In an era of constrained official development assistance (ODA), increasing the representation and activity of developing country governments, regional development banks, and private actors in the blended finance market is more critical than ever. How Sub-Saharan African Public Institutions Blend (paywall), a new Convergence Enhanced Data Brief, explores how Sub-Saharan African (SSA) public institutions have sought to build and develop their blended finance programs to date, examining the challenges they have faced and identifying opportunities for the future.
The case for local leadership amid constrained aid flows
Blended finance’s future amidst unprecedented aid cuts in the Global North remains uncertain. With baseline ODA levels significantly diminishing, the shifting dynamics of global aid present a pivotal opportunity for developing country governments, regional development banks, and private actors to emerge as leaders in the blended finance market. By advancing their ambitions and shaping global agendas around their priorities, developing country actors can influence how capital is structured and deployed, thereby helping to guide blended finance toward more inclusive and sustainable outcomes.
Historically, cross-border foreign investment in blended finance was prioritized in the “billions to trillions” agenda, such that mobilizing a fraction of the $460 trillion in global financial assets based largely in developed economies became the focus for addressing the Sustainable Development Goals (SDG) financing gap. There is increased recognition however, that external financing is most catalytic when it complements rather than substitutes domestic resource mobilization. Recent studies have estimated that Africa holds at least $4 trillion in domestic capital, including $1.1 trillion in institutional capital, $2.5 trillion in commercial banking assets, and more than $470 billion in external reserves.
Much of Africa’s domestic capital remains invested in low-risk, short-term instruments and has not been tapped to help address the region’s SDG financing gap. Maximizing the activity of local funders investing in local currency is even more critical at a moment when overseas aid flows are at risk. They are key to the mantra of blended finance being able to do more with less in an environment of constrained ODA.
Persistent challenges: policy, capacity, and project preparation
The brief finds that SSA governments have faced three central challenges in structuring their blended finance programs.
First, policy frameworks for private sector-led development are underdeveloped in SSA, with stretched fiscal resources rarely being allocated toward mobilizing the private sector for development. Effectively aligning different public stakeholders in accordance with a national blended finance strategy remains a challenge across the region.
Second, SSA institutions often lack the technical capacity to develop blended finance programs that utilize limited fiscal resources to mobilize private capital efficiently. Sourcing necessary skillsets has proven challenging for nascent blended finance programs, with internal capacities for deal structuring, risk allocation, and financial modelling having to be built over time, often with outside technical support. This need has been particularly acute for organizations historically more involved in deploying grants at smaller ticket sizes, where financial skillsets have been scarcer.
Third, a lack of well-structured projects ready for private sector investment is pervasive across SSA. Due to gaps in their preparation, few projects in the region reach financial close. Dedicated project preparation facilities are needed to help conduct feasibility studies and provide technical preparation support, thereby enabling private financing at a later stage across project lifecycles.
Opportunities: coordination, partnerships, and advisory support
Public institutions in SSA can capitalize on several opportunities to boost the effectiveness of their blended finance programs in catalyzing both overseas capital and domestic institutional capital into local development projects.
SSA governments should establish coherent policy frameworks and country platforms for blended finance to improve coordination and signal local commitment to overseas investors and domestic institutional investors. Such frameworks should explicitly define how blended finance can be deployed to mobilize investment, while noting how domestic fiscal resources will be used to de-risk projects and catalyze private participation.
They should also foster partnerships with local, regional, and international actors to share knowledge and develop transaction structures that can attract sustainable private inflows into development sectors. Partnering with other actors in the ecosystem such as foundations, impact investors, and development finance institutions can help build operational capacity, share risk, and ultimately develop innovative structures investable by institutional investors.
Finally, governments should seek advisory support to boost their understanding of blended finance and improve project structuring and impact monitoring. Regional development banks and other actors can strengthen their advisory roles, helping financial institutions and governments incorporate blended finance tools to catalyze private funding for development objectives.
Key data findings
Convergence Market Data has recorded 96 concessional commitments from investors domiciled in SSA across 87 SSA transactions, representing $1.38 billion in investment volume. Sixty-six of these commitments occurred in the last 10 years across 59 SSA transactions.
The median deal size of SSA transactions funded concessionally by SSA-domiciled actors ($32 million) tends to be slightly smaller than that of the overall SSA blended market ($36 million) and the entire blended finance market ($50 million). The most targeted vehicles by SSA-domiciled concessional funders are companies (25% of commitments) and projects (24%), followed by funds (21%).
The leading sub-instruments deployed by SSA-domiciled concessional funders are investment-stage grants (31% of commitments), technical assistance grants (15%), and design-stage grants (14%). The top sectors targeted are energy (43% of commitments) and financial services (22%). Most SSA-domiciled concessional funders come from the public sector, accounting for 54% of concessional commitments. The most active concessional investors are Financial Sector Deepening Africa (FSD Africa) with 14 commitments and InfraCredit Nigeria with 10.
Toward African-driven blended finance For SSA governments facing elevated debt burdens that reduce fiscal flexibility and limit sustainable borrowing, the incentives for de-risking and catalyzing private capital through blended finance are clear. Strengthening coordination, building technical capacity, and expanding project preparation will be essential to mobilize greater levels of private investment for domestic development priorities.
In an era of constrained overseas aid flows, boosting the capacity of SSA governments to independently structure their own blended finance programs is more critical than ever.
Read the full Enhanced Data Brief: How Sub-Saharan African Public Institutions Blend (paywall) Published October 2025
