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__Friday, February 28, 2025, 9:00AM - 5:00PM EAT, Nairobi, Kenya__

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Join Nairobi's public, private, and philanthropic actors for an in-person interactive and practice-driven training on blended finance. This intermediate-level session will combine insights from Convergence experts and blended finance practitioners in the field. This training is an opportunity for Convergence members and partners to gather to share insights and experiences and tackle difficult questions around innovative approaches to mobilize private capital for the Sustainable Development Goals.

Speaker details and agenda to follow.

This training is complimentary for members (one seat for Standard Membership, two seats for Market Builder Membership), USD 150 for additional member seats, and USD 250 for non-members. Please contact your relationship manager for more details or questions about your membership type.

*Registration is on a first come, first served basis and capacity is limited. We encourage registering early to reserve your seat.*

In-Person Convergence Blended Finance Training in Nairobi

Join us in Nairobi, Kenya for a full-day training combining insights from Convergence experts and blended finance practitioners in the field.

Blended Finance Training in London U.K.

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__February 19-21, 2025, Cape Town, South Africa__

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Don’t miss [Africa's Green Economy Summit](https://wearevuka.com/green-economy/ages/) in Cape Town from February 19-21, 2025, where global capital meets African opportunities. This investor-focused event will spotlight key themes including green reforms, nature and biodiversity, climate finance, resilient cities, and green industrialization. 

Convergence is a supporting partner of the Summit.

Africa's Green Economy Summit

Don’t miss Africa's Green Economy Summit in Cape Town!

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__Monday, February 3, 2025, 9:30AM - 4:30PM GMT, London U.K.__

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As an intermediate-level programme, this full-day training will combine blended finance and mobilization data, case studies, insights from Convergence experts, notable speakers from major organizations, and technical experts in the field. Convergence members will participate in an inspiring, interactive, and practice-driven day of learning and knowledge sharing around blended finance as an approach to mobilize more private capital for the United Nations Sustainable Development Goals and Paris Agreement.

This training is complimentary for members (one seat for Standard Membership, two seats for Market Builder Membership), USD 500 for additional member seats, and USD 750 for non-members. Please contact your relationship manager for more details or questions on your membership type.

Register by __January 7th__ to reserve your seat.

In-Person Convergence Training for Blended Finance Practitioners in Europe

Join us in London U.K. for a full-day training combining blended finance and mobilization data, information and cases, insights from Convergence experts, notable speakers from major organizations, and technical experts in the field.

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__Info Session: Scale Private Investment Mobilization Standardization Project, Wednesday, January 15, 2025, 10:00AM ET__

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Convergence invites you to an Information Session and Member Consultation on the Scale Private Investment Mobilization Standardization Project.

The main objective of the project is to identify, in consultation with Developing Countries, Developed Countries, MDBs & DFIs, philanthropic foundations and private sector investor groups, proven blended finance models that will lead to private investment mobilization at scale to Low and Middle-Income Countries to fund the SDGs. Once identified, the goal is to standardize and replicate these models and demonstrate how concessional funding can be awarded optimally to the best cases aligned to the models.

The 60-minute session will include a presentation on the project, gathering initial feedback from members. Your participation will help shape this transformative effort to mobilize private investment at scale.

Register now to join us.

Info Session: Scale Private Investment Mobilization Standardization Project

Join Convergence for an Information Session and Consultation on the Scale Private Investment Mobilization Standardization Project

Private Investment Mobilization Standardization Project

Member Training: How Foundations Blend

__Member Training: How Foundations Blend, January 9, 2025, 10:00AM ET__

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Following the release of Convergence's [Blending with Foundations Data Brief](https://www.convergence.finance/resource/blending-with-foundations/view), this member training will present on the major findings of our research and invite speakers from international foundations who are actively involved in blended finance.

The session will cover:
- How foundations engage in blended finance on both a concessional and commercial basis.
- What barriers and opportunities exist for foundations looking for catalytic investments using blended finance.
- How foundations are uniquely placed to support transactions across social sectors and current initiatives looking to increase capital flows from these capital providers.

Join us as we explore how foundations blend

How Philanthropic Organizations Blend

Convergence Member Networking in Mumbai: Scaling Blended Finance in India

__Thursday, December 12, 2024 at 4:00pm – 6:30pm IST__

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Convergence invites you to a networking event with members and partners in Mumbai, India. The event will feature:

- Keynote presentation of key findings from our [State of Blended Finance 2024: Climate Edition ](https://www.convergence.finance/resource/state-of-blended-finance-2024-climate-edition/view)with Asia and India lens
- Discussions on potential to scale blended finance in India
- Networking Drinks 
 

Jointly organised by Convergence and KOIS, this event will bring together Convergence's members, partners, and other innovative finance stakeholders comprising impact investors, institutional investors, donor agencies, development banks, and sponsors of blended finance deals. It will be an opportunity to connect with like-minded individuals engaged in blended finance, make new contacts, exchange ideas, and more.

Due to limited capacity, this is an invite-only event. If you are interested in attending, please reach out to: asia@convergence.finance

Convergence invites you to a networking event with members and partners in Mumbai. 

Member Networking Mumbai: Scaling Blended Finance in India

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__Inside the Deal: Climate Investor 2, December 4, 2024, 9:00AM - 10:00AM ET__

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Explore the inner workings of real blended finance transactions through Convergence's "Inside the Deal" webinar series. Each quarter, we delve into a successful deal, inviting the deal sponsor and key stakeholders to offer candid insights on structuring these intricate transactions.

In our next webinar, we will feature Climate Fund Managers' Climate Investor 2 (CI2). CI2 is a blended finance facility delivering water, sanitation, and oceans infrastructure projects in emerging markets.

During this hour-long webinar, the Climate Fund Managers team will provide an overview of the facility’s structure and their fundraising journey. We will also conduct in-depth interviews with key stakeholders involved in the transaction, uncovering invaluable lessons learned along the way. The webinar will conclude with an open Q&A session.

*This webinar is open to Convergence members only.*

Inside the Deal: Climate Investor 2

Explore the inner workings of real blended finance transactions through Convergence's "Inside the Deal" webinar series. Each quarter, we delve into a successful deal, inviting the deal sponsor and key stakeholders to offer candid insights on structuring these intricate transactions.

In this webinar, we featured Climate Fund Managers' Climate Investor 2 (CI2). CI2 is a blended finance facility delivering water, sanitation, and oceans infrastructure projects in emerging markets.

During the hour-long webinar, the Climate Fund Managers team provided an overview of the facility’s structure and their fundraising journey. We also conducted in-depth interviews with key stakeholders involved in the transaction, uncovering invaluable lessons learned along the way. The webinar concluded with an open Q&A session.

Join us to learn about Climate Fund Manager’s Climate Investor 2 (CI2).

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__Wednesday, November 27, 2024, 4:00PM-5:00PM EAT__

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Blended finance has emerged as a key tool for mobilizing private capital to address development and climate challenges, especially in Sub-Saharan Africa. As climate risks intensify, the need for sustainable investment in sectors like energy, agriculture, and financial services becomes more critical.

Convergence’s recently published [State of Blended Finance 2024: Climate Edition](https://www.convergence.finance/resource/state-of-blended-finance-2024-climate-edition/view) provides fresh insights into the state of blended finance globally, with a special focus on climate-related investments. The report highlights that Sub-Saharan Africa accounts for 41% of climate-blended finance transactions, driven by the continent's investment opportunities and urgent climate needs. Despite significant progress, barriers such as perceived risks and relatively small transaction sizes continue to hinder private sector participation in the region.

Join us, alongside Africa's Green Economy Summit, for this webinar as we present key findings from the report, discuss the successes and challenges in mobilizing climate finance in Africa, and explore strategies to unlock more private capital with a climate lens.

The State of Blended Finance 2024 (Climate Edition): Spotlight on Africa

Join us, alongside Africa's Green Economy Summit, for this webinar exploring the State of Blended Finance 2024: Climate Edition, with specific focus on Africa.

