An overview of blending: financing to development final assignment
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The document discusses blending, which refers to combining grants with loans or equity from public and private financiers for development projects. It outlines different types of blending facilities and provides examples. Benefits of blending include mobilizing additional resources and improving development impact. However, concerns relate to risks of financial incentives outweighing development goals and insufficient transparency. The document suggests reducing complexity, carefully assessing impacts, and ensuring timely decision making to effectively implement blended finance.
An overview of blending: financing to development final assignment
- 1. An overview of blending Submitted as final assignment for “Financing for Development” Massive Open Online Course (MOOC) offered by World Bank Group Rohan Kumar Ramayad
- 3. Introduction
- 4. Introduction Watch the video Blended Finance | The Road to Addis and Beyond at https://youtu.be/Bc0g7HspRw4
- 5. Definition
- 6. Definition Blending refers the combination of grant with loans or equity from public and private financiers.
- 7. Definition Blending refers the combination of grant with loans or equity from public and private financiers. Grants Loans or Equity Blending
- 9. Types of Blended Finance:
- 10. Types of Blended Finance: Mustapha et al (2014) identifies the following forms of blended finance:
- 11. Types of Blended Finance: Mustapha et al (2014) identifies the following forms of blended finance: Direct grants
- 12. Types of Blended Finance: Mustapha et al (2014) identifies the following forms of blended finance: Direct grants Conditionality/performance-based grants
- 13. Types of Blended Finance: Mustapha et al (2014) identifies the following forms of blended finance: Direct grants Conditionality/performance-based grants Interest Rate Subsidy
- 14. Types of Blended Finance: Mustapha et al (2014) identifies the following forms of blended finance: Direct grants Conditionality/performance-based grants Interest Rate Subsidy Guarantee/risk-sharing products
- 15. Types of Blended Finance: Mustapha et al (2014) identifies the following forms of blended finance: Direct grants Conditionality/performance-based grants Interest Rate Subsidy Guarantee/risk-sharing products Structured finance − first loss financing
- 16. Types of Blended Finance: Mustapha et al (2014) identifies the following forms of blended finance: Direct grants Conditionality/performance-based grants Interest Rate Subsidy Guarantee/risk-sharing products Structured finance − first loss financing Technical assistance
- 17. Types of Blended Finance: Mustapha et al (2014) identifies the following forms of blended finance: Direct grants Conditionality/performance-based grants Interest Rate Subsidy Guarantee/risk-sharing products Structured finance − first loss financing Technical assistance Risk capital
- 19. Examples of blending facilities:
- 20. Examples of blending facilities: Accelerated Co-financing Facility for Africa (ACFA)
- 21. Examples of blending facilities: Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund
- 22. Examples of blending facilities: Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF)
- 23. Examples of blending facilities: Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative
- 24. Examples of blending facilities: Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative Neighborhood Investment Facility (NIF)
- 25. Examples of blending facilities: Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative Neighborhood Investment Facility (NIF) Public-Private Infrastructure Advisory Facility (PPIAF)
- 26. Examples of blending facilities: Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative Neighborhood Investment Facility (NIF) Public-Private Infrastructure Advisory Facility (PPIAF) Western Balkans Investment Framework (WBIF)
- 27. Examples of blending facilities: Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative Neighborhood Investment Facility (NIF) Public-Private Infrastructure Advisory Facility (PPIAF) Western Balkans Investment Framework (WBIF) Latin America Investment Facility (LAIF)
- 28. Examples of blending facilities: Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative Neighborhood Investment Facility (NIF) Public-Private Infrastructure Advisory Facility (PPIAF) Western Balkans Investment Framework (WBIF) Latin America Investment Facility (LAIF) Investment facility for Central Asia (IFCA)
- 29. Examples of blending facilities: Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative Neighborhood Investment Facility (NIF) Public-Private Infrastructure Advisory Facility (PPIAF) Western Balkans Investment Framework (WBIF) Latin America Investment Facility (LAIF) Investment facility for Central Asia (IFCA) Caribbean Investment Facility (CIF)
- 31. Discussion on blending in marign of European Development Days in 2013
- 32. Discussion on blending in marign of European Development Days in 2013 Watch the video below of Bruno Wenn, the chairman of EDFI, the Association of European Development Finance Institutions on blending:
- 33. Discussion on blending in marign of European Development Days in 2013 Watch the video below of Bruno Wenn, the chairman of EDFI, the Association of European Development Finance Institutions on blending: https://youtu.be/ZDOM7-fY8BI
- 35. Support for blending: The need to mobilise additional resources for development and global public goods
- 36. Support for blending: The need to mobilise additional resources for development and global public goods The prospect of closing the financial gap, for projects that could not be wholly financed through loans only
- 37. Support for blending: The need to mobilise additional resources for development and global public goods The prospect of closing the financial gap, for projects that could not be wholly financed through loans only The possibility of improving the development impact of the investment, through the grant element as complementary funding
- 38. Support for blending: The need to mobilise additional resources for development and global public goods The prospect of closing the financial gap, for projects that could not be wholly financed through loans only The possibility of improving the development impact of the investment, through the grant element as complementary funding The objective of reducing the potential debt burden resulting from the investment, enhancing long term public sector borrowing capacity/sustainability
