployed millions into gender-focused investments. How does Ceniarth identify a women-centered investment initiative? What are the big questions the team is exploring now when it comes to gender lens investing? 

 

Given the gender dynamics in many of the regions we invest in, our mission to address rural livelihoods has become synonymous with investing in women; women as customers, entrepreneurs, service-providers, advocates, and decision-makers. Many of our investees have had an explicit emphasis on women, even before the field began labeling this activity as gender lens investing. For example, we have invested over USD 10 million with [Global Partnerships](https://www.convergence.finance/resource/af090575-76ec-49ed-95b2-d403023dfa32/view "Convergence | Global Partnerships Investment Funds Case Study"), US-based non-profit impact investment firm, in large part because of their women-centered investment initiatives and impact assessment process. Our investments in Pro Mujer (USD 2 million of revolving credit), WaterEquity (Ceniarth invested USD 3 million in their newest fund), and Convergence design funding grantee, Women’s World Banking Capital Partners (Ceniarth invested USD 1 million in their first private equity fund), are based on their explicit focus on women as customers for financial services. These organizations existed before the market adopted the term gender lens.

One question we are now grappling with is how to balance a gender lens view knowing many of the poorest and most vulnerable women in the world live in some of the most conservative societies? Diane is outspoken about how the gender lens movement is taking an overly western centric view of what gender equality should look like today and raises how the westernization of gender equality is resulting in many investors allocating money to the less challenging gender lens opportunities – for example, investing in western companies with female leadership and board membership. On this front, Ceniarth is led with the viewpoint that the gender framework for poorer women in emerging markets will need to look different based on their respective social and cultural fabric. Just as there is finally an acknowledgement that patient capital is required more generally, practitioners in the field need to take a more patient and longer-term view on gender across developing markets. 

I am also happy to share that Ceniarth recently partnered with [Value 4 Women](https://v4w.org/ "Value 4 Women") (V4W), an advisory firm specializing in bringing a gender lens to business practices. In the next few months, V4W will be working with our portfolio companies directly to offer guidance and assistance.

 

## For Ceniarth, achieving a level of financial return is as important as creating lasting impact. Can you highlight the types of terms or arrangements that have allowed your capital to be more catalytic?

 

To clarify, recycling our capital and earning a modest financial return is very important to us in a transaction, but not necessearily generating a commercial level of return. We explicitly invest in opportunities where more mainstream, market-rate capital does not go. That said, typically, our capital is most catalytic when it takes a subordinate and/or first loss position that can be leveraged to attract senior lenders to a transaction. Depending on the perceived risk of an opportunity, Ceniarth can often attract senior lenders to a transaction at a 5:1 or even 10:1 ratio. For example, a USD 5 million subordinate investment (USD 3 million from Ceniarth) in Global Partnership’s most recent blended Impact-First Development Fund unlocked an additional USD 50 million from the U.S. International Development Finance Corporation. This type of leverage is on the high side, given Global Partnership’s strong historical performance, but a real example of how blended finance can be used to scale transactions. 

Our pilot debt transactions, often deployed via our Foundation’s PRI pool, are also highly catalytic, given the amount of risk we shoulder that others cannot. These transactions provide capital to underserved enterprises and help them understand what types of financial forecasting and reporting are required to work with professional, sophisticated lenders. As these enterprises successfully repay us, they in turn build a track record that can be assessed by other lenders.

 

## Ceniarth employs a unique model, what advice would you give to other family offices that are unsure about engaging in blended finance? 

 

A few suggestions come to mind when I think about general family offices:

__- Get clear on your driving cause.__ Know why you are approaching blended finance; is it with the interest to grow your impact investment portfolio or to channel your philanthropic endeavors? Knowing what you are trying to do with your capital will fair you well. 
__- Start small.__ Find other practitioners who are taking more flexible positions in the capital stack and invest with them to get familiar with the market and what works for you.
__- Ask the additionality question.__ It is important to remember that your money must work to mobilize additional capital, so the question, “Is my capital getting leverage and/or bringing down the cost of capital?” must be asked early on. If your dollar is just a dollar in a deal, you should not be involved. 

Finally, I encourage all family offices thinking about engaging in blended finance to come talk to us. It is not as hard as it may seem to be catalytic as a family office in the blended finance space, but only a handful of us are doing it. Ceniarth has spent years building its network with other investors, especially foundations and DFIs, that can support deals and help evaluate the best terms for impactful transactions targeting frontier and emerging markets. This year, we are focused in doing whatever we can to share our learnings and knowledge, so we are happy to speak to others that want to engage in blended finance.

