Convergence Eventbrite

__Thursday, August 26 2021, 9am – 11:30am Singapore time (GMT +8):__

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

- Overview of the role and activity of philanthropic organizations in the blended finance ecosystem
- The rationale and considerations for philanthropic organizations to use blended finance as a structuring approach
- Case studies on blended finance transactions with philanthropic organization participation
- Recommendations on how best to actively engage and mobilize philanthropic capital into transactions  

Foundations in the blended finance space have most commonly played a small but catalytic role, either providing small amounts of financing to seed large-scale and ground-breaking initiatives or providing smart forms of subsidy and risk mitigation (e.g., interest rate reductions and/or concessional capital) to crowd-in the private sector. 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 philanthropic organizations have participated. 

This is the second 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 Philanthropic Organizations Blend (Asia/West Coast)

'How Philanthropic Organizations Blend' is the second training in Convergence's series "How Investor Types Blend".

How Philanthropic Organizations Blend, Asia/West Coast

__Wednesday, August 25 2021, 9am – 11:30am Eastern time (GMT -4):__

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

- Overview of the role and activity of philanthropic organizations in the blended finance ecosystem
- The rationale and considerations for philanthropic organizations to use blended finance as a structuring approach
- Case studies on blended finance transactions with philanthropic organization participation
- Recommendations on how best to actively engage and mobilize philanthropic capital into transactions  

Foundations in the blended finance space have most commonly played a small but catalytic role, either providing small amounts of financing to seed large-scale and ground-breaking initiatives or providing smart forms of subsidy and risk mitigation (e.g., interest rate reductions and/or concessional capital) to crowd-in the private sector. 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 philanthropic organizations have participated. 

This is the second 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 Philanthropic Organizations Blend (Europe/East Coast)

__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

*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 Catalytic Capital Consortium (C3) announced that its C3 Grantmaking program has awarded $1.2 million in grants to an initial group of leading impact investing networks: Convergence, the Global Impact Investing Network, Mission Investors Exchange, and Toniic. As the first grants made by C3 Grantmaking, the funding will help these organizations increase the knowledge, awareness, and use of catalytic capital among a diverse set of investors globally, with a focus on the identification and diffusion of best practices.

Launched in 2019 by three strategic partners, the John D. and Catherine T. MacArthur Foundation, The Rockefeller Foundation, and Omidyar Network, the Catalytic Capital Consortium is a global initiative to help the impact investment field realize its full potential for creating inclusive growth, achieving equity, improving health, and fighting climate change, along with reaching the United Nations’ Sustainable Development Goals. Together, the Catalytic Capital Consortium strategic partners are jointly funding C3 Grantmaking, a program housed at the [New Venture Fund](https://newventurefund.org/). 

C3 Grantmaking supports research, networking, peer learning, and other field building activities intended to help increase the amount, effectiveness, and impact of catalytic capital investments in the field. It does this by building a stronger evidence base about the role and value of catalytic capital and equipping investors with the knowledge and tools they need. With a focus on catalytic capital investments made by foundations, development finance institutions, family offices, and ultra high net worth individuals, the program will award approximately $10 million in grants over the next three years.

Today’s awards are the first grants made by C3 Grantmaking. The next set of grants will be announced later this year and will focus on projects that show why and where catalytic capital is needed, how it has been used, and its potential impact. 

Working with their respective investor communities, each other, and the field, the grantees will identify and share catalytic capital best practices, develop informational resources, host convenings, and undertake other activities that strengthen and expand the use of catalytic capital throughout the global impact investment field.

__Organizations Receiving Grants__ 

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.

“We will draw on our deep connections in the development finance community to act as a bridge between them and C3 on the critical issue of acting catalytically, of achieving impact beyond any single institution’s own actions,” said Joan Larrea, CEO of Convergence. 

[Global Impact Investing Network ](https://thegiin.org/)
The Global Impact Investing Network (GIIN) is the global champion of impact investing, dedicated to increasing its scale and effectiveness around the world. The GIIN builds critical infrastructure and supports activities, education, and research that help accelerate the development of a coherent impact investing industry.

