British International Investment (BII) is the UK’s development finance institution (DFI). Established in 1948, they invest to deliver productive, sustainable, and inclusive growth in emerging and developing economies. Their mission is to help solve the biggest global development challenges by investing patient, flexible capital to support private sector growth and innovation. BII currently partners with over 1,600 businesses in emerging economies and has total assets of £9.9 billion.
We spoke with Michael Sanni, Investment Director, Financial Services Group and Christopher Dartsmith, Investment Manager, Capital Solutions about BII’s 5-year strategy, their new report on scaling blended finance, their work with the Emerging Markets and Developing Economies (EMDE) Investor Taskforce, and more.
Tell us about your new 5-year strategy. What are your goals and key priorities?
Our new 2026–31 strategy responds to a changing global environment, with increased pressure on public finances, climate urgency, and widening development financing gaps. It sharpens our focus on where our capital and expertise can have the greatest impact to help markets work better for the people they serve.
To achieve this, we’re focusing on three strategic shifts:
- Delivering market-level impact by addressing the barriers that prevent markets from functioning effectively and supporting changes that last beyond individual investments.
- Deepening our commitment to frontier markets and least developed countries, where access to capital remains most constrained but where investment can have the greatest development impact.
- Accelerating private capital mobilization, using our capital, expertise, and partnerships to attract significantly more commercial investment into priority sectors and markets.
What is your approach to blended finance and how has it evolved?
BII views blended finance as a critical enabler for market level impact, frontier market development, and private capital mobilization. Our approach has evolved from deal-by-deal applications to a more strategic, programmatic deployment of catalytic capital in service of three objectives:
- Addressing market failures and financing gaps in priority sectors, including financial inclusion, e-mobility, agricultural value chain solutions, energy access, and circular economy.
- Using catalytic capital to drive growth of real economy businesses, support financial services, and enable critical infrastructure development in frontier markets, enhancing economic resilience.
- Mobilizing private capital at scale through blended finance funds and other intermediated structures that leverage catalytic capital to de-risk relevant opportunities in EMDEs.
Our catalytic capital toolkit consists of two pools of capital, Catalyst and Kinetic. Both Catalyst and Kinetic allow BII to pursue deeper impact through a higher risk tolerance than traditional core DFI/multilateral development bank capital.
The primary distinction between Catalyst and Kinetic is their position on the risk spectrum, with Kinetic having a higher risk appetite than Catalyst. In the new strategy period, we have aligned both these tools more closely and will deploy them as a coordinated toolkit, combining capital and technical assistance (TA) to address market barriers and mobilize private capital at scale.
In April 2025 you released a report featuring Practical guidance to scale blended finance and you’ve recently released a second report building on that guidance, what prompted BII to develop these reports and how do they support and develop the global blended finance market?
Despite strong growth in blended finance activity in recent years, the market for blended finance funds remains constrained by the absence of a common framework across ecosystem stakeholders, leading to complex and highly bespoke structures that are costly and time-intensive to execute. The ‘Scaling Blended Finance’ series started as a response to these constraints, to translate real world structuring practices into practical guidance, creating a shared language across DFIs, fund managers, private investors, and catalytic capital providers and improving efficiency and effectiveness in blended fund structuring.
Scaling Blended Finance II, developed in partnership with Boston Consulting Group and Glasgow Financial Alliance for Net Zero, focuses on ‘mobilizing archetypes’ that are set out in the typology presented in Scaling Blended Finance I and presents a practical framework linking commercial investor constraints to different concessional instruments and their respective sizing considerations. In doing so, it helps answer three critical questions: why concessional capital is needed, what form it should take, and how much is required to bridge the gap between the binding constraints of commercial investors and an asset pool’s risk-return profile. The report aims to provide the market with a practical guide to optimizing concessionality in mobilization structures.
We hope that this work will help reduce structuring complexity and timelines, create a shared language among stakeholders, and support the scaling and replication of mobilization structures. We, along with our partners, are planning practitioner-focused engagements throughout the year to continue to build on the best practices set out in the report and translate them into real world action.
Through the EMDE Investor Taskforce, you regularly engage with institutional investors, such as pension funds and insurance companies. What have you learned about their expectations towards blended finance deals?