The State of Blended Finance 2024 (Climate Edition): Africa

Let's talk about Blended Finance: Practical Cases

__Tuesday, November 26, 2024 at 8:00 - 10:00 AM ET__

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Join Convergence, NAB Colombia, and Brigard Urrutia for an engaging networking event, “Let’s Talk About Blended Finance: Practical Cases,” on November 26, 2024, from 8:00 AM to 10:00 AM in Bogotá, Colombia.

One complimentary seat is available for each Convergence member.

Networking Event – Let’s Talk About Blended Finance: Practical Cases

Let’s Talk About Blended Finance: Practical Cases

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__Innovative Finance for Climate: The Role of Blended Bonds, November 25, 2024, 10:00AM - 11:30AM ET__

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Join us for a webinar on the innovative use of blended bonds to address the climate financing gap. As global climate commitments continue to grow, the need for effective financing solutions has become paramount. This webinar will explore how blended bonds are emerging as a critical tool to mobilize capital for climate adaptation and mitigation projects worldwide.

The session will begin with presentations from leading organizations in the field: Convergence and the Climate Bonds Initiative (CBI). Convergence, a global network for blended finance, will provide an overview of how blended finance climate bond structures are effectively attracting both public and private capital. CBI, a pioneer in the green and sustainable bond space, will present on how certification and standardization of climate bonds are enhancing transparency, lowering risk, and improving market credibility and on the role of policy makers in supporting this process.

Following the presentations, a dynamic panel discussion will delve into the practical aspects of structuring and deploying blended bonds for climate action. Panelists will address the challenges and opportunities in scaling up the use of blended bonds.

The final agenda and panelists will be shared closer to the event date.

Innovative Finance for Climate: The Role of Blended Bonds

Watch this webinar on the innovative use of blended bonds to address the climate financing gap. As global climate commitments continue to grow, the need for effective financing solutions has become paramount. The webinar explored how blended bonds are emerging as a critical tool to mobilize capital for climate adaptation and mitigation projects worldwide.

The session began with presentations from leading organizations in the field: Convergence and the Climate Bonds Initiative (CBI). Convergence, a global network for blended finance, provided an overview of how blended finance climate bond structures are effectively attracting both public and private capital. CBI, a pioneer in the green and sustainable bond space, presented on how certification and standardization of climate bonds are enhancing transparency, lowering risk, and improving market credibility and on the role of policy makers in supporting this process.

Following the presentations, there was a dynamic panel discussion delving into the practical aspects of structuring and deploying blended bonds for climate action. Panelists addressed the challenges and opportunities in scaling up the use of blended bonds.

Join us to learn about the innovative use of blended bonds to address the climate financing gap.

State of Blended Finance Climate Edition – Spotlight on Asian Trends

__Member Training: State of Blended Finance (Climate Edition) – Spotlight on Asian Trends, November 21, 2024, 10:30AM-11:45AM SGT__

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Convergence just launched [the State of Blended Finance 2024 report](https://www.convergence.finance/resource/state-of-blended-finance-2024-climate-edition/view) with a focus on climate, which offers an updated analysis on climate blended finance in emerging markets, covering sector, region, and investor trends.

This session will focus on the the Asia-Pacific region, exploring the challenges and opportunities to mobilizing private sector finance into climate projects at scale in Asia.

__Featured Speakers:__
- Tristan Knowles, Unit Head, Blended Finance, Asian Development Bank
- Nandini Chaudhury, Managing Director, Head of APAC Advisory, CrossBoundary
- Eric Arndt, Director, Asia Regional Office, The Rockefeller Foundation
- Ritesh Thakkar, Senior Advisor and Head of Asia Pacific, Convergence Blended Finance (Moderator)

Each Convergence member organization has two complimentary seats in each training. Non-members can register for a fee of USD75.

Member Training: State of Blended Finance (Climate Edition) – Spotlight on Asian Trends

__Member Training: State of Blended Finance (Climate Edition) – Spotlight on Asian Trends, November 21, 2024, 10:30AM-11:45AM SGT__

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Convergence recently launched [the State of Blended Finance 2024 report](https://www.convergence.finance/resource/state-of-blended-finance-2024-climate-edition/view) with a focus on climate, which offers an updated analysis on climate blended finance in emerging markets, covering sector, region, and investor trends.

This session focused on the the Asia-Pacific region, exploring the challenges and opportunities to mobilizing private sector finance into climate projects at scale in Asia.

__Featured Speakers:__
- Tristan Knowles, Unit Head, Blended Finance, Asian Development Bank
- Nandini Chaudhury, Managing Director, Head of APAC Advisory, CrossBoundary
- Eric Arndt, Director, Asia Regional Office, The Rockefeller Foundation
- Ritesh Thakkar, Senior Advisor and Head of Asia Pacific, Convergence Blended Finance (Moderator)

Join us as we explore climate blended finance in Asia-Pacific region.

State of Blended Finance Climate Edition – Asian Trends

Member Townhall 2024

__Wednesday, November 20, 2024 at 10:00AM – 11:00AM ET__

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Convergence is delighted to invite you to its inaugural __Member Townhall 2024__. This Townhall will provide Convergence’s members the opportunity to directly engage with members of its Content and Engagement Teams, and:
- Provide feedback on Convergence’s recently published research.
- Provide suggestions on topics for Convergence to explore in future research reports.
- Discuss other ways in which Convergence’s __Content__ and __Engagement Teams__ can better service your needs or areas of interest as members. 
 
Stay tuned for more details on the full agenda.

Convergence Member Townhall 2024

Join us for our inaugural  Member Townhall 2024.

Rand Merchant Bank (RMB) is a leading African corporate and investment bank and part of FirstRand Limited, one of the largest financial services groups in Africa. RMB offers their clients innovative, value-added advisory, funding, trading, corporate banking, and principal investing solutions. RMB has a deal footprint in over 35 countries in Africa, as well as a presence in the UK, USA, India, and China. 

We spoke with Alessandro Scalco, Blended Finance Lead, at RMB about their blended finance strategies, how they measure impact, their future in the blended finance space, and more.

__What can you tell us about your approach to using blended finance?__

Although blended finance is an evolving concept in Africa, RMB is very familiar with its features, for example the blending of different risk types in a capital stack. We have identified blended finance as an important capability in delivering on our ambitions for shared prosperity in Africa. We believe that an African corporate and investment bank should be driving blended finance in the region to help find solutions and close developmental funding gaps in Africa.

RMB is currently working on several blended finance deals in South Africa. We are sector agnostic working across a variety of sectors, including healthcare, affordable housing, financial inclusion, and women-led businesses.

__Can you tell us about the partners you work with and any commonalities and differences between them?__

We work with a variety of partners, including local development finance institutions (DFIs), international DFIs, institutional investors, corporates, foundations, and other investor types. One of our focus areas is fostering relationships with local DFIs to work towards closing development financing gaps in Africa. Many of the foundations we’ve engaged with are reassessing their grant programs and are interested in using innovative finance structures to create more impact with their grants.

What is clear from our blended finance engagements is that across the spectrum of stakeholders both impact and financial return is critical. However, different stakeholders have different priorities. Grant and concessional funders prioritize impact, aiming to catalyze investors into transactions to make them bankable. While commercial investors are more focused on financial returns. However, regardless of the type of stakeholder, impact is an essential component of blended finance transactions. For us striking the right balance between both sides, impact and financial return, is critical. 

__Can you share an example of a successful transaction that has benefited from your blended finance approach?__

Blended finance is quite new to RMB in the sense that we haven't structured for the market, but I’ll tell you about a transaction where we were the social investor. 