 

## How do you hope Convergence continues to support participants in blended finance and its member network?

 

Convergence does a commendable job at both highlighting transactions in the blended finance market and educating new impact investors on the strategies and tactics that are most effective in structuring and fundraising blended transactions. Currently, we see the most acute need in blended finance for more impact-first investors who are willing to take subordinate, catalytic positions. There is an encouraging amount of senior, development finance and other institutional capital waiting to be deployed if junior tranches can be fully funded. Continuing to identify new sources of first loss capital – most likely from foundations and family offices – is critical to the field. Convergence’s Deal Platform is particularly beneficial for offices that might not have a big in-house team searching for new investment opportunities. It also helps identify other international collaborators that are working on these types of deals (e.g., DFIs), and new interesting public sector vehicles. Ceniarth is very grateful to Convergence for highlighting these opportunities and potentially identifying new participants, and we encourage others seeking to get involved to think about employing such tools.

 

__Are you interested in becoming a member of Convergence's global network for blended finance? [Let us know](https://www.convergence.finance/sign-up "Convergence | Sign-up")!__

*By [Namrata Narayan](https://ca.linkedin.com/in/namratanarayan), former Communications Lead (Interim) at Convergence*

Convergence recently connected with Greg Neichin, Director of Ceniarth, to learn more about their impact investing approach and what makes blended finance an attractive tool to build their investment portfolio and meet their impact objectives.

Member Spotlight with Greg Neichin, Director, at Ceniarth

Member Spotlight with Greg Neichin, Director of Ceniarth

Design Funding grant recipient Albion Capital, a Brazilian asset management firm, and Órigo Energia, have successfully closed Green FIDC Solar SD at USD 35.8 million (BRL 201 million), the first FIDC issued as a green bond in Brazil. The announcement comes two weeks after the close of Brazil’s first Green CRI, a spinoff from the Green FIDC, which secured USD 14.3 million (BRL 80.1 million). Together, the two vehicles raised USD 50 million (BRL 281.1 million). 

The Green FIDC allows clean energy and energy efficiency projects to secure financing based on future cash flows from energy sales. The Green FIDC builds on a Brazil-specific instrument, the Fundo de Investimento em Direitos Creditórios (FIDC), which is used by companies to raise capital by securitizing receivables.

Albion Capital and Climate Policy Initiative [received design funding](https://www.convergence.finance/news-and-events/news/4a00hVBqxQoTFuJ7KMs2kK/view "Convergence | Grant awarded to Albion Capital & Climate Policy Initiative to develop an innovative asset-backed securitization for green projects in Brazil") in 2019 for the Green FIDC concept, which was proposed and developed as part of the Global Innovation Lab for Climate Finance (the Lab). Design funding was used to support the research, structuring, and fundraising activities required to bring the Green FIDC model to Brazilian capital markets.

“What attracted us to this concept was how Albion Capital adopted an instrument already familiar to Brazilian investors, the FIDC, and applied it to green projects for the first time,” says Joan Larrea, CEO of Convergence. “Making it possible, through blended finance, to attract local institutional investors in Brazil – not only a large financial market but also a critical country to our global climate goals – into climate-related projects.”

Renewable energy and energy efficiency projects are a crucial component of Brazil’s 2030 climate goals. The country aims to increase energy efficiency by 10% and for non-hydro renewables to account for 23% of total power generation.

The Green FIDC and the Green CRI are each the first of their kind of security to be certified green for the Brazilian market. Certification is handled by the rigorous global standards of the Climate Bonds Initiative. 

For next steps, Albion Capital is currently investigating an expansion of other variations of the Green FIDC concept into different vehicles that match investors’ risk-return preferences. The goal is to allow a faster and simpler scale-up process for other sectors, such as water infrastructure.

__For more information, read the [press release](https://www.climatepolicyinitiative.org/press-release/lab-green-fidc-closes/ "CPI | Brazil’s first FIDC and CRI issued as climate bonds raise USD 50 million").__ 


Design Funding grant recipient Albion Capital, a Brazilian asset management firm, and Órigo Energia, have successfully closed Green FIDC Solar SD at USD 35.8 million (BRL 201 million), the first FIDC issued as a green bond in Brazil.

Design Funding Recipient Closes Brazil’s First Green FIDC

Design Funding Recipient Closes Brazil’s First Green FIDC at USD 35.8 Million

In 2017, Convergence awarded Clarmondial a proof of concept design grant to develop and launch The Food Securities Fund (FSF), an open-ended private credit investment fund focused on providing working capital loans to sustainable local agriculture companies (e.g. cooperatives, traders, and processors). Today, we are thrilled to share that the FSF has officially [launched](https://www.clarmondial.com/fsf_launch_first_investment/ "Clarmondial Launches Food Securities Fund to Support Responsible Agricultural Aggregators ") and started operations. 

