Blended Finance Knowledge Test

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? Around 200 More than 400 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. Between US$ 10 to 250 Mn. Less than US$ 10 Mn. More than US$ 100 Mn.

Are you familiar with the basics of Blended Finance?

Blended Finance Knowledge Test

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Blended Finance Purpose

1. What is the main goal of Blended Finance?

2. How does Blended Finance differentiate itself from Impact Investing and Commercial Investing?

3. What are the key characteristics of a Blended Finance transaction?

Blended Finance Actors

1. Who are the primary actors involved in Blended Finance transactions?

2. What is THE essential Blended Finance feature that triggers more private capital flow to developing countries?

3. How do the motives of public, philanthropic and private sector funders differ?

Blended Finance Instruments

1. What are the main types of Blended Finance solutions?

2. What is the core function of concessional capital in Blended Finance?

Blended Finance Obstacles

1. What is the biggest obstacle to increasing Blended Finance activities?

2. When NOT to use Blended Finance?

Blended Finance in Practice

1. How many Blended Finance Deals do you think have been closed world-wide to date?

2. What would you say is the typical deal size of a Blended Finance transaction?