In March 2023, RMB provided upfront funding as a social investor for the Imagine Social Impact Bond, an outcomes-based funding model aimed at improving the health outcomes of adolescent girls and young women in South Africa. The South African Medical Research Council (SAMRC), in its role as outcomes funder, made payments based on the achievement of pre-agreed impact outputs and proxy-outcomes. As the social investor, RMB only received a return on the upfront funding provided. The outcomes funder is only required to make a payment to the extent that the impact outputs and proxy-outcomes are achieved by the programme implementer, Networking AIDS Community of South Africa (NACOSA). NACOSA delivers a package of interventions targeting the prevention and management of HIV/AIDS and pregnancy within the target population. Outcomes achieved each quarter are verified by an Independent Verification Agent (IVA).

The implementation risk of the program is transferred to RMB and the efficiency of public health service funding is increased. In addition to defining a package of health services that improves health outcomes for adolescent girls and young women in 14 schools based in Moretele and Newcastle, the program seeks to test the funding model for scale to enable greater investment from the private sector and achieve both financial and social returns.

Our goal with this transaction was to deepen our understanding of blended finance. It was a key step in our journey towards establishing our blended finance capabilities and getting buy-in from relevant stakeholders, as well as a proof-of-concept that these transactions can work. After seeing the impact that the transaction had and is currently having, we decided that we are quite well suited to structure blended finance transactions and take them to market.

We're already talking to SAMRC, NACOSA, and other organizations about how we can support future funding in the space and structure for that market. 

__What are some ways that RMB measures and evaluates the success and impact of blended finance transactions?__

We currently have a pipeline of about five transactions across healthcare, student accommodation, affordable housing, financial inclusion, and conservation. Measurement and evaluation of success is different for each transaction. The critical first hurdle for us in any transaction is what is the impact? That's always the first question we ask. Then, what is the commercial investor trying to get out of this? What is the return or the impact that they're trying to get and how can we get that right for them? The second aspect is looking at the implementer or the beneficiary of the transaction. What's critical is that there is a measurable outcome, a tangible impact resulting from the measures implemented. Another important element of measuring success for us is ensuring that there's a stretch element to the impact. We want to push the institution or the beneficiary to drive impact and go above and beyond what they might normally do, while still being sustainable and achievable.

In a market like Africa and South Africa you also need to be careful in striking that balance, because if you go too far many projects will fail from an impact perspective, which could lead to the perception that blended finance is ineffective. However, on the other hand if you choose easy targets, you could get criticism that transactions are not impactful enough.

We measure our success and impact by looking at the replicability, scalability, and additionality of each transaction. For example, if we are looking at an outcomes-based funding structure in the conservation space, success for us would be: 
i. creating a transaction that results in the conservation project securing the required funding to achieve scientifically tested and agreed upon success metrics 
ii. crowding in commercial investors to take on the implementation risk (but with the potential to outperform if successful) 
iii. developing the market for these types of instruments, thereby crowding new capital into conservation and shifting the way traditional grant/donation funding is channeled into these projects.

__As a corporate and investment bank, what are some unexpected challenges or opportunities you’ve experienced navigating blended finance transactions?__

Blended finance is still new to the market and a lot of energy is expended on explaining what it is. There is also the risk that some of the deals are too highly structured or complicated and will not be replicated or taken up by traditional investors (i.e. investors other than DFIs or impact focused investors). Access to deals seems to be a common theme in this space right now. This doesn’t mean there aren’t companies who need the capital, we just haven't bridged the gaps to provide funding to those businesses yet. 

The opportunity for us as a bank is to explore how we can close those gaps and create more bankable deals. We are in a good position as RMB to close this gap in that we have a variety of capabilities and skills at our disposal. Additionally, the brand backing goes a long way in legitimizing the importance of blended finance in Africa. 

The struggle we have as a bank is getting the deal size right. We acknowledge that we'll need to look at deals that are not our usual deal size, so we can build our blended finance capabilities. Too often the knee jerk reaction in Africa is to use a debt structure because it's more palatable to investors, but there is a need to use more patient capital. That's something we need to navigate.

__How does RMB apply a gender lens?__

We haven’t reached the maturity yet where we can say we specifically apply a gender lens on investments, but we look at it on a deal-by-deal basis.

The issue facing the South African market now is that there is a lack of investable deals, this is not to say there is a lack of businesses looking to be funded, but rather the traditional sources of funding (i.e. banks) won’t fund early-stage businesses, and if those businesses do find alternative funding, it will often be at a rate that will likely cripple them. It is important that we use blended finance to bridge this gap and create an enabling environment that will result in businesses, particularly those led by women and youth, being able to access patient and enabling capital to support them so they can grow and prosper. 

That’s the key here, by creating a universe in which you can do that you will then be able to apply a gender lens and a youth lens and fund the space more actively because people will feel confident that there is access to finance.

__How do you see RMB’s blended finance activities evolving in the future?__

At RMB we like to stay one step ahead of the market, but also one step abreast with the market. Evolution will be led by the demand in the developmental space. Climate and just transition are the focus right now, but that space is starting to get crowded. We need to identify the next developmental focus area and determine the funding nuances in that space. Healthcare, affordable housing, and water in particular, are becoming very topical on the African continent. It is going to be an evolving space and each of these sectors will have different funding needs. 

More patient capital will be required going forward, so I suspect we will see more “equity like” capital instruments (i.e. convertibles being introduced to bridge the gap between the needs of the market and the developmental funding need). I also believe the use of guarantees will become more prominent as a tool in blended finance, especially to catalyze investments into early-stage projects where the risks are higher or perceived to be higher. Blended finance is going to become more mainstream in Africa, however I would caution that we often overcomplicate blended finance, we structure the structure too much and that crowds out the market. We need to create structures that are replicable, scalable, and simple enough that investors can be comfortable and allocate capital to them.

Learn about Rand Merchant Bank's blended finance strategies, how they measure impact, their future in the blended finance space, and more.

Rand Merchant Bank Member Spotlight

Rand Merchant Bank Member Spotlight with Alessandro Scalco

ResponsAbility is an impact asset manager. Since 2003, they have invested over $15 billion in impactful projects and currently manage $5 billion in assets divided into three investment themes: climate finance, financial inclusion, and sustainable food. Beyond these three core themes they also offer tailor-made and Fund of Funds investment solutions, totaling at $1 billion. 

Blended finance makes up a significant portion of their portfolio. Structured blended finance debt strategies account for over $1.3 billion of responsAbility's assets under management, a figure that’s expected to grow rapidly, especially in climate finance. Two new structured blended finance debt strategies have been launched recently: the Climate Smart Agriculture and Food Systems strategy in March 2023 and the Asia Climate Strategy in November 2023.

We spoke with Henk Nijland, Head Business Development, DFIs & Public Investors, at responsAbility, about their blended finance strategies, how they measure impact, their acquisition by M&G plc., and more.

__Can you tell me about your background and experience in blended finance?__

Blended finance has been a central theme throughout my career. I began my professional journey at the Dutch Ministry of Economic Affairs, where I worked on promoting investments from Dutch companies in Eastern Europe. These investments often required de-risking through subsidies and political risk insurance – what we now recognize as blended finance, even though the term wasn’t in use at the time. 

I later spent 20 years at FMO, the Dutch Development Bank, where I held roles as a banker and head of investment teams focused on financial inclusion, infrastructure, and renewable energy. FMO is well-known in the blended finance arena. I was involved in 2014 with a Climate strategy, which provides green lines to financial institutions and direct lending for smaller project finance transactions. This strategy is managed by responsAbility. FMO’s $20 million investment in the strategy, alongside other notable investors like KfW and IFC1, was a key milestone. Today, the strategy has grown to around $613 million, demonstrating the long-term impact and scalability of blended finance.

1. [Project detail - GLOBAL CLIMATE PARTNERSHIP](https://www.fmo.nl/project-detail/33148)

__Can you tell me more about the Asia Climate Strategy and responsAbility’s role?__

In November 2023, we launched the Asia Climate Strategy, which targets corporates in Asia that operate in sectors with high CO2 reduction potential, including renewable energy, energy efficiency, e-mobility, and circular economy. A cornerstone of this strategy is our innovative "Climate Impact Assessment and Monitoring Framework", which ensures transparency and aims to achieve direct CO2 savings of an estimated 16 million tons2 over the lifetime of the investments. 