“As global crises mount, impact investing—and particularly, investors leveraging catalytic capital—must play an even greater role in helping to address the world’s most pressing challenges,” said Amit Bouri, Co-Founder and CEO of the Global Impact Investing Network. “The Catalytic Capital Consortium’s support will play a critical role in helping the Global Impact Investing Network explore the ways that catalytic capital can amplify the effectiveness of impact investing. This funding also helps to unlock emerging investment models that will extend the reach of the industry’s impact. In particular, we are incredibly excited to study practices among institutional asset owners in the deployment of catalytic capital in the realm of climate solutions.”

[Mission Investors Exchange](https://missioninvestors.org/) 
Mission Investors Exchange (MIE) is the leading impact investing network for foundations dedicated to deploying capital for social and environmental change. 

"Mission Investors Exchange is thrilled to partner with the Catalytic Capital Consortium to help expand the use and impact of catalytic capital investing among our network of foundation members and the broader impact investing community," said Matt Onek, President and CEO of Mission Investors Exchange. "The support from C3 Grantmaking will enable MIE and our network to share best practices and implement new strategies to bring flexible, patient, and risk-tolerant capital to our most critical social and environmental issues, as well as catalyze change to build more equitable and just communities."

[Toniic ](https://toniic.com/)
Toniic is a global community of high net wealth individuals, family offices, and foundations seeking deeper positive net social and environmental impact with their assets.

"Impact investors are clustering at the ‘market rate’ end of the spectrum, leaving many high impact opportunities underfunded," says Adam Bendell, CEO of Toniic. "This project is supporting a deep dive with our members to understand how to foster greater deployment of catalytic capital and to share those learnings with the public."

__Catalytic Capital Consortium Strategic Partners__

[John D. and Catherine T. MacArthur Foundation](https://www.macfound.org/)
The John D. and Catherine T. MacArthur Foundation supports creative people, effective institutions, and influential networks building a more just, verdant, and peaceful world. MacArthur is placing a few big bets that truly significant progress is possible on some of the world’s most pressing social challenges, including advancing global climate solutions, decreasing nuclear risk, promoting local justice reform in the U.S., and reducing corruption in Africa’s most populous country, Nigeria. In addition to the MacArthur Fellows Program and the global 100&Change competition, the Foundation continues its historic commitments to the role of journalism in a responsive democracy as well as the vitality of our headquarters city, Chicago. In addition, MacArthur is working to build the field of impact investing and provide catalytic capital to address social and environmental challenges around the world.

[The Rockefeller Foundation](https://www.rockefellerfoundation.org/)
The Rockefeller Foundation is a pioneering philanthropy built on collaborative partnerships at the frontiers of science, technology, and innovation to enable individuals, families, and communities to flourish. Rockefeller works to promote the well-being of humanity and make opportunity universal.  Their focus is on scaling renewable energy for all, stimulating economic mobility, and ensuring equitable access to healthy and nutritious food.  For more information, sign up for their newsletter at rockefellerfoundation.org and follow them on Twitter @RockefellerFdn.

[Omidyar Network](https://omidyar.com/)
Established by philanthropists Pam and Pierre Omidyar, Omidyar Network is a social change venture that has committed more than $1 billion to innovative for-profit companies and nonprofit organizations since 2004. Omidyar Network works to reimagine critical systems and the ideas that govern them, and to build more inclusive and equitable societies in which individuals have the social, economic, and democratic power to thrive. 


Convergence is thrilled to be a grantee in the Catalytic Capital Consortium's (C3) Grantmaking program, which awarded $1.2 million in grants to an initial group of leading impact investing networks.

Convergence awarded grant by Catalytic Capital Consortium

Catalytic Capital Consortium Announces $1.2 Million to Leading Impact Investing Networks 

*Blended finance can improve the quality of India's spending on healthcare and education; and bring the country closer to achieving its development goals.*

As India works through the health, financial, and socio-economic implications of COVID-19, it is evident that the country needs to dramatically increase and improve the quantity and quality of spending on healthcare and education. This increased investment will be critical to maintaining its development trajectory and delivering inclusive, poverty-alleviating growth.

