Our Check Tools
Blended Finance Knowledge Test
Are you familiar with the basics of Blended Finance?
Blended Finance Purpose
1. What is the main goal of Blended Finance?
It blends and leverages public resources with private sector engagement
It enables development finance and philanthropic funds to mobilize private capital
I heard about Blended Finance, but don't know exactly what it aims at
It helps development agencies and foundations to finance the SDGs
It's a strategic approach to use development finance and philanthropic funds to mobilize private capital flows to emerging and frontier markets
2. How does Blended Finance differentiate itself from Impact Investing and Commercial Investing?
I have no idea
Blended Finance and Impact Investing are two different investment approaches to foster impact
It's essentially the same
Blended Finance, Impact Investing and Commercial Investing are three different approaches that have distinct characteristics but also have overlaps in tackling specific development impact challenges
Blended Finance is a structuring approach that may include Impact Investments
3. What are the key characteristics of a Blended Finance transaction?
It provides a high leverage of private capital on each public and/or philanthropic dollar
It's (a) a blended, (b) a financial and (c) a big transaction
There are three key characteristics of every Blended Finance transaction: positive additionality, positive impact and positive financial return
It is additional, i.e. it crowds in private sector investment which wouldn't have been attracted otherwise
It creates additionality to the project by effectively crowding in private capital while positively contributing to the SDGs
Blended Finance Actors
1. Who are the primary actors involved in Blended Finance transactions?
Everyone who wants to provide capital
Private, philanthropic and public providers of capital plus the organizations and enterprises on the ground receiving the capital to implement the development impact project
All investors who aim to support the SDGs
Capital providers from the public and the private sector
Providers of development finance and philanthropic funds, impact investors and commercial investors aiming to engage in emerging and frontier markets
2. What is THE essential Blended Finance feature that triggers more private capital flow to developing countries?
Making transactions bigger so they are more efficient
Mitigating the risks of transactions for private sector investors
Making local financial markets function efficiently
Providing knowledge to private sector investors
Improving the risk-return profile of transactions for private sector capital providers
3. How do the motives of public, philanthropic and private sector funders differ?
Private sector investors want to reduce their risks
I don't know exactly, probably in terms of return expectations
Public and philanthropic actors strive to achieve more effective and lasting impact with their funding, while private sector capital providers need to aim either for a pre-defined financial return for a given (or perceived) risk, or less risk for a given expected return
They dont't differ, all funders are perfectly aligned in their motives
Public and philanthropic funders want to achieve more impact for every dollar provided
Blended Finance Instruments
1. What are the main types of Blended Finance solutions?
Only standard grants
Structured & layered funds as well as pay-for-results & incentive solutions, e.g. Development Impact Bonds
Standard grants and guarantees
Catalytic capital in the form of "smart" guarantees and grants, e.g. redeemable grants
There are many ways for grants, guarantees and concessional capital to add value and catalyze. The main types are (1) structured & layered funds, (2) pay-for-results & market incentives, as well as (3) guarantees & insurances for risk-underwriting. On top come support for ecosystem-building or design & preparation of a project (e.g. Technical Assistance, Investment Readiness)
2. What is the core function of concessional capital in Blended Finance?
I don't know
As the name says: it's cheap!
There are several value adds, but the most important for Blended Finance are (a) a better risk-return ratio for private sector investors and (b) less cost of capital for the transaction
It can protect other more conservative "senior" investors by taking first losses
Concessional debt or equity provide favorable terms relative to market pricing
Blended Finance Obstacles
1. What is the biggest obstacle to increasing Blended Finance activities?
I have no idea
Shaping successful Blended Finance transactions and creating best practice examples
Understanding the different mind-sets of public, philanthropic and private sector funders and overcoming mentality gaps to enable effective collaboration
There is none: it's only in our heads
Getting the public and philanthropic actors moving towards more innovative solutions
2. When NOT to use Blended Finance?
When it's too expensive
When the project/solution doesn't provide additionality and/or isn't ready to take on investment
It's ALWAYS useful!
When it's too complicated
When the project or solution doesn't have a market-based model, isn't scalable, lacks additionality and doesn't provide evidence about its ability to create the intended impact as well as about the potential to become self-sustaining
Blended Finance in Practice
1. How many Blended Finance Deals do you think have been closed world-wide to date?
I don't know, maybe 20?
More than 450
Less than 100
It depends on who you ask
2. What would you say is the typical deal size of a Blended Finance transaction?
I have no idea
Between US$ 100 to 250 Mn., with a median at 65 Mn.
The range is considerable, but the majority is between US$ 10 to 250 Mn.
Less than US$ 10 Mn.
More than US$ 100 Mn.
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