KfW, the anchor investor in the junior tranche3, and FMO, in the senior tranche4, play critical roles in this strategy. Additionally, a German family office invested in the senior tranche. In the strategy’s second closing in August 2024, M&G plc’s Life business invested $100 million5, bringing the strategy’s size to over $200 million. This example highlights how blended finance can effectively mobilize private sector capital at scale.

2. Calculations based on USD 500 million strategy
3. [Boost for the transformation in Asia: KfW supports mobilisation of private capital with the responsAbility Asia Climate](https://www.kfw.de/About-KfW/Newsroom/Latest-News/Pressemitteilungen-Details_788544.html)
4. [Project detail - ResponsAbility Asia Climate](https://www.fmo.nl/project-detail/63058)
5. [responsAbility Asia Climate strategy surpassed USD 200 million at second closing](https://www.responsability.com/en/press-releases/responsability-asia-climate-strategy-surpassed-usd-200-million-at-second-closing/)

__How do you measure the impact of responsAbility's blended finance deals?__

We take a rigorous approach to impact measurement, which we call the “4 eyes” principle. It involves two key teams: our in-house impact team and our Climate Advisory Specialist team. The latter comprises local technical experts who work hand in hand with an Investment Officer to estimate the impact of portfolio companies’ projects before and after investment. These specialists gather and analyze climate impact data, which is then validated and reported by our impact team - the two pairs of eyes. 

We’ve also developed a carbon measurement tool that tracks and reports climate impact, ensuring our data is accurate and transparent. Typically, we engage reputable external partners to review the fund’s portfolio carbon impact at the end of its life, further ensuring the veracity of our impact reporting. 

__Last year responsAbility was acquired by M&G plc, can you talk a bit about this and what the acquisition might signal for the impact investing and blended finance space?__

In May 2022, M&G plc., a leading international savings and investment company, acquired responsAbility. This acquisition underscores the growing interest among mainstream investors in impact investing and blended finance, as well as the increasing importance of sustainability in investment decision-making. What makes this acquisition particularly noteworthy is M&G’s active involvement in our recent initiatives. For example, in January 2023, M&G committed $274 million to two sustainable food strategies6 in Latin America and Asia, and in August, M&G’s Life business invested $100 million in the Asia Climate Strategy7. 

These large private investments highlight M&G’s strong commitment to impact investing and serve as a positive signal to other large institutional investors to engage more actively in this space, particularly in our pioneering structured blended finance strategies. 

6. [responsAbility announces first closings of two Sustainable Food strategies totaling USD 274 million](https://www.responsability.com/en/press-releases/responsability-announces-first-closings-of-two-sustainable-food-strategies-totaling-usd-274-million/)
7. [responsAbility Asia Climate strategy surpassed USD 200 million at second closing](https://www.responsability.com/en/press-releases/responsability-asia-climate-strategy-surpassed-usd-200-million-at-second-closing/)

__How do you see responsAbility's blended finance activities evolving in the future?__

Since our inception in 2023, we’ve raised over $2 billion in blended finance across various strategies, including the Global Climate Partnership strategy, the Access to Clean Power strategy, and the Social Bond focussed on financial inclusion, health, water, and sanitation. The Asia Climate Strategy, our newest flagship blended finance strategy, has a target size of $500 million and has already raised over $200 million, we expect to secure the remaining $300 million within the next year. 

Looking ahead, we’re committed to developing more high impact blended finance strategies, particularly in financial inclusion and climate finance, covering both mitigation and adaptation. We’re excited about the future and look forward to collaborating with Convergence and its members to further promote blended finance as a tool to mobilize private investments at scale to reach the SDGs.

Learn about responsAbility's blended finance strategies, how they measure impact, their acquisition by M&G plc., and more.

ResponsAbility Member Spotlight

responsAbility Member Spotlight with Henk Nijland

African Guarantee Fund (AGF) is a specialized guarantee provider whose mission is to facilitate economic development and poverty reduction in Africa. To achieve this, AGF increases access to finance for small- and medium-sized enterprises (SMEs) across key economic sectors through an array of guarantee products and capacity development assistance. Since inception, AGF has unlocked $4.3 billion in SME financing, through partnerships with 250 partner financial institutions across 43 African countries.   

AGF is backed by the following shareholders and sponsors: The Government of Spain through the Spanish Agency for International Cooperation (AECID), the African Development Bank (AfDB), French Development Agency (AFD), Nordic Development Fund (NDF), Investment Fund for Developing Countries (IFU), German Development Bank (KfW), French Agency for Private Sector (PROPARCO), West African Development Bank (BOAD), Global Affairs Canada (GAC), USAID's West Africa Trade & Investment Hub (WATIH), The Norwegian Agency for Development Cooperation (Norad) and TechnoServe.  

We spoke with AGF’s Group Chief Executive Officer, Jules Ngankam, about how AGF works to achieve their mandate of facilitating access to finance for SMEs, enabling them to drive the growth of African economies.

__The total financing gap for Africa's 50 million SMEs, which form the backbone of Africa's economies, is [estimated](https://pressroom.ifc.org/all/pages/PressDetail.aspx?ID=17513) to be $330 billion. Tell us about the gaps AGF aims to bridge when it comes to SME financing in the context of Africa.__

AGF is committed to bridging the $330 billion SME financing gap by addressing several critical gaps in Africa’s budding business landscape. These gaps are related to: information, collateral, tenor, skills, product, and perception gaps. 

Below is an analysis of the gaps AGF aims to bridge.

![AGF Table Draft 1](//images.ctfassets.net/4cgqlwde6qy0/Yw9gKjCPqZX9Yha4MrvMD/34482d89f8e1511c4a0b60119cc1e20a/AGF_Table_Draft_1.png)
*Source: African Guarantee Fund*

__AGF offers intentionally designed products to bridge these gaps and address the needs of African SMEs, as well as to support financial institutions in serving these businesses. How do your products enable you to do this?__

By renewing and enhancing existing guarantee lines and targeting new prospects, AGF alleviates the challenges SMEs encounter in accessing finance.

We offer tailored guarantees that reduce the risk for financial institutions, making it easier for them to extend credit to SMEs without stringent collateral requirements.

Our products support all the funding needs of the SMEs, from debt to equity; working capital to capital expenditure; short term to longer-term financing solutions, as well as addressing the tenor gaps that hinder the growth of SMEs. We provide capacity development for financial institutions, ensuring they have the tools and knowledge to assess and manage their SME portfolio effectively. Additionally, we encourage the creation of innovative financial products that align with the unique business cycles and needs of SMEs, ensuring they receive adequate and appropriate financing.

By showcasing the success and potential of SMEs through our guarantee products, we help shift the perception of these businesses as viable and attractive financing prospects.

__Tell us about your suite of guarantee products and how you determine when to deploy them.__

AGF offers a suite of guarantee products designed to address specific financing challenges faced by SMEs, while also empowering financial institutions to extend their lending capabilities. Our Loan Portfolio Guarantees (LPGs) provide a 50-75% risk cover for on-lending to increase lending to SMEs with higher risk cover for Green SMEs and Women SMEs (WSMEs). This gives significant comfort to partner financial institutions (PFIs), encouraging them to increase their exposure to SMEs and WSMEs and take on risks they are not typically comfortable with. Below is a breakdown of our key products and how we determine their deployment:

1. __Loan Portfolio Guarantee:__ Covers multiple loans within a specified portfolio, helping PFIs scale up SME lending where collateral requirements are unmet. We use this when targeting a broader segment of SMEs, enabling PFIs to support more businesses simultaneously.

2. __Loan Individual Guarantee:__ Covers a single loan made by a PFI to a specific borrower. It is applied when a particular SME needs support, allowing PFIs to provide targeted assistance.

3. __Equity Guarantee:__ Covers the risk associated with equity investments by private equity or venture capital funds in SMEs, and it strengthens SMEs’ capital base by mitigating investment risks.