In the immediate term, emergency government spending on social welfare and traditional development aid are crucial to minimising the impact of COVID-19. But what about the longer-term? How can the structural weaknesses in the healthcare and education system—made stark by the pandemic—be changed in the long run?

Blended finance offers one possible pathway to this.

__What is blended finance?__

Blended finance is the use of [catalytic capital](https://ssir.org/articles/entry/what_investors_need_to_know_to_embrace_catalytic_capital) from public and/or philanthropic sources to increase private sector investment in developing countries towards sustainable development. Simply put, catalytic capital accepts a reduced rate of return (ie higher risk) to generate a positive impact. In doing so, it makes third-party investments (that would otherwise not have been possible), possible.

Blended finance addresses the two main barriers that private investors face when considering investments in developing countries: a) high perceived and real risk and, b) poor returns for the risk taken compared to other investments. The presence of public and/or philanthropic capital within a transaction improves its risk-return ratio, making these investments more attractive for commercial investors.

Over the past few years, India has been amongst the most targeted countries as far as blended finance transactions are concerned. At Convergence, where I work, we maintain a database of [historical blended finance deals](https://www.convergence.finance/blended-finance#regions). According to this database, since 2010 approximately 13 percent of all transactions have targeted India. In keeping with global trends, these transactions have primarily targeted the energy, financial services, and agriculture sectors.

__Improving healthcare in India with blended finance__

The setback of COVID-19 for[ Sustainable Development Goal](https://sdgs.un.org/goals) (SDG) 3 (Good Health and Well-Being) has been obvious. India was woefully unprepared due to persisting challenges such as a relatively [weak health system](https://www.bbc.com/news/av/world-asia-india-57201304), lack of quality infrastructure, and substandard service delivery.

A good example of a blended finance transaction that is seeking to address these systemic issues is the [Utkrisht Development Impact Bond ](https://www.convergence.finance/resource/93d7cc2b-dbdd-4b61-b83f-8f9bf9a2b242/view)(Utkrisht DIB). This was the first of its kind in the healthcare sector globally; its development was supported by Convergence’s [Design Funding Programme](https://www.convergence.finance/design-funding).

The Utkrisht DIB seeks to reduce maternal and newborn deaths by using a pay-for-success model where a private investor fronts the cost of an intervention. In this case, the [UBS Optimus Foundation](https://www.ubs.com/global/en/ubs-society/philanthropy/optimus-foundation.html) (using UBS client funds) provides initial working capital to the service providers [Population Services International](https://www.psi.org/) and [Hindustan Latex Family Planning Promotion Trust](https://hlfppt.org/). This, in turn, enables the two organisations to work with private healthcare facilities in Rajasthan to improve the standard of quality and care. Following this, the results of the intervention are measured by clear, predetermined metrics (ie. reduction in maternal and newborn deaths). Finally, if the intervention achieves pre-agreed outcomes, an outcome funder—in this case [USAID](https://www.usaid.gov/) and [MSD for Mothers](https://www.msdformothers.com/)—repays the investor and provides a return on the investment. If outcomes are not achieved, the investor generally stands to lose not only the potential returns but also the principal. From the outcome funder’s perspective, money is disbursed only against documented results.

An interesting aspect of this transaction involves the role of the Government of Rajasthan, which participates in the oversight of the impact bond. If the programme is successful, the Rajasthan government will likely become the outcome funder for the next phase of interventions. Assuming a consistent improvement in the quality of care provided by private healthcare facilities, the programme will likely save an estimated 10,400 lives over five years.

The Utkrisht DIB transaction template is currently being replicated in other areas of the healthcare sector in India. The Pimpri-Chinchwad Municipal Cooperation in Maharashtra and the [United Nations Development Programme](https://www.undp.org/) (UNDP) have [recently](https://economictimes.indiatimes.com/news/politics-and-nation/undp-and-pimpri-chinchwad-municipal-corporation-to-co-create-indias-first-social-impact-bond/articleshow/80012354.cms) signed an MoU for a blended finance transaction. Through it, private funds will enable the municipality to upgrade its healthcare infrastructure, build its staff’s capacity, and establish protocols that can improve the quality of healthcare.

