Published 2017
The promise of ‘blended finance’
By Homi Kharas

Homi Kharas is a Senior Fellow and Co-Director at The Brookings Institution, which is a non-profit public policy organisation that brings together more than 300 leading experts in government and academia from all over the world. Homi Kharas studies policies and trends influencing developing countries, including aid to poor countries, the emergence of the middle class, global governance and the G20.

The rough contours of financing for the Sustainable Development Goals (SDGs) are now well known. Low-income and lower middle-income countries alone will need incremental resources of US$ 1.4 trillion per year over the next 15 years.¹ The challenge is how to mobilise and orient enough capital for investments that contribute to achieving the SDG targets. In this note, I argue that ‘blended finance’, a much used and much abused term that broadly refers to the mixing of funds from public and private sources, offers the greatest promise, but is still in its infancy as an instrument for sustainable development. The Organisation for Economic Co-operation and Development (OECD) estimates that only US$ 27 billion of private money was mobilised by official development finance interventions in 2015 in blended finance operations.² This should increase to several hundred million dollars per year within five years.