4. __Bank Fundraising Guarantees:__ Enables financial institutions to raise funds for scaling up credit facilities to eligible SMEs. This assists PFIs in securing long-term resources and facilitating the funding of long-term SME needs.

5. __Capacity Development:__ Here we provide PFIs with training sessions on financial product development, diversity, equity, and inclusion, market research, and customer service. This enhances PFIs’ understanding and willingness to revamp their processes and product offerings to cater to a broader spectrum of SMEs. 

Each product deployment begins with a thorough assessment of the specific needs and challenges faced by the SME or financial institution. Products are customized to address identified gaps, ensuring they provide maximum support and impact. There are also continuous monitoring and feedback loops to ensure the effectiveness of the deployed products and allow for adjustments as needed.

We also have structured guarantee products for specific sectors or unprecedented occurrences:

__Green Guarantee Facility__

With support from the Nordic Development Fund (NDF) and the Danish Investment Fund for Developing Countries (IFU), AGF has designed an innovative pan-African financing program, the Green Guarantee Facility (GGF) to support sustainable private-sector led economic growth in Africa. The GGF is a platform which combines a guarantee facility with a capacity development program to unlock greater financing for SMEs advancing climate change mitigation and adaptation efforts, as well as those working in climate-smart industries. The GGF is a market leader in green financing that crowds-in other financial institutions (FIs) to provide greater financial and/or capacity development supports.

__AFAWA Guarantee for Growth__

With support from the Group of Seven (G7) countries, the Netherlands and Sweden, and the African Development Bank (AfDB), AGF has created an innovative pan-African financing program, Affirmative Finance Action for Women in Africa (AFAWA) Guarantee for Growth (G4G), to encourage financial institutions to bridge the continent’s $49 billion gendered financing gap. AFAWA G4G is a gender-lens investing platform which combines a risk sharing mechanism with a capacity development program to unlock up to $2 billion in financing for African WSMEs and develop specialized WSME products. 

__You have a blended capital structure with a tranche for concessional capital providers such as donor agencies as well as private commercial capital. Why was this structure necessary and how does it enable AGF to achieve its mandate of scaling SME financing?__

AGF’s blended capital structure is essential for scaling SME financing effectively. It features a waterfall structure with tranches for concessional and private capital providers. This accommodates the diverse risk and impact profiles of various investors, offering flexibility to meet their unique needs and requirements. In terms of why this structure is necessary, summarily, it allows for diverse investor needs and risk mitigation. The waterfall structure allows us to tailor investment options, making it attractive to a wide range of investors, based on their varying risk tolerance and impact goals. By structuring investments in tranches, AGF also offers preferred positions to meet investor needs and address their constraints. 

This layered approach distributes risk appropriately, making it feasible to secure significant capital from diverse sources. This is how AGF attracts investments to achieve its mandate of scaling SME financing across Africa, driving inclusive economic growth and sustainable development.

__What about your work with donor agencies outside of your capital structure? You have partnered with Global Affairs Canada (GAC) on the Affirmative Finance Action for Women in Africa (AFAWA) program and with the Nordic Development Fund (NDF) on the Green Guarantee Facility. Tell us more about these programs and how these donor agencies are supporting in order to reduce the effective cost of the guarantees issued.__

Partnerships with organizations such as GAC and NDF enhance AGF’s ability to provide cost-effective guarantees and drive sustainable development across Africa.

Under the Green Guarantee Facility, for example, our partnership with NDF launched in 2016. This climate-focused initiative supports SMEs engaged in sustainable energy, cleaner production, climate-smart agriculture, natural resource management, and green services. By aligning with the Paris Agreement’s Nationally Determined Contributions (NDCs), AGF and NDF work together to enhance sustainability, stimulate green job growth, increase income, and improve the quality of life for low-income communities across Africa. Since then, other partners, such as IFU have joined AGF to contribute to the program.

With the AFAWA program, originally supported by the G7 nations and the African Development Bank, our aim is to improve women’s access to financing through innovative financial instruments and risk-sharing mechanisms. GAC contributed capital to support AFAWA, which aims to unlock up to $3 billion in financing for women-owned SMEs. The program also includes a risk-sharing instrument and a capacity development grant. AFAWA focuses on gender equality and financial inclusion, helping women entrepreneurs access the funding they need to grow their businesses and contribute to economic development.

Through strategic partnerships and collaboration like these, AGF’s capacity to issue guarantees increases, making financing more accessible and affordable for SMEs.

__An important feature of a guarantee is to reduce the difference between the perception and reality of risk. Can you give us a success story of an institution that you worked with that increased provision of credit to an asset class/segment?__

One of our success stories is our collaboration with a financial institution in East Africa that has been able to increase its women customer base from 28% to 40% through a tailormade product that addressed the specific needs of women entrepreneurs. 

The bank utilized AGF's guarantees and capacity development to mitigate risk concerns and confidently offer loans to this underserved segment. Over time, as the institution witnessed the robust performance and repayment rates of these loans, it gained a deeper understanding and appreciation of the true risk profile of women-owned SMEs. The success and positive impact of the program transformed the bank's perception as women accessing loans from this lender increased from 10% to 38%.

Our partnership has so far enabled the bank to:
- Grow its loan portfolio by supporting financing of businesses that lack required collateral who are mostly women SMEs.
- Improve the quality of the business portfolio for both the bank and customer through capacity development support especially for women entrepreneurs resulting in improved business operations.
- Grow its customer base as customer financing needs are adequately addressed through structured financing based on the facilities under the partnership.
 
Through the AGF guarantee and capacity development program the institution has developed enough confidence and expertise to sustainably provide credit to women entrepreneurs. Today, it has expanded its lending portfolio to include a significant share of women-owned SMEs, driving growth and empowerment in its community. This success story exemplifies how AGF's guarantees not only bridge financing gaps but also create lasting change in the financial landscape. 

__AGF applies a stringent Monitoring and Evaluation (M&E) framework to measure impact across strategic, beneficiary, and operational levels. Tell us about this framework and what are some key indicators to this end? Has your M&E approach evolved since inception?__

Our comprehensive approach to measuring impact allows us to gauge the effectiveness of our interventions in enhancing SME financing in Africa.

The purpose of our macro-level impact indicators is to assess long-term effects on financial markets and SME-targeted products. Some key metrics include: loan tenor, cost of loans, collateral requirements, and the share of loan portfolios favoring SMEs in countries of exposure. We take this measure every 3-5 years through surveys. Our goal is to demonstrate how sustained support triggers broader adoption of similar initiatives, contributing to economic growth and poverty reduction, aligning with the SDGs.

We also have outcome indicators at the beneficiary/SME Level. The purpose is to track direct effects on PFIs’ behavior and socioeconomic impacts on SMEs benefiting from guaranteed loans. This is measured by the number of SMEs accessing financing, effects of capacity development support, the share of PFIs’ loan portfolios to SMEs, non-performing loans among trained PFIs, SME revenue growth, job creation, gender distribution in SME ownership, and other socioeconomic changes. We do this using annual surveys and case studies focusing on primary data collection at the SME level, supplemented by data from AGF systems and field visits.

To monitor the direct activities and inputs from PFIs and AGFs output and input indicators, data on PFIs’ activities is reported monthly and quarterly to AGF, and the input data is retrievable from AGF’s database. 

Since its inception, AGF’s M&E approach has evolved to become more comprehensive and data-driven. Initially focused on basic output tracking, we now include sophisticated impact assessments and outcome measurements, ensuring a holistic view of our interventions' effectiveness. This evolution has enabled us to fine-tune our strategies and better support the SMEs we serve, ultimately driving more meaningful and sustainable economic development. By continuously refining our M&E framework, AGF ensures that our initiatives not only provide immediate financial support but also contribute to long-lasting positive changes in the African SME landscape.