__Narrowing the access to education gap__

The COVID-19 pandemic has also exposed the inadequacies and inequities in India’s education system and impacted the achievement of SDG 4 related to Quality Education. There is a misalignment between needs and resources available, such as having access to broadband and computers for online education. Such gaps provide an opportunity for blended finance transactions to fund the extraordinary efforts required to plug them.

Following the model of the results-based finance mechanism described above, the [British Asian Trust](https://www.britishasiantrust.org/) (BAT) is currently supporting a blended finance transaction in India—[the Quality Education India (QEI) Development Impact Bond](https://qualityeducationindiadib.com/). The QEI brings in additional funds to improve the quality of education delivery through teacher and headteacher training, whole-school development, and educational technology. In doing this, it seeks to improve the quality of literacy and numeracy learning for more than 200,000 primary school children from marginalised communities across four locations (Delhi, Gujarat, Maharashtra, and Uttar Pradesh).

Additionally, in order to address a shortage of skilled healthcare workers and increasing unemployment, the British Asian Trust is also working with the [National Skills Development Corporation ](https://nsdcindia.org/)(NSDC) to launch a similar mechanism to finance innovative skills training models to increase employment for Indian youth during post-COVID-19 recovery.

Another example of how blended finance can be used to support the education sector (especially in the context of COVID-19) is [Varthana](https://varthana.com/), a non-banking finance company (NBFC) that supports private schools for low- and middle-income students. It provides loans to students to attend the schools and loans to private schools so they can offer a higher quality of education. As there is an enhanced perception of risk with respect to their underlying borrowers (the students and private schools), the organisation secured a USD 5 million guarantee from the [United States Development Finance Corporation](https://www.dfc.gov/) (US-DFC), which helped them mobilise 10 times more capital, and scale their intervention.

Even prior to the pandemic, the blended finance market within India was growing, with increasing recognition that collaboration between public, private, and philanthropic capital was critical to unlocking the additional finance required to achieve the SDGs. The crisis precipitated by COVID-19 has put this into even sharper relief. India has suffered a significant setback in achieving its SDGs, but now there is an opportunity to learn from the weaknesses exposed by the pandemic. Though not a silver bullet, blended finance offers India a unique framework for collaboration. It is one way to raise the additional private capital needed for development and to deploy it as productively as possible so that we can build back better.

*This article was originally published on India Development Review and can be viewed [here](https://idronline.org/article/philanthropy-csr/how-blended-finance-can-support-indias-covid-19-recovery/).*

 Blended finance can improve the quality of India's spending on healthcare and education; and bring the country closer to achieving its development goals.

How blended finance can support India’s COVID-19 recovery

The United Nations (UN) Joint Sustainable Development Goals (SDGs) Fund is a unique entity in the UN system. It provides catalytic grants to UN country teams and their partners to develop and implement innovative blended finance initiatives. 

The Fund has partnered with Convergence to identify which initiatives receive funding and to provide technical assistance and support to applicants throughout the process, including coaching and mentoring to deal sponsors, investor matching and facilitation, and opportunities for peer-to-peer learning. 

Earlier this year the Joint SDG Fund and Convergence announced [$41 million in commitments ](https://www.convergence.finance/news-and-events/news/30u4T2V4OOHIImsclOFQ9k/view)to catalyze strategic financing to accelerate the SDGs. Convergence led a rigorous evaluation process and ultimately recommended proposals from __Fiji__, __Indonesia__, __Malawi__, and __Uruguay__ for funding. The Joint SDG Fund is also currently working with an additional [12 countries](https://www.jointsdgfund.org/where-we-work) to nurture new solutions, including in __North Macedonia__, __Madagascar__, __Barbados__, __Kenya__, and __Suriname__. Since 2020, 28 countries have received design grants to study the feasibility of 59 financial instruments, spanning bonds, equity funds and credit enhancement facilities.

