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23 May, 2019

To scale, blended finance needs capacity building

To scale, blended finance needs capacity building

At Convergence, we’re seeing that as blended finance increases in prominence, more and more public, private, and philanthropic organizations are looking to engage in blended transactions, but they don’t know where to start.

This is reflected in our keystone report, the State of Blended Finance 2018, which identifies capacity building and training as one of the crucial next steps for scaling blended finance transactions to mobilize greater flows of private sector capital.

To address this need for more capacity around blended finance, Convergence has launched a blended finance training series to support organizations that see the potential of blended finance and now want to actively engage in the space.

Our training series kicked off last week in Washington, DC. with a one-day training that brought together 26 participants from 16 different organizations from the public, private, and philanthropic sectors, primarily from our membership, including: Credit Suisse, The Nature Conservancy, Citi, U.S. Overseas Private Investment Corporation, International Finance Corporation, and Global Affairs Canada.

To bring participants from principles to practice, the training provided real world examples and case studies that outlined the anatomy of blended finance transactions. For example, James Rawles of WWF broke down the blending and structuring mechanics around the Land Degradation Neutrality Fund, which provides long-term financing as well as technical assistance to sustainable land management project developers in the agricultural and forestry sectors.

The case studies not only looked at the mechanics of a transaction but also addressed vital questions such as:

  • Why were these deals blended and could they have been executed without concessional capital?
  • How does blended finance reduce the gap between real and perceived risk?
  • How did these transactions attract institutional investors?
  • How is development impact measured?

In addition to providing participants with insight on the ins and outs of blended finance deals, the training also helped break down barriers between the different stakeholder groups (e.g. development agencies, development banks, private investors, and philanthropies, not only through the presence of participants that span the blended finance spectrum, but also through content that focused on collaboration.

For example, one panel brought together USAID, Citi, Rockefeller Foundation and IDB Invest for a discussion on building effective blended finance partnerships. Together they teased out the motivations, constraints and characteristics of the various stakeholder groups that typically participate in blended finance transactions. Some questions they addressed included:

  • What is your institution trying to achieve and how does blended finance help you get there?
  • Whose money does Citi work with and what kind of risk and returns do they need?
  • What is the public sector looking to achieve when it puts its money into a blended finance transaction instead of doing pure stand-alone grants? How is this impact measured?
  • As development banks provide (near) commercially-priced capital into blended finance transactions, how does development impact fit into their approach?

For blended finance to scale, its diverse players need to invest in capacity building to ensure that the right blended finance instruments are deployed effectively and efficiently to avoid negative effects, like market distortion, and to optimize the use of scarce aid dollars. Trainings, like the ones offered by Convergence, are critical to building the capacity of public, private, and philanthropic organizations to efficiently engage in blended finance.

Our next training will take place on October 1st in Amsterdam. We’ll update our events page soon with more information, or sign up for our newsletter to get regular updates on trainings and other blended finance news and events. We reserve seats at our trainings for our members, other participants are also welcome but will be accommodated on a first come first served basis.

About the Authors
Aakif Merchant

As a Senior Associate at Convergence, Aakif is responsible for capacity building among clients from public, private to philanthropic organizations. Aakif brings over 6 years of experience as a management consultant having most recently served as Principal of the NeXus Consulting Group, where he spearheaded business development and project execution across a variety of sectors including international development and retail. Aakif has also worked at Dasra, India’s leading strategic philanthropy foundation, L.E.K Consulting in New York and as a legislative and economic advisor for the Parliament of India. Aakif holds an M.B.A. from the University of Toronto and a B.A. in Economics and Political Science from The George Washington University in Washington D.C.

Sijia Yi

As the Communications Lead, Sijia heads communications strategy and implementation at Convergence. Sijia brings with her over five years of communications expertise in media relations, digital media management, and strategy development. Prior to joining Convergence, Sijia was a Communications Officer at the United Nations University (UNU) in Bonn, Germany. At UNU she explored new ways to tell stories about climate change. She also oversaw international media relations and placed UNU in high impact outlets around the world, including the New York Times, BBC, and Reuters. Sijia has also served in a communications capacity at Fairtrade International and McGill University. Sijia holds a B.A. in Psychology from McGill University and an M.A. in Digital Media and Business Communication from Tilburg University in the Netherlands.

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