__AGF now has a presence across 43 countries in Africa and has cumulatively unlocked $4.3 billion in SME financing since inception. Where does the organization go from here in terms of achieving scale and how can blended finance help you get there?__

AGF's journey to scale is ambitious and inspiring. We aim to grow our capital to $500 million by 2028, unlocking an additional $5 billion financing for SMEs across Africa. In achieving scale, we’ve sought to expand our reach with plans to deepen our presence in existing markets while exploring new ones, ensuring that more SMEs across Africa have access to financing. We are also developing and introducing new financial products tailored to the unique needs of African SMEs, so we can continue to address critical financing gaps. 

On the role of blended finance in catalyzing investments, blended finance combines concessional capital from donors with private capital to mitigate risks and attract more investors. We leverage resources to maximize the impact of each dollar invested, enabling AGF to significantly unlock more funding for SMEs. Ultimately, blended finance encourages collaboration between the public and private sectors, fostering partnerships, and aligning interests and resources to achieve optimal impact and support sustainable economic growth.

*By Karolyn Xie, Interim Head of Communications*

Learn how the African Guarantee Fund works to achieve their mandate of facilitating access to finance for SMEs, enabling them to drive the growth of African economies.

African Guarantee Fund Member Spotlight

African Guarantee Fund Member Spotlight with Jules Ngankam

Established in 1898, Bechtel is a global engineering, procurement, construction, and project management company. Bechtel has helped customers complete more than 25,000 projects in 160 countries on all seven continents.

Housed within Bechtel Infrastructure, bechtel.org is the corporation’s social enterprise. Structured as a breakeven business, their mission is to help build resilient and sustainable communities in frontier and emerging markets through technical advisory and project management. bechtel.org originates its own projects, partnerships, and financing and measures impact. Their focus is execution and delivery; however, they have also been involved in project development.

__Tell us about the interaction between Bechtel and bechtel.org?__

bechtel.org was formed as a part of Bechtel’s sustainability journey. While exploring ways to leverage Bechtel’s core capabilities to support underserved communities in developing countries, we tested the concept with various friends in the non-profit sector and launched the Building Resilient Communities corporate initiative. We deployed technical experts into projects in Kenya, Nigeria, Philippines, and Peru and found our expertise in helping local teams manage and deliver projects was a demand driver. We also sought feedback from other corporate social enterprises and found Bechtel’s global reach and depth of experience was a key value proposition. Hence, we kept the Bechtel name and simply added .org instead of creating a separate organization with a new name. This early work informed our executive leadership and shaped bechtel.org’s business model and impact framework, which is distinct from Bechtel Foundation, Bechtel’s CSR initiatives, and Bechtel’s Sustainability and ESG. 

Our integration and interaction with Bechtel Corporation is intentional and synergistic. We’re governed by a Board of Advisors, an Impact Committee that assesses and evaluates our projects, and an executive sponsor that keeps us connected to the broader enterprise. We are challenged by our Board to demonstrate *why this project* and *what impact we leave behind*. We apply Bechtel’s business process and procedures to develop and deliver projects. And while we leverage Bechtel’s global resources, we do not use bechtel.org to bring commercial advantage to Bechtel. Once there’s a project scope and financing, we recruit and onboard talent from Bechtel’s global projects into bechtel.org (we do not outsource) and then integrate them into local implementing organizations. We benefit from accessing a global pool of Bechtel colleagues with a diverse set of experiences, competencies, and skills. This means we can form integrated teams that can transfer Bechtel’s knowledge and technical know-how to local organizations so they can build their own capacities to deliver projects. 

We’re also sector agnostic. For example, if logistics or infrastructure (e.g., storage and process facilities) is part of a solution to boost food security in the agriculture sector, we’ll get involved. We’ll collaborate with any organization – non-profit, for-profit, government – that share our values and interests and complement our capabilities. 

Increasingly, we see this synergistic integration with Bechtel Corporation as a value proposition for blended finance and impact investors as we can help de-risk investments to local firms, improve their project’s certainty of outcome, and help ensure the additionality of social impact is delivered.

__What is your approach to impact infrastructure? How does blended finance support this?__

For bechtel.org, the infrastructure’s value to the community is not the asset itself but the services it provides and the additionality it creates – that’s impact infrastructure. We focus on the overlooked elements like operations and maintenance (O&M), which, if neglected or addressed downstream in the project, put the intended impact at risk. For example, if the aim is to expand access to healthcare for women by solarizing health facilities in rural communities, and then a technical component of the solar energy system fails in a year because there is no O&M or sustainable financing, there’s no impact.    

Issues arising from O&M or the lack of an enabling environment to sustain a project mean we spend a lot of time on engaging and supporting the ecosystem of local actors who have a stake in the durability of the project. This is very time-consuming and often requires bechtel.org becoming political athletes, but it’s important and necessary if we are focusing on the long-term. 

We also measure. We want to demonstrate the correlation between infrastructure and social impact. Because we could not find an external framework that was fit for purpose, we developed our own and are road-testing it on our projects. Our intent is to build a body of knowledge and share how we’re measuring infrastructure with a community of interest. We have a full-time impact analyst devoted to this. 

These experiences have been part of an ongoing rethinking and reorientation of bechtel.org and blended finance is a key part of this evolution. Catalytic capital and long-term investment from a mix of partners (e.g., foundations, banks, DFIs, aid agencies, communities, corporates) is critical to covering the costs associated with project development, capital expenditures, operating expenses, and ensuring impact. Blended finance structures discipline partners to focus on the durability of the project to achieve the intended impact.

__What are the advantages of leveraging a blended finance approach? Can you give us some examples of specific transactions that illustrate this?__

Blended finance helps bechtel.org in two ways:

One of the strategic pivots we’re taking is to become technical assistance facilities or accelerators to blended finance or impact funds that want to de-risk their investments, build local capacity, and deliver impact. In addition to our technical expertise in project delivery, we bring a ready-made facility with a structure, governance, and transaction model that can bolt onto these funds. This blended approach offers several advantages: risk mitigation, access to capital, mobilizing private investment, and additionality. We’re currently working with a financial intermediary to develop a climate adaptation fund and accelerator targeting Southeast Asia. We hope to replicate this for Africa and Latin America. Blended finance allows us to align stakeholder interests to deliver a project that meets the unique needs and priorities of communities. We can solve complex problems from a position of strength and often that strength is the partnership. 

Second, a few of our current projects use a pilot-test-scale approach. Blended finance plays an important role particularly in seed funding, de-risking, capacity building, and demonstration effect. In Peru, seed capital from mining companies enabled us to pilot an innovative thermal harvesting system that can futureproof thousands of indigenous homes in the remote Peruvian Andes from extreme frost. In India, seed capital from an insurance company facilitated an early assessment of a nature-based solution that regenerates polluted canals for productive use and flood mitigation. In Zambia, catalytic capital from a public aid agency enabled us to pilot a project to increase transactions between smallholder farmers and commodity buyers to reduce post-harvest loss and bolster food security. Blended finance allows us to align incentives and explore innovative financing structures to scale these projects. 

__How does bechtel.org apply a gender lens to its blended finance transactions?__

In all our projects, we measure specific metrics around access to services (e.g., health, education, jobs) that contribute to impact on women and other marginalized demographics (e.g., migrants, youths). For example, we are developing an accelerator targeting Ukraine migrant-owned/operated SMEs and developed a vulnerability lens to identify and assess women-led SMEs that can be suppliers or service providers for energy transition projects in Europe and/or Ukraine’s future reconstruction. 

Women are also part of the design thinking process for our current projects. In Peru, the thermal harvesting system mentioned earlier was based on the input of women as to what is a living temperature inside the home when temperatures drop below -10 degrees Celsius at night. Similarly in India, women were among the 350 consultations to help us identify the appropriate technology for a nature-based infrastructure solution. Our approach is to be intentional and upstream on the inclusion of women as part of the solution.