We spoke to Lisa Kurbiel, Head of the Joint SDG Fund, about the impact of Covid-19 on the Fund’s objectives, its blended finance initiatives, how the Fund measures the impact of its work, and much more. 

__What are some interesting or unexpected challenges you’ve faced as a blended finance actor in the UN system?__

I think what is so unique about the Joint SDG Fund is that for the first time the UN is directly de-risking transactions, enabling private sector participation and investment in emerging markets. So, the first challenge is really matching the pipeline of ideas and solutions that are created at the country level, with community involvement and multi-stakeholders, with the needs of investors, including mainstream investors. 

Another obstacle is the legwork required to harness investor excitement around the SDGs and channel it into concrete impactful solutions that many countries absolutely need. The other is resource mobilization, how can the UN mobilize grants from the public and philanthropic sector to offset the risks for the private sector partners that we hope to bring in. We're finding resource mobilization particularly difficult given the impacts of the Covid-19 pandemic and that's stalling our capacity to expand and to bring more countries into our pipeline.

__Can you expand a bit more on how Covid-19 has affected your operations?__ 

The Joint SDG Fund flourishes with the generous support of member states. When the pandemic struck there were tremendous demands on member states to support responses to Covid around the world as well as in their own home countries. This naturally put pressure on overseas development assistance budgets, and because of economic contraction and recessions in many countries due to the pandemic, there was just less funding available overall. As we enter the recovery phase of the pandemic, as we try to build forward and build greener, and get back on track, the challenge is that there's a smaller envelope then there was two years ago and so that's really why blended finance and attracting the private sector is more critical now than ever.

__Can you tell us about a couple blended finance initiatives funded by the Joint SDG Fund?__ 

We’re very excited about our first four initiatives in Fiji, Indonesia, Malawi, and Uruguay. I’ll start with our [Fiji programme](https://www.jointsdgfund.org/programme/investing-coral-reefs-and-blue-economy), where we have a coral reef fund which aims to protect the country’s coral reef ecosystems. The programme brings together an international investment manager, local conservation actors, financial institutions, the local government, and the UN system. The initial line-up is of three blended finance transactions, respectively covering eco-tourism, organic fertilizer production and waste management. The first will make 10 Locally Managed Marine Areas market ready to private investment through a special purpose vehicle structure and viable business models featuring eco-tourism, sustainable fisheries, and blue carbon credits. The second is a $14 million deal where private and public capital will be blended to fund a sanitary landfill before replication across the country. The third is a direct investment in an eco-fertilizer factory. In all three transactions, the aim is to reach scale, what we’re trying to do is construct a pipeline of bankable projects that are linked back to those reefs, which local communities rely on for their economic livelihoods. Over the course of four years the target is to attract $50 million of private capital into the local blue economy.  

I’ll also talk about the [Malawi programme ](https://www.jointsdgfund.org/programme/build-malawi-window-specialized-structured-blended-finance-vehicle-agribusiness)which is the first impact fund supported by the Joint SDG Fund, and it specifically focuses on creating jobs and supporting small businesses in the country’s undercapitalized agriculture sector.  It’s a blended finance vehicle that will mobilize $35 million, it will invest patient capital into promising businesses that will then allow them to increase their production capacity to serve a broader customer base and of course improve efficiency and effectiveness. The UN is supporting the technical assistance facility that will help source the pipeline, assisting the businesses to be ready to receive the funding, and then of course managing and reducing any risks in that regard. So far, the program is expected to obtain $28 million in additional investment beyond our first loss contribution and we have a fund manager - Bamboo Capital Partners - that will be establishing and capitalizing the fund by doing additional outreach to DFIs and local pension funds and other investors later this year. Most interestingly is the potential attraction of local pension funds in similar deals.

__How do you measure the impact of your blended finance activities?__

We are currently engaging with the Organisation for Economic Co-operation and Development (OECD) to be one of the very first pilots for their [Impact Standards for Financing Sustainable Development](https://www.oecd.org/publications/oecd-undp-impact-standards-for-financing-sustainable-development-744f982e-en.htm), which were developed by the UN Development Program. We are looking to adopt these standards across our portfolio and aim to use their sector-based standards where available, while also using the value added of the UN in terms of impact management and being an outcome guarantor. In most of the transactions, UN agencies are co-designing the impact management system of the financial instruments proposed. We hope to streamline a whole new generation of impact measurement systems that can contribute to the wider blended finance community.

