In February 2018, the GIIN launched a Blended Finance Working Group to address the bespoke nature of designing blended finance structures in order to decrease transaction costs and to scale the use of blended finance.
The Blended Finance Working Group identified a number of challenges that arise in structuring blended finance investments. Since these investments often involve a variety of stakeholders, the Working Group found that difficulties frequently occurred during negotiations over the design and specific terms of the investment vehicle. Specific issues included opposing expectations between risk capital providers and market-rate providers, as well as a lack of common language among the stakeholder group. At best, these issues led to a lengthy negotiation process; at worst, they caused deals to fall apart.
To address these challenges, the Working Group has created a suite of resource documents for stakeholders who have decided to utilize a blended finance structure that leverages one of the following catalytic tools: junior equity, subordinated debt, first-loss capital, guarantee and technical assistance.