__Have you faced any interesting or unexpected challenges in your blended finance journey?__

Blended finance has many positives for bechtel.org. With multiple partners the amount of time to align interests and the due diligence required on each of the investors was somewhat unexpected. Despite these time challenges it's the right thing to do. I also did not expect to spend a year studying blended finance models. We knew the market was moving in this direction and it was critical to learn how it works and more importantly how we fit. It was one of the reasons we became a member of Convergence.

__What are some lessons you have learned so far about measuring the impact and evaluating the success of blended finance transactions?__

We’ve learned that because of our business model and the nature of our projects, bechtel.org may never participate on a project long enough to contribute to its full impact, but we can be there long enough to position the project to achieve it. We also learned that we need to measure attribution and contribution separately. Our measurement framework is implemented in two parts: attribution to bechtel.org and the project’s overall contribution to impact. By separating the two we can distinguish between the level of control we have on the project and, alongside with our partners, capture the project’s overall contribution to impact. 

__What have the different types of stakeholders that you’ve worked with looked for in blended finance deals?__

Our stakeholders have diverse objectives, preferences, and expectations. In our projects, public sector investors are focused on policy alignment and impact measurement while private investors prioritize financial returns and risk mitigation. Philanthropic organizations tend to emphasize innovation, scalability, and partnerships while DFIs are interested in alignment with their development mandate and crowding-in private capital. I would say all of them support blended finance deals that increase local capacity building and technical assistance.

__How do you see bechtel.org’s blended finance activities evolving in the future? What is next for the organization?__

As I highlighted earlier, we’re positioning bechtel.org to be a technical assistance facility or accelerator to blended finance or impact investment funds. For us these financing models generate the kind of scale, durability, and impact that Bechtel is known for.

*By Karolyn Xie, Interim Head of Communications*

Hear from Tam Nguyen of bechtel.org on their approach to impact infrastructure, blended finance, gender, and more.

bechtel.org Member Spotlight

bechtel.org Member Spotlight with Tam Nguyen

FOUNT is a leading impact investment firm, providing strategic advisory and investment management services focused on driving social and environmental impact alongside financial returns in emerging markets. 

Building upon earlier experiences in their previous roles, Bernadette Blom and Bob Assenberg established FOUNT in 2013 as a strategic advisory firm, specializing in impact investing within emerging markets. As FOUNT advised and supported its numerous clients to achieve substantial impact, the firm expanded their involvement to encompass fund and investment management activities, leveraging their existing networks and expertise in setting up and managing impact investment funds. This evolution started with the management, restructuring, and eventual divestment of an affordable housing portfolio in emerging markets.

We spoke with co-founder Bernadette Blom about FOUNT’s portfolio, blended finance insights and learnings, integrating a gender lens, and more.

__Can you tell us about FOUNT’s portfolio of impact funds?__

FOUNT currently oversees a diversified portfolio of four impact funds that span various sectors, geographies, and instruments, all characterized by innovative and sustainable business models.

Since 2017, we manage __BIX Capital__, focusing on pre-financing impact receivables (mainly carbon credits) in Sub-Saharan Africa. Additionally, since 2019 we are Fund Manager for the __Good Fashion Fund__, contributing to systemic change within the textile and apparel industry and as of 2020, we serve as the Investment Advisor for the __AGRI3 Fund__, collaborating with Cardano Development, to provide guarantees for sustainable agriculture, forest protection, and improved rural livelihoods.  FOUNT recently added the __Organic Development Finance__ to its portfolio, dedicated to providing affordable finance for organic agricultural producers in developing countries.

Our commitment revolves around innovative, unique, and impact-focused initiatives, with blended finance constituting a central role in all our endeavours.

__What is FOUNT’s approach to blended finance? What have you observed in your practice of blended finance?__

The impact funds under our current management exhibit a blended capital structure comprising distinct risk/return tranches. This structural composition is imperative for innovative impact funds without a proven investment thesis. In instances where risks are indeterminate, investors frequently perceive them as high, underscoring the indispensability of a blended capital structure to stimulate private investor participation. The strategic allocation of varying risk/return profiles across diverse investors within a unified capital structure facilitates the attainment of substantial impact.

As a prudent practice, ascertained from experience, we observe that upon establishing a robust track record, the concessional tranche can be strategically diminished. Simultaneously, leverage can be augmented for subsequent funds, capitalizing on the diminished risk perception among investors. This nuanced approach aligns with industry best practices and enhances the overall viability and attractiveness of subsequent investment vehicles.

__FOUNT has an array of blended transactions, ranging from fashion, to clean cooking to agriculture. What lessons have you learned working with different instruments and across sectors?__

When establishing an innovative fund, particularly one entering a new sector or featuring a novel investment instrument, as exemplified by our experience with all our mandates being first-of-its kind impact funds, the primary objective is to showcase the financial, environmental, and social viability of the investments. In the context of such a ‘demonstration fund’, the inclusion of junior equity/first-loss is imperative to attract private investors. 

The distinctive innovation introduced by BIX Capital (investors include Shell foundation, International Finance Corporation (IFC), FMO: Dutch Entrepreneurial Development Bank (FMO), and U.S. International Development Finance Corporation (DFC)) lies in its unique investment instrument, impact receivable finance. Under this mechanism, carbon credits generated through the utilization of cookstoves or other impact products are pre-sold to reputable offtakers, based on a pre-agreed volume and price . The underlying agreement serves as collateral, mitigating the need for recourse to the balance sheet of the financed SME. Since its inception BIX Capital has successfully demonstrated the efficacy and scalability of this business model, and is now fully invested prompting the initiation of a follow-on fund, BIX2, characterized by increased leverage, a larger fund size, and a broader investment mandate.

AGRI3 (investors include the Dutch Government, Rabobank, and Global Environment Facility (GEF)) , on the other hand, specializes in providing risk mitigation, employing various types of guarantees to empower financial partners in developing countries to collaborate with their clients towards greater sustainability, encompassing areas such as sustainable agriculture, deforestation avoidance, and support for rural livelihoods. AGRI3 facilitates transactions that might be beyond the capacity of individual partners, ensuring scalability through collaborative efforts. 

__Tell us about a past transaction that benefitted from using a blended finance approach.__

The strategic utilization of blended finance empowers FOUNT to foster innovation and engender positive environmental and social impact, aligning seamlessly with our commitment to maintaining an impact-focused and innovative approach in managing our funds.

A notable illustration of the successful implementation of blended finance is the establishment of the Good Fashion Fund in 2019.The fund strategically targets apparel manufacturers. Investments are directed towards impactful equipment that results in a substantial (>50%) reduction in the utilization of energy, water, or chemicals in the production process, concurrently improving workers' conditions and rights.

The textile sector is known for its environmental impact, challenging labor conditions, and reputational challenges. Laudes Foundation initiated the fund, acknowledging the pressing need for investments and the considerable potential for positive impact within the sector. The junior equity investments from Laudes Foundation and the Mills Fabrica catalyzed senior debt funding from Rabobank. This collaborative approach not only validated the viability of the business model but also exemplified the indispensability of the blended finance strategy in overcoming inherent challenges and propelling the success of such initiatives.

__How does FOUNT integrate a gender lens into its investment decisions?__

Gender inequality remains a formidable global challenge, and FOUNT is unwaveringly committed to the rights of women and contributing significantly to the realization of gender equality. Within our funds, women, whether as customers, company proprietors or employees, play pivotal roles. A comprehensive gender lens is meticulously integrated into the investment decisions of AGRI3, Good Fashion Fund, and BIX. Each fund adheres to an individualized gender policy, incorporates leading industry standards and best practices, and tailors to address specific gender challenges within the targeted sectors.

In the case of BIX2, the fund has undertaken multifaceted adaptations to the 2X Challenge criteria, aiming to yield tangible gender outcomes from its investments. The primary focus is on the percentage of investments targeting products specifically designed to enhance the livelihoods of underserved female populations. Our steadfast commitment involves dedicating 80% of investment capital, via SME finance, to such products and services. We are committed to quantifying the number of women reached and calculating time saved by women, utilizing a proprietary model. Where feasible, we intend to pre-finance companies based on monetized time savings, denoted as "Gender Credits." 