__How do you see Joint SDG Fund evolving?__

Our timeline for the Joint SDG Fund is through 2030 and we already see momentum in the [+300 plus ](https://sdginvest.jointsdgfund.org/investor-advisory-groups)partners that we’re engaging through our global investment advisory groups or at the country level. In the group you can find impact funds such as Mirova’s Sustainable Ocean Fund of Mirova, many local banks and pension funds (e.g. in Uruguay and Malawi), as well as commercial investors such as Rabobank, Credit Suisse, BNP, Allianz, and Société’ Générale. Our goal is to have proof of concept with our initial pipeline of the countries where we’re working now and then to expand from there. We have high expectations for replenishment of the fund, the target set for us is $300 million annually and we're expecting to exceed that, so I would say we're looking for exponential growth, we're looking to be a credible investment partner, and we want to keep our focus on the impact to ensure that all SDG investments really do have transformational impact.

__Based on your experience in blended finance to date, what gaps do you see in the market that need to be filled?__

We're seeing tremendous growth in committed capital when it comes to impact funds and facilities, it seems like every month there's another type of fund that's focused on the oceans, focused on green energy, etc. This is all extremely powerful and exciting, but what is really the challenge is fundraising for the grant element of the equation, because for blended finance to work you do need that concessional capital to de-risk the transaction and to help expand the work and ensure that the technical assistance, the structuring, and the legalities can really be catered to. So, for us, we’re looking at how we can bring in more grant money to ensure that momentum for blended finance, for investment in the SDGs, can be maintained and we hope that part of your membership can be part of the answer to that challenge.


Convergence spoke to Lisa Kurbiel, Head of the Joint SDG Fund, about the impact of Covid-19 on the Fund’s objectives, its blended finance initiatives, how the Fund measures the impact of its work, and much more. 

Lisa Kurbiel of the UN Joint SDG Fund on blended finance

Member spotlight with Lisa Kurbiel of the UN Joint SDG Fund

The BlackRock managed Climate Finance Partnership (CFP) fund has reached first close by securing $250 million in financing. The design and coordination was supported by our grantee [Aligned Climate Capital ](https://www.convergence.finance/design-funding/grant-portfolio/I5y8rA7djo7Ic6w6n4fp7/view)(ACC). The CFP is an unprecedented blended finance partnership between the world’s largest asset manager - BlackRock - and leading philanthropies and governments.

Convergence awarded ACC a Design Funding grant in 2019 to support the coordination and design of the CFP. The partnership has jointly committed to develop a flagship blended private infrastructure equity fund for climate infrastructure projects and companies in emerging markets. The fund aims to be one of the biggest blended vehicles to-date targeting climate-related investments in developing countries. It will seek to make investments in sectors such as renewable energy, energy efficiency, and energy storage in Latin America, Asia, and Africa.

“More large-scale investment vehicles of this type are needed to aim institutional money at the Sustainable Development Goals,” says Joan Larrea, CEO of Convergence. “BlackRock’s role in this partnership is a signal that Wall Street is catching on to blended finance as a structuring tool for entering challenging sectors and emerging markets. With this successful first close, we hope to see more heavyweights join them.”

Government and philanthropic partners include the Governments of France and Germany, James and Kathryn Murdoch's Quadrivium Foundation, the William and Flora Hewlett Foundation, the Jeremy and Hannelore Grantham Environmental Trust, and the IKEA Foundation.

The fund has a target of closing at $500 million by summer 2022.


The BlackRock managed Climate Finance Partnership (CFP) fund has reached first close by securing $250 million in financing. The design and coordination was supported by Convergence grantee Aligned Climate Capital (ACC).