- 39. Support for blending: The need to mobilise additional resources for development and global public goods The prospect of closing the financial gap, for projects that could not be wholly financed through loans only The possibility of improving the development impact of the investment, through the grant element as complementary funding The objective of reducing the potential debt burden resulting from the investment, enhancing long term public sector borrowing capacity/sustainability Economic crises and increased budget constraints on donors such that leveraging developing financing through blending is often perceived as a means to partly address the requirement “to do more with less”
- 40. Support for blending: The need to mobilise additional resources for development and global public goods The prospect of closing the financial gap, for projects that could not be wholly financed through loans only The possibility of improving the development impact of the investment, through the grant element as complementary funding The objective of reducing the potential debt burden resulting from the investment, enhancing long term public sector borrowing capacity/sustainability Economic crises and increased budget constraints on donors such that leveraging developing financing through blending is often perceived as a means to partly address the requirement “to do more with less” The potential for enhancing the partner country governments’ ownership of the development assistance due to the loan component
- 41. Support for blending: The need to mobilise additional resources for development and global public goods The prospect of closing the financial gap, for projects that could not be wholly financed through loans only The possibility of improving the development impact of the investment, through the grant element as complementary funding The objective of reducing the potential debt burden resulting from the investment, enhancing long term public sector borrowing capacity/sustainability Economic crises and increased budget constraints on donors such that leveraging developing financing through blending is often perceived as a means to partly address the requirement “to do more with less” The potential for enhancing the partner country governments’ ownership of the development assistance due to the loan component Potential economies of scale generated as a result of better pooling of resources and coordination among development financiers
- 44. Concerns about blending: The risk of financial incentives outweighing development principles
- 45. Concerns about blending: The risk of financial incentives outweighing development principles The risk to differentiate in favour of middle-income countries against poorer countries
- 46. Concerns about blending: The risk of financial incentives outweighing development principles The risk to differentiate in favour of middle-income countries against poorer countries The risk of crowding out private financing and distorting markets
- 47. Concerns about blending: The risk of financial incentives outweighing development principles The risk to differentiate in favour of middle-income countries against poorer countries The risk of crowding out private financing and distorting markets The risk of providing insufficient attention to transparency and accountability
- 48. Concerns about blending: The risk of financial incentives outweighing development principles The risk to differentiate in favour of middle-income countries against poorer countries The risk of crowding out private financing and distorting markets The risk of providing insufficient attention to transparency and accountability The risk of unclear or ill-defined monitoring and evaluation methods
- 49. Concerns about blending: The risk of financial incentives outweighing development principles The risk to differentiate in favour of middle-income countries against poorer countries The risk of crowding out private financing and distorting markets The risk of providing insufficient attention to transparency and accountability The risk of unclear or ill-defined monitoring and evaluation methods The debt risks for developing countries of increasing lending.
- 51. Suggestion:
- 52. Suggestion: ETTG report (2011) suggests that in order to guarantee an efficient allocation and implementation of blended finance, it is important to:
- 53. Suggestion: ETTG report (2011) suggests that in order to guarantee an efficient allocation and implementation of blended finance, it is important to: ◦ reduce the complexity of blending mechanisms, for instance by clearly assigning responsibilities (accountability) in order to avoid transparency issues
- 54. Suggestion: ETTG report (2011) suggests that in order to guarantee an efficient allocation and implementation of blended finance, it is important to: ◦ reduce the complexity of blending mechanisms, for instance by clearly assigning responsibilities (accountability) in order to avoid transparency issues ◦ carefully assess the impact that mixing a loan with a grant element could have on a recipient country in order to avoid crowding-out other potential sources of funding
- 55. Suggestion: ETTG report (2011) suggests that in order to guarantee an efficient allocation and implementation of blended finance, it is important to: ◦ reduce the complexity of blending mechanisms, for instance by clearly assigning responsibilities (accountability) in order to avoid transparency issues ◦ carefully assess the impact that mixing a loan with a grant element could have on a recipient country in order to avoid crowding-out other potential sources of funding ◦ define the percentage of the grant element in such a way as to deter recipient countries from imprudent borrowing
- 56. Suggestion: ETTG report (2011) suggests that in order to guarantee an efficient allocation and implementation of blended finance, it is important to: ◦ reduce the complexity of blending mechanisms, for instance by clearly assigning responsibilities (accountability) in order to avoid transparency issues ◦ carefully assess the impact that mixing a loan with a grant element could have on a recipient country in order to avoid crowding-out other potential sources of funding ◦ define the percentage of the grant element in such a way as to deter recipient countries from imprudent borrowing ◦ reach agreement among donors on requirements to provide funds in a timely fashion and avoid delaying decision-making processes
- 57. Source: http://www.worldbank.org/mdgs/documents/MDBs-IMF- DevFin-Solutions-11-3-15.pdf ETTG (2011) Aid for Trade and Blended Finance. Aid for Trade Case Study submission to OECD/ WTO. London: Overseas Development Institute. http://ecdpm.org/wp-content/uploads/2015-European- Report-on-Development-English.pdf http://ecdpm.org/wp-content/uploads/2013/11/Blending- Loans-Grants-Blend-Not-Blend.pdf http://www.evidenceondemand.info/topic-guide- blended-finance-for-infrastructure-and-low-carbon- development-full-report