The Food Securities Fund kicks off by making its first investment in coffee production in East Africa, reaching almost 4,000 smallholder farmers operating in agroforestry systems, utilizing organic and regenerative practices.

[Learn more](https://www.convergence.finance/design-funding/grant-portfolio/5WUCyaTqWkqcwAGCe822uk/view "Convergence | Design of Food Securities Fund, an open-ended investment fund for private credit in agriculture") about Convergence’s design funding award to Clarmondial. 

*__Convergence’s design funding program is the only funding program exclusively providing design stage grants for innovative blended finance solutions. Since the establishment of the program, Convergence has awarded USD 6.8 million in funding to 21 solutions, which have gone on to mobilize over USD 618 million from public, philanthropic, and private investors. Explore our [open design funding windows](https://www.convergence.finance/design-funding "Convergence | Design Funding Program"). __*


Clarmondial Launches Food Securities Fund to Support Responsible Agricultural Aggregators

The infrastructure sector is chronically underfunded in developing countries. Barriers to infrastructure investment include unstable investment and regulatory environments, underdeveloped local capital markets, and a lack of investible deals. 

[The Private Infrastructure Development Group](https://www.pidg.org/ "PIDG Group") (‘PIDG’) is an innovative infrastructure project developer and investor delivering pioneering, sustainable, and affordable infrastructure in the poorest and most fragile countries in Sub-Saharan Africa and South and Southeast Asia. PIDG has a deliberate focus on financing infrastructure projects through local capital and credit markets, building capacity and resilience in frontier markets across these regions.

PIDG has evolved significantly since its inception. As PIDG enters its 20th year, and sets new sights to create investment-ready, bankable infrastructure opportunities across Sub-Saharan Africa and Southeast Asia, we connected with Philippe Valahu, CEO of the PIDG Group, to learn more about PIDG’s evolution, investment mindset, and vision for blended finance and infrastructure development. 

 

## What led to PIDG’s establishment? Could you walk us through PIDG’s evolution to date?

 

PIDG exists to enable sustainable infrastructure projects in some of the most challenging jurisdictions in the world, and started out as a pilot, and as one entity – our debt fund, the Emerging Africa Infrastructure Fund (EAIF). EAIF was created due to a lack of long-term commercial debt (15–20-year money) to fund infrastructure projects. Over the years, as EAIF proved its purpose and established a track record, other ideas emerged, and other entities were brought on to the PIDG platform to complement EAIF. Today, PIDG has five entities: the debt fund (EAIF), GuarantCo (the local currency credit solutions arm, set up 15 years ago), InfraCo Africa and Asia, which are two early-stage project development companies, and our technical assistance arms: The PIDG Technical Assistance and DevCo. DevCo sits within the International Finance Corporation (IFC) but is managed by PIDG. Each entity was set up as a response to gaps in the market to develop, finance, and take infrastructure projects to successful financial closure and construction. 

 

## How do the various PIDG entities come together to support a project across its lifecycle and capital structure? 

 

Since the establishment of PIDG Limited (PIDG Group) in April 2018, which has its own Board of Directors, there has been improved governance, which has helped us overturn barriers or operational limitations we once faced. 

What does this mean in practice? If there is a transaction in the solar energy space in a country like Chad, that project needs a few things: it needs early-stage project development (equity), debt, and technical assistance. For projects of this nature, there are times where it is necessary to bring in all our entities to give everything that project needs to reach financial close and break ground to generate tangible impact on human lives. However, we do not always do so, because that would crowd out other players in the market. 

 

## How do you know when to pull in other participants and when to keep business within PIDG? 

 

In these difficult markets, we find out quite early in the process. Consider the example above. On the project development side, we would be on a wild goose chase to find a project developer willing to place USD 5-6 million in equity to develop the project and take it towards financial close. In such cases, we know we must rely on one or two players that are linked to the African Development Bank (AFDB) or the IFC, as private sector investors are not willing/positioned to do this unless they team up with a multinational development bank or us (InfraCo). On the debt side, no commercial investor is willing to commit 15-20-year money in such a difficult market. 

With that said, there is no simple model to assess which entities from the group need to be involved. We lean on our due diligence to assure our role is additional. 

 

## How does PIDG use blended finance structures and archetypes to de-risk projects for commercial investors? What are some of these risks that the various offerings help mitigate? 