Effective mobilization structures start with a clear understanding of investor constraints, including regulatory requirements, mandate guardrails, asset allocation frameworks, limited emerging markets expertise, and reliance on ratings or external risk metrics. For some investors, these constraints can be binding, for example, matching adjustment requirements for UK life insurers. Our Scaling Blended Finance II report sets out these constraints by investor type and maps them against the concessional mechanisms that can help address them, including downside protection, return enhancement, cashflow and liquidity enhancement, and volatility reduction. The key lesson is that mobilization starts with understanding the specific constraints of the investors you are trying to attract. Different investor groups face different barriers and there is no universal blended finance structure that works for all of them. Concessional capital is therefore most effective when it is targeted and tailored to address the binding constraints of a defined investor segment, while remaining pragmatic and flexible in how concessionality is structured to bridge risk-return gaps.
Can you share some specific blended finance transactions you have been involved in and what role you played?
BII’s capital toolkit (Growth, Catalyst, Kinetic, and BII Plus TA) is designed to sit across the risk spectrum of development finance. This enables BII to take on various roles in blended finance transactions, i.e. we can act as catalytic investors, anchor investors, and/or senior investors.
Some recent blended finance fund transactions that BII has been involved in include:
- In December 2025, BII invested $40 million in the junior tranche of the Allianz Credit Emerging Markets Fund, helping reduce volatility and mobilize a target of $850 million of private capital for emerging market credit if the fund achieves its target size of $1 billion. The fund supports Paris Agreement-aligned climate finance.
- In May 2026, BII committed $30 million to the junior tranche of BlackRock’s Industrial Transformation Programme under Singapore’s FAST-P initiative, with the aim of mobilizing commercial capital for decarbonization and transition opportunities in Southeast Asia. The investment supports energy and industrial decarbonization projects, aligns with BII’s climate and mobilization strategy, and marks BII’s second FAST-P commitment after the Pentagreen-managed Green Investment Partnership.
What have you learned about measuring the impact and evaluating the success of blended finance transactions?
Measuring the success of blended finance transactions requires looking beyond mobilization alone. Mobilization ratios are important, particularly for structures that crowd in private capital at scale, but they only provide a partial picture of success. Ultimately, we assess blended finance transactions against the same core objectives as any other investment: their contribution to productive, sustainable, and inclusive development. BII’s impact framework provides the foundation for this assessment, helping us to understand who benefits, what outcomes are delivered, the scale of those outcomes, and the extent to which our investment was needed to achieve them. Our Impact Score and evaluation work help us assess these outcomes both at an individual investment level and across the portfolio.
We have also learned that some of the most important impacts of blended finance can occur after the immediate transaction. A successful blended finance structure can demonstrate a new financing model, help establish track record for an emerging asset class, crowd in new types of investors, or reduce the amount of concessional support needed over time as markets mature. As a result, we increasingly look not only at how much capital has been mobilized, but also the quality of mobilization and whether a structure is helping to build a more sustainable market for the future.
How do you apply a gender lens in your blended finance work? At what stage are gender considerations typically discussed?
Gender is a core strategic impact priority at BII and is embedded throughout our investment process from origination and due diligence to structuring and portfolio management. We use a gender lens to identify and prioritize investments that can expand access to finance, create more jobs, increase climate resilience, and improve other social outcomes for women. These efforts are complemented by targeted TA through BII Plus. As a result, gender considerations are typically discussed from the earliest stages of blended finance transaction, with a particular focus on financial inclusion, women’s economic participation and leadership, and ensuring women share in the benefits of the climate transition.
How do you see BII’s blended finance activities evolving in the future?
We expect our blended finance activities to rally around the three strategic shifts in our new strategy in the medium term: market level impact, frontier market development, and private capital mobilization. We expect to continue to learn and incorporate lessons into our blended finance operations and broader engagement with the market. Where possible, we will aim to drive standardization and simplicity in structures, acknowledging that there is an inherent tension between innovation and scale in blended finance. Flexibility in blended finance structures can be understood as a continuum, with varying degrees of bespoke structuring.
At one end are highly bespoke transactions, allowing BII to support innovative business models, technologies, and solutions that would otherwise struggle to access capital. These structures offer the greatest scope to solve for specific market or company constraints, but they are also the most time-intensive to execute and hardest to replicate.
At the other end of the spectrum are standardized structures designed for replication and scale, which are most feasible where underlying portfolios consist of assets whose risks and performance characteristics are well-understood. These large-scale mobilization structures are where we will aim for maximum simplicity and standardization, in line with the best practices set out in the Scaling Blended Finance series.
Local capital mobilization is also an important priority nested within our broader mobilization ambition and we expect to see structures that target localized mobilization coming through in this strategy period. A longer-term ambition at the core of all our blended finance activity is to reduce the reliance on concession as markets mature and deepen and risks become well understood. We envision blended finance remaining a key tool in our toolkit to drive development impact in our markets.