Climate Finance Partnership first close at $250 million

Convergence supported Climate Finance Partnership reaches first close at $250 million

Five years ago, 197 governments promised to limit the impacts of climate change. Today, we are still very far from realizing that promise, as climate change impacts continue unabated. No continent has more to lose from this inaction than Africa, from worsening health outcomes, the destruction of natural resources, landscapes, and biodiversity, to significant economic losses at the macro and micro levels. This is further compounded by weak policies and regulatory frameworks not suited to support nationally determined contributions (NDCs) to reduce CO2 emissions and adapt to climate change, as well as limited funding available to implement critical programs and projects.

Green finance has become more mainstream in recent years, with the emergence of the global [green bond market that could be worth $2.36 trillion](https://www.nnip.com/en-INT/professional/insights/articles/global-green-bond-market-set-to-hit-eur-2-trillion-in-three-years-says-nn-ip) by 2023. However, only $2 billion worth of green bonds had been issued in Africa by Q4 of 2019, representing 17 issuances. Risk mitigation and credit enhancement are vital to Africa’s nascent market, and the application of [blended finance](https://www.convergence.finance/blended-finance) in green finance is one way to scale investments that can strengthen the region’s ability to mitigate and adapt to climate change. 

Blended finance is the use of catalytic capital from public or philanthropic sources to increase private sector investment in sustainable development. It is a way to reach key development and environmental objectives, while attracting private investment in the region.

Blended finance has a demonstrated track record when it comes to both climate action and financing sustainable development goals (SDG) linked projects. Convergence data indicates that 15% (representing $31 billion) of historical blended finance transactions in developing countries targeted SDG 13 on climate action, while 48% ($97 billion) were directly linked to renewable energy, sustainable agriculture, water and sanitation, sustainable cities, and life below water. At the same time Sub-Saharan Africa is the most frequently targeted region in blended finance transactions – accounting for 45% of historical transactions. But for blended finance to catalyze greater green finance and bring in the volumes of private investment that are needed for climate mitigation and adaptation in the region, we need to first see more African governments and stock exchanges define clear policies and establish robust regulatory environments that support green finance. 

There has been some momentum. In South Africa, the Johannesburg Stock Exchange (JSE) sets clear rules for green listings with a dedicated division for green bond issuances. In Ghana, the government has worked to create an enabling environment that incentivizes private investment in green finance projects through the provision of full and partial government guarantees, (concessional) debt and equity, as well as tax and insurance incentive schemes, in a bid to drive its low-carbon development plan. It has additionally set emission reduction targets for lighting, cooking, and cooling, and launched a “green growth fund” to finance adaptation projects. Nigeria and Kenya have also seen the issuance of sovereign and corporate green bonds respectively, the proceeds of which will be used to finance renewable energy projects and green-certified affordable housing for students. Despite these positive developments, scaling interventions and catalyzing larger volumes of private investment remain difficult.

Some of the limitations to embracing green finance in the region include: (i) The lack of clear policies and regulatory frameworks; (ii) Limited or non-existent national budget allocations to green finance; (iii) Limited national capacity in developing and implementing green finance standards, processes, and projects; and (iv) Limited ability to engage with private investors. Below I discuss two considerations that could help tackle some of these constraints. 

__1. Implement green fiscal reforms__

Green fiscal policy instruments could prove to be transformational in scaling investments in green finance, however they require deep political will to be implemented. For instance, environmental taxes can be levied to limit emission levels, provide incentives to transition to cleaner, low-carbon options, while generating revenues that can be used by government to fund public adaptation and mitigation programs and projects. Green investment incentives can include feed-in-tariffs for renewable energy generation, as well as subsidies to shift from fossil fuels. Carbon taxes are also applicable and have been used in countries like South Africa with subsidies to transition from fossil fuel-based energy sources to solar water heaters.

To attract private investment at scale to support their green finance objectives, governments can leverage both policy de-risking instruments that address market failures and remove the underlying barriers to private investors, and financial or market-based incentives. These can include issuing national targets, facilitating and streamlining the licensing and permitting processes for various projects, as well providing public equity co-investments, concessional capital, and so on. 