 

Here, it is worth highlighting the Kigali Bulk Water Supply Project, the first bulk surface water supply project in Sub-Saharan Africa using a public-private partnership (PPP) model. It was developed by Kigali Water Limited (KWL), a fully owned subsidiary of Metito, which is a global provider of intelligent water management solutions based out of Dubai. This project reached financial close in 2017, however, what is more noteworthy is that it reached its Commercial Operations Date (COD) in January this year, which means potable water is now being delivered to the population in Kigali. This is a remarkable accomplishment, given much of the construction and monitoring by the lenders, including EAIF, took place during 2020, 9 months of which were plagued by the COVID-19 pandemic. 

Convergence’s [Case Study on EAIF](https://www.convergence.finance/resource/2e3d40a3-8d79-417c-b253-82714fec31ca/view "Convergence | Emerging Africa Infrastructure Fund Case Study") details this project well. Essentially, EAIF and AFDB provided USD 40.6 million of the capital cost: USD 38 million of senior debt and USD 2.6 million of junior debt, with all loans on 18-year terms. Metito provided the balance in equity finance. 

DevCo did the upstream work to advise the government on the regulatory framework required to allow a water sector PPP. It did the tender and earned the support of a private sector operator and concessionaire (Metito) in a very difficult sector with a 27-year concession. At one stage, what Metito and others in the deal realized was that an element of grant funding was needed to make the model work. Through our technical assistance offering, PIDG put in place a viability gap funding (VGF) package of USD 6.5 million dollars to make the project bankable. This is one of the few examples of a water PPP getting off the ground using a blended finance structure and grant capital to create an investible transaction to improve water connections, to get fresh, clean water to communities that would otherwise not be able to afford this type of access. This is how blended finance should be used.

 

## In 2019, PIDG set a 5-year strategy to continue to overcome investment barriers in developing countries. Can you tell us more about this strategy and its implementation to date?

 

Two key tenets of our strategy are to achieve scalability and replicability. We are focused on creating economies of scale, given capital for early-stage project development can be scarce. The area that is giving us a lot hope is the off-grid sector: micro-grids and mini-grids. The sector itself is designed for scale and adoption, so there is a lot of room to show that these solutions are affordable across different income levels, and there is demand for getting sustainable electricity to communities that have historically had to rely on high-cost energy solutions that are more damaging to human health and the environment. 

 

## How does GuarantCo help advance long-term infrastructure financing in local currency and domestic resource mobilization?

 

This is an area where we are doing what very few others are. GuarantCo is as much about infrastructure as it is about capital market development – developing local currency markets. GuarantCo approached Nigeria as a testing ground and executed several transactions in Nigeria to familiarize itself with the market. Once it knew the market and developed adequate awareness for its product, it began to work with the Nigerian Sovereign Investment Authority (NSIA) to set up InfraCredit Nigeria, offering credit enhancement for domestic bond issuances in Naira (NGN) for the financing of brownfield and greenfield infrastructure projects. 

InfraCredit Nigeria did its first transaction soon after it was set up. The first deal (~USD 40 million) attracted 13 domestic pension funds and six domestic insurance companies, who for the first time were investing in the infrastructure asset class. Before this deal, that had not happened before. To make this happen, GuarantCo worked with NSIA to build up InfraCredit Nigeria, coordinated with regulators to create an infrastructure asset class to attract institutional investors like pension funds and insurance companies, and provided training to these investors to better understand this asset class and the associated risks. As a result, there is some issuance taking place in NGN where institutional investors no longer need credit enhancement. Now, the challenge is a lack of pipeline of bankable transactions of this nature. 

 

## What does success mean to PIDG? What are some of the metrics you use to measure success?

 

Overall, we articulate our impact in terms of outcomes for people – with focus on end users and jobs, wider economy, mobilizing local investors and transforming markets through demonstration that enables future finance flows to infrastructure. So, success looks different based on the rationale behind each project. This is best illustrated when looking at projects like the Kalangala Infrastructure Services (KIS), established to support the residents of Bugala Island, situated on Lake Victoria in Uganda’s Kalangala District. Prior to KIS, Kalangala was identified as one of Uganda’s poorest districts, lacking safe regular access to the mainland, reliable electricity, and clean water. KIS was initially set up to put in place a private ferry service to bridge access between the island and mainland Uganda. If you are familiar with Uganda, every year without fail, hundreds of people lose their lives due to overcrowding and a lack of life vests on these ferry boats. It is devastating. The introduction of this private ferry now delivers a dependable service that allows residents to travel safely from Bugala to the mainland to sell their produce. 

 

## Some of PIDG’s owners, including the Australian Government and Government of Sweden, are interested in gender equality. How does PIDG apply a gender lens?

