Figure 1: Annual deal count and aggregate financing of blended transactions involving financial institutions within Convergence Market Data, 2014-2024
Financial institutions (FIs) occupy a unique position in blended finance. Unlike transactions that finance a single project or company, these blending arrangements support the balance sheets of various FIs, enabling them to expand lending to underserved borrowers such as small and medium-sized enterprises (SMEs), climate-focused businesses, and low-income households. Through this intermediary model, a single transaction can reach thousands of end beneficiaries.
To date, Convergence Market Data has recorded 301 blended finance transactions involving FIs, totaling $30.1 billion in aggregate financing — a figure that has grown significantly as development finance institutions (DFIs) and investors increasingly use financial intermediaries to deploy capital at scale. In Convergence Market Data, FIs refer to regulated entities that provide financial services and allocate capital within domestic markets, including commercial banks, microfinance institutions, and non-bank financial institutions.
Convergence’s latest data brief explores how blended finance has been used to support FIs and examines the distinctive characteristics of these transactions. Drawing on an analysis of deals captured in Convergence Market Data and interviews with industry stakeholders, the brief highlights how blending arrangements with FIs operate, the types of arrangements commonly used, and the role these transactions play in mobilizing capital to underserved borrowers.
Highlights from the Brief
| Figure 2 | Figure 3 |
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| Top 10 commercial investors in blended FI transactions by number of commercial capital commitments | Top 10 concessional investors in blended FI transactions by number of concessional capital commitments |
DFIs anchor FI blended finance transactions
DFIs and multilateral development banks (MDBs) play a defining role in these arrangements, frequently acting as both providers of concessional capital and senior commercial investors within the same transaction. Concessional capital is often delivered through dedicated institutional facilities or concessional windows, for example International Finance Corporation (IFC)’s Women Entrepreneurs Finance Initiative (We-Fi) is designed to invest alongside the institution's own balance sheet. This dual role means the leading concessional investors in FI blending arrangements closely mirror the leading commercial investors — institutions such as IFC and the Dutch Entrepreneurial Development Bank (FMO) consistently appear across both categories.
Figure 4: Blended FI transactions by sub-sector vs. the entire blended finance market
Capital flows to SMEs and climate finance
FIs channel blended capital to borrowers who might otherwise lack access to financing. Many transactions target SMEs — widely recognized as engines of economic growth yet chronically underserved in emerging markets — while a growing share focuses on climate-related investments including renewable energy, energy efficiency, and adaptation. Blending concessional with commercial capital helps FIs extend credit to sectors perceived as higher risk or unfamiliar, while leveraging their existing lending infrastructure and local market knowledge.
Challenges and opportunities for scaling
Build enabling environments and institutional capacity.
Regulatory constraints, limited technical capacity, and insufficient data on segments like climate or gender-focused finance continue to restrict growth. Technical assistance can help FIs develop new lending products, strengthen risk assessment, and improve reporting — building the foundation for sustainable expansion into underserved markets.
Reduce perceived risk to attract private capital.
DFIs and MDBs have been essential in anchoring these deals, but scaling the market requires greater commercial participation. Risk-sharing instruments, concessional capital, and longer-tenor financing can lower barriers for private investors, while a growing track record of successful transactions helps demonstrate the viability of lending in underserved markets.
FIs represent one of the most effective channels for deploying blended finance at scale, but the model is not without its limits. Growth has been concentrated among a relatively small group of DFIs and MDBs, and private sector participation remains constrained by perceived risk and limited track record in many markets. Expanding the reach of FI blended finance will depend on addressing these structural barriers — through targeted technical assistance, stronger enabling environments, and blending structures that make a credible case to commercial investors. Progress is being made, but scaling the intermediary model to meet the financing needs of underserved borrowers remains a work in progress.