The [Global Energy Transfer Feed-in-Tariff (GET FiT)](https://www.getfit-uganda.org/about-get-fit/) program is a blended finance solution that was developed to facilitate a climate resilient, low-carbon development path for East Africa and provides an insightful illustration. Its first rollout was in Uganda and it helped to strengthen the enabling environment for private investment in renewable energy projects, while providing long-term capital to increase the availability of least cost electricity. GET FiT Uganda provided feed-in-tariffs and other premiums to attract private investment. It received donor funds from the governments of Norway, the UK, Germany, and the EU-Africa Infrastructure Trust Fund. Public funding leveraged five times its funding in private investments, with senior debt of $494 million provided by Deutsche Bank. The World Bank also provided a partial risk guarantee and technical assistance. The program, which is now being implemented in Zambia with positive outcomes, further highlights how blended finance can be used as an effective approach to drive more private investment towards green finance. 

Other countries can learn from this example to deepen and scale their green fiscal reform processes, implementing appropriate policy and financial instruments to catalyze greater volumes of green finance to drive green growth in the region. 

__2. Green the Central Banks to attract private investment at scale__

Climate change is a major systemic risk for the financial sector. Corporates and banks in developed markets have already begun to factor in environmental considerations in their risk models to avoid the high financial costs, as well as the adverse reputational and regulatory risks they present. They are also increasingly reporting and disclosing information about their “green strategies” and steps to build climate resilient operations. 

African central banks have a role to play in helping to “green” financial systems in the region, particularly where weak public institutions poorly implement environmental regulations. “Green” central banks could wield significant influence in promoting environmental mandates within the banking sector through green policy instruments and green finance guidelines, enforcing disclosure requirements, and allowing differentiated capital requirements. This application of blended finance approaches is critical where limited public funding can be strategically directed to be truly catalytic for mobilizing green finance at scale. 

As an example, the [Central Bank of Nigeria (CBN) directed](https://www.cbn.gov.ng/out/2012/ccd/circular-nsbp.pdf) commercial banks and national Development Finance Institutions to adopt sustainable banking principles to incorporate Environmental, Social, and Governance (ESG) guidelines in their operations. The CBN further committed to provide certain financial incentives, as needed, to those institutions that took concrete steps to incorporate the principles in their operational, enterprise risk management, and governance frameworks.

One outcome of CBN’s directive was that in March 2019, Access Bank announced the [issuance of a NGN 15bn ($41m) corporate green bond](https://www.worldfinance.com/banking/access-bank-drives-nigerias-sustainability-efforts-with-corporate-green-bonds), which was the first of its kind in Africa. The Climate Bonds Certified Bond could provide a strong demonstration effect for other corporates in the country. The [five-year, 15.50% fixed rate green bond](https://www.fsdafrica.org/wp-content/uploads/2020/08/Africa_GBToolKit_Eng_FINAL.pdf), issued on 1st April 2019 was fully subscribed, and was the first corporate bond to benefit from the Nigerian Green Bond Market Development Program launched in June 2018 by FMDQ, Climate Bonds Initiative, and the UK Aid funded Financial Sector Deepening (FSD) Africa.

Central banks in the region could be a powerful force for stimulating green finance and could apply blended finance approaches to help create the right enabling environment and compelling incentives for scaled and faster adoption. 

Climate change is an urgent, shared global challenge, with the African continent likely to experience the worst impacts if more ambitious climate action is not taken. Adapting to and mitigating this risk will require a large increase in the availability of green finance products. To do this, countries will need to leverage blended finance approaches that have already achieved some modest success, scaling these interventions, and undertaking appropriate green fiscal reforms with complementary policy instruments to truly unlock private capital. It’s a massive challenge, but green finance that leverages blended finance approaches for de-risking might just be our best chance. 

*Originally published on [The Exchange - Africa's Investment Gateway](https://theexchange.africa/industry-and-trade/green-finance-is-the-game-changer-africa-needs-to-combat-climate-change/). *


How green finance that leverages blended finance approaches for de-risking might be the continent's best chance to combat climate change.

Combating climate change in Africa using green finance

Green finance is the game changer Africa needs to combat climate change   

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.