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19 September, 2019

Measuring Impact in Blended Finance: Current Trends and Gaps

Measuring Impact in Blended Finance: Current Trends and Gaps

This blog post is part of a new series that will look at the impact of blended finance, including key opportunities and challenges for achieving, measuring, and disclosing the impact of blended finance transactions. Go to the bottom of the page for other blogs from the series.

Our latest Data Brief focuses on measuring impact in blended finance, including (i) the types of intended development impact and (ii) common practices in measurement and reporting. While blended finance is not a panacea for achieving the Sustainable Development Goals (SDGs), blended finance can be used to support a broad range of development activities, from renewable energy projects to improving the quality of care provided by healthcare centers.

To date, the majority of blended finance transactions have focused on financial inclusion (56% of transactions) and SME growth (46%), which have both been identified as key enablers to reducing poverty and boosting prosperity. Other common development objectives have included access to clean energy and sustainable agriculture and land use. The most common target direct beneficiaries have been entrepreneurs and small businesses, with more than three-quarters of blended finance transactions ultimately aiming to reach low-income populations and/or base of the pyramid (BoP) consumers (e.g., via products and services provided by those entrepreneurs and small businesses).

In terms of measurement and reporting, the majority of blended finance transactions have focused on measuring impact at the institution level (i.e., the effects of a growing and sustainable business). “Total beneficiaries served” and “number of jobs created” are the most common metrics used to measure impact across all blended finance transactions, irrespective of focus sector or SDG alignment. Climate-related metrics, particularly “amount of CO2/GHG emissions avoided”, are also widely used. However, the vast majority of metrics used in blended finance transactions are specific to the development activities financed. We also explored this topic more in another blog post in this series.

Convergence analysis shows that reporting on impact has been limited in blended finance (as with development finance more broadly), approximately half of blended finance transactions do not publicly disclose impact outcomes. Blended finance transactions in the financial services and education sectors have been more likely to disclose impact, while transactions focused on energy or infrastructure have been least likely. Only one quarter of blended finance transactions have publicly disclosed gender disaggregated data, or data that is collected and analysed separately on males and females.

Where impact outcomes have been publicly disclosed, the majority of impact reporting has been self-reported by the lead organization through an annual report. Blended finance transactions led by foundations and NGOs have been most likely to disclose impact, with 74% of these transactions having some form of publicly available impact report. Public sector sponsors, including MDBs and development agencies, have most commonly relied on their partner organizations to capture and report these outcomes.

Ultimately, development impact is at the core of blended finance. Yet, we need to find ways to understand the effectiveness and efficiency of blended finance in order to identify and scale the solutions with development impact. To do this we need more measurable impact outcomes that are: 1. Tracked, reported, and communicated: Impact outcomes should be regularly measured and disseminated and include a baseline and endline analysis. 2. Standardized: Impact metrics and reporting should be standardized across common sectors and development objectives to allow for greater benchmarking and learning.

Become a member and read the full brief.

Other blogs from our impact series:

About the Author
Justice Johnston

As a Manager, Justice is responsible for Convergence’s data and research activities, including building out Convergence’s database of historical blended finance transactions, documenting blended finance case studies, developing blended finance trends analysis and benchmarks, and coordinating webinars and workshops. Prior to joining Convergence, she worked at the MasterCard Foundation as Program Coordinator for the Financial Inclusion team. While there, Justice was responsible for contributing to new project development, managing current projects, updating project records and preparing strategic reports, as well as managing team organization and coordination. Prior to joining the Foundation, Justice was at the University of Toronto’s Munk School of Global Affairs completing her master’s thesis on Financial Inclusion and the Role of Government. She also has a variety of research and policy experience through her work at Scotiabank’s Government Communications, Policy and Research department, the G20 Research Group, and the World Wildlife Fund.

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