 

Today, within PIDG we have a gender taskforce to identify actions to further empower women through our investments, and to deliver on PIDG’s Gender Equity Action Plan, which is based on (i) safeguarding women and girls, (ii) gender lens investing, and (iii) gender equity within PIDG. 

In the past 2 years, PIDG put both climate and gender considerations at the core of its investment approach. At the Group level we introduced climate and gender KPIs for each company. At the level of investment decision making, compliance with PIDG Climate Change Standards and Gender Ambition Policy are two of only three minimum compliance thresholds for any deal to be considered (the other being additionality). The development impact rating of each deal is heavily influenced by its expected outcomes for the planet and for women. Deals that directly empower women and demonstrate innovative climate solutions receive bonus ratings and benefit from increased credit limit and higher risk appetite. Conversely, analysis of climate and gender related risks is prioritized. 

The PIDG Gender Ambition Policy broadly aligns with the 2X Challenge and we have tailored the approach to infrastructure projects. We screen all projects for both gender risks and potential for positive gender outcomes against five gender lens domains: company and project governance, workforce, supply chain, consumer market (products and services) and community. The approach is showing some results in bringing about innovative solutions that demonstrate gender lens in infrastructure.

Some examples of PIDG projects that have applied a gender lens and consequently empowered women include the [Zimbabwe Border Crossing Project](https://www.eaif.com/pidg-company-emerging-africa-infrastructure-fund-fills-funding-gap-in-zimbabwe-border-crossing-project-set-to-stimulate-trade-and-business-investment/ "PIDG | Zimbabwe Border Crossing Project"), to stimulate trade and dependable transit – with a dedicated focus on women traders, safeguarding and women in the workforce, and [Net1](https://infracoasia.com/wp-content/uploads/2020/11/201116-InfraCo-Asia-Investments-contributes-to-growth-financing-package-for-rural-broadband-roll-out-in-Indonesia-1.pdf "PIDG | Net1"), delivering broadband access in underserved regions of rural Indonesia, focusing on the supply chains by enabling women to open Wi-Fi kiosks for internet access to boost their income. 

 

## PIDG is approaching its 20-year anniversary. How is the team reflecting on the past 20 years, and if you had to look 20 years ahead, what does the future look like for PIDG and blended finance?

 

On the one hand, the future sometimes looks depressing. On the other, it is filled with hope. 

On the depressing note, the reasons and rationale that led to the establishment of EAIF are just as valid today as they were two decades ago. So, it begs the question: has the needle not moved? In some areas, no. Today, if you look at the market in Sub-Saharan Africa or South and Southeast Asia, there are, maybe, at best, three commercial investors that can provide 15-20-year money; and they usually require some sort of guarantee or insurance. Others have retrenched after the 2008 financial crisis and due to the new regulations to curb risk. On the other hand, if you look at the work GuarantCo is doing today and had told me 5 years ago we would have set up an entity like InfraCredit, I would have laughed. But that has happened because we have coordinated with regulators and pension funds. We have demonstrated it can be done in difficult markets. I find that hopeful. 

Right now, in development finance, everyone wants to talk about the ‘Billions to Trillions’ agenda. For us, interest in this discussion is expiring, because we know what is needed to get to where we need to be. What we should be asking is how do we generate a pipeline of bankable transactions that are risk adjusted for institutional investors to come in? And how do we mobilize domestic savings in Africa and Southeast Asia like the InfraCredits of the world? And how do we focus all these efforts on low carbon, climate resilient and inclusive infrastructure that enables a just transition towards net zero, with the greatest socio-economic needs and aspirations? 

Blended finance, more specifically, is having a moment in the spotlight. Everyone wants to talk about it, everyone is saying they are doing it, but few are really thinking about what it is. That is somewhat frustrating for us, but perhaps more frustrating for organizations like Convergence. In 20 years, I would hope we achieve: 

1. wider recognition of what blended finance is and is not; and it is certainly not a means to prop up investor return or indirectly provide grant funding to a government; 
2. improvements in our tender process and our ability to offer more flexible options (e.g., VGF); and
3. greater sophistication in our understanding and interpretation of investment risk associated to Sub-Saharan Africa and South and Southeast Asia 

As for PIDG, in 20 years, I really hope it has put itself out of business. We dare to dream! 

 

*__Are you interested in becoming a member of Convergence's global network for blended finance? [Sign up today](https://www.convergence.finance/sign-up "Convergence | Sign-up").__*

*By [Namrata Narayan](https://ca.linkedin.com/in/namratanarayan), former Communications Lead (Interim) at Convergence*

Convergence recently connected with Philippe Valahu, CEO of the PIDG Group, to learn more about PIDG’s evolution, investment mindset, and vision for blended finance and infrastructure development.