Beyond our core focus, we actively engage with portfolio companies to promote gender-positive workforce and supply chain policies and. Additionally, we consciously exhibit a positive bias towards investing in female-led or owned businesses.

__What are some key challenges FOUNT has faced in your blended finance journey?__

Securing risk capital, particularly for the first-loss/concessional tranche, poses a considerable challenge, yet is pivotal for mobilizing private funding, especially for innovative impact funds. 

Our track record has become instrumental in facilitating the expansion of our funds. Given our focus on establishing high-impact, pioneering funds with innovative approaches, operational in developing countries, the associated perceived risks are often elevated. Over the years, we have systematically instituted standards and policies that can be applied across various initiatives, encompassing investment, environmental, and social impact considerations.

__We are seeing lots of interest in the potential for blended finance to enable scaled opportunities and impact. Could you share some insights and advice based on your experience managing funds of a significant size?__

We see many opportunities for blended finance and foresee substantial prospects in its future application. It is often imperative to initiate a first fund to establish the proof of concept. Drawing from the insights gained in this initial endeavor, a considerably larger second fund can be formulated. The second fund typically necessitates a reduced reliance on junior or concessional capital, given that the viability of the business case has been substantiated, resulting in a commensurate reduction in perceived risk.

__How do you see FOUNT’s blended finance activities evolving in the future?__

As we focus on the continued management and investment of existing funds in our portfolio, a logical progression for FOUNT is to leverage the insights garnered, sector networks, knowledge, methodologies, and processes from our current funds. These valuable assets will be strategically channeled into the creation of larger follow-up funds, including a first close of BIX2 in 2024 and our imminent plans for GFF 2.0.

Moreover, we are dedicated to exploring new, innovative initiatives capable of generating substantial impact and that have not yet achieved widespread implementation.

__Thinking about your time at FOUNT to date, what has stood out to you?__

FOUNT was founded in 2013 by two visionary entrepreneurs committed to enhancing livelihoods and ecosystems in emerging markets. Presently, FOUNT is strengthened by a dedicated team of international professionals. Over the years, FOUNT has successfully established multiple impact investment funds, disseminated knowledge, and facilitated financial flows to impact investment initiatives. Through the creation of innovative and scalable projects in emerging markets, FOUNT actively contributes to advancing the Sustainable Development Goals.

Our commitment is to persist in this journey alongside our stakeholders, with a focus on expanding FOUNT's influence as an innovator in the sector. Simultaneously, we aspire to maintain our status as an inspiring workplace dedicated to making a meaningful impact.

*By Karolyn Xie, Interim Head of Communications*

Hear from Bernadette Blom of FOUNT on their portfolio of impact funds, their approach to blended finance, how they are integrating a gender lens in their work and more.

FOUNT Member Spotlight

FOUNT Member Spotlight with Bernadette Blom

I&P is a pioneering impact investment group with a proven track record of over two decades investing and supporting small and medium-sized enterprises (SMEs) in Africa.  

With a team of approximately 180 dedicated professionals operating from ten locations across Africa, (including Burkina Faso, Cameroon, Côte d'Ivoire, Ghana, Kenya, Madagascar, Mali, Niger, Senegal, and Uganda), and in France and the United States, I&P and its partners have invested in over 250 SMEs across roughly twenty Sub-Saharan African countries, with a primary focus on frontier markets and fragile states within Francophone Africa, where access to finance is most limited. 

We spoke with Sébastien Boyé, Co-CEO of I&P about their comprehensive approach to blended finance to support African SMEs, how they measure their impact, the gaps and opportunities they see in the blended finance market, and more.

__Can you tell us about I&P’s mandate and how it engages in blended finance?__

Our mission is rooted in the belief that small and medium-sized enterprises (SMEs) are catalysts for sustainable and inclusive growth across the African continent. These enterprises create local added value, provide formal and high-quality employment opportunities, deliver essential products and services, and foster significant social, environmental, and governance impacts. 

I&P takes an innovative investment approach, providing directly or indirectly through local African Impact funds, seed financing to emerging small businesses and taking minority equity stakes in startups and growing SMEs, with financing ticket sizes ranging from $30,000 to $5 million. This approach involves nurturing long-term partnerships with entrepreneurs, offering management expertise, networks, and knowledge to enhance business strategies, formalization, and overall performance. We also contribute to strengthening the broader ecosystem supporting African entrepreneurship, including local African investment team, investors, accelerators, incubators, and other critical stakeholders.

I&P covers a wide range of investment stages within the SME spectrum and takes a comprehensive approach to blended finance. From providing repayable grant funding to early-stage small companies, to anchoring local African impact funds, to making relatively large investments (up to $5 million per transaction) in commercially viable growth companies or to invest as a LP in emerging Impact Funds, I&P uses catalytic capital in different forms and for different project stages to tailor to the needs of African entrepreneurs. 

In its programs and funds, I&P strategically combines diverse financial products to tailor optimized funding and technical support for portfolio companies. We offer various financing instruments, including seed and equity financing, along with an extensive range of ecosystem support services, including consulting, training, fundraising, and more. Our diverse expertise enables us to cater to the specific needs of the "missing middle" within the SME sector, thus amplifying our impact.  

As an illustration, [I&P Afrique Entrepreneurs](https://www.ietp.com/en/content/ipae-closes-investment-phase) (IPAE3), the third I&P Impact Fund, is structured as a conventional growth equity model with an added layer of risk mitigation through a first loss tranche. This first loss tranche will be secured through contributions from Development Finance Institution (DFI) investors. 

In addition, IPDEV, I&P’s second investment vehicle which aims at anchoring local African impact funds will be structured as an evergreen fund with a first loss tranche sourced mainly from a large institutional Donor. It is expected that this first loss tranche will allow private investors to support this high impact initiative. This support in blended finance will also provide Technical Assistance for the anchored funds and their investees, as well as high impact seed finance.

__Tell us about one or two blended finance transactions I&P has engaged in.__ 

Agroserv, led by Burkinabe entrepreneur Siaka Sanon, stands out as a prominent grains manufacturer in the land-locked country of Burkina Faso. Siaka started his company by aggregating the supply of grains in the country and adding value through a small processing plant. Sinergi Burkina, one of the single-country funds sponsored by I&P, initially invested in Agroserv, providing an equity ticket of less than half a million dollars. 

Over the following six years, Agroserv experienced remarkable revenue growth, driven by increased demand from a rapidly urbanizing population and beverage manufacturers. Agroserv was able to graduate to a private equity fundraise of $12 million. I&P led this fundraise, which included additional investors as well as a matching grant from USAID (part of the US Government’s DFI). The combined impact of the concessionary grant and the substantial capital raise proved highly beneficial for Agroserv, facilitating operational enhancements and the establishment of a new milling factory.  

__How does I&P measure the impact and evaluate the success of its blended finance transactions?__ 

By the end of 2023, I&P's portfolio companies had directly and indirectly impacted 3.7 million people in over 20 African countries, including employees, their families, suppliers, and clients.

To evaluate impact and chart success, we measure investee company performance with a comprehensive in-house impact management tool based on global impact performance metrics. Close to one hundred impact indicators are collected on a declarative basis and analyzed every year to assess partner companies’ impacts on their local stakeholders (entrepreneurs, sub-contractors, employees, clients). I&P tracks its portfolio on a consistent and clearly quantifiable basis.

This tracking and reporting system enables I&P to gauge the progress of blended investments and support programs. Comprehensive reports inform future decisions regarding the optimal mix of financial and concessionary capital. A summary of our impacts can be found in our [Annual Impact Report](https://www.ietp.com/en/content/annual-impact-report-2023).

The impact of technical assistance is also carefully weighed and assessed in seeking the right balance to support the growth and development of portfolio companies. 

In response to the increasing global focus on climate finance mandates, I&P conducted an in-depth examination of climate adaptation and mitigation strategies implemented across portfolio companies. This evaluation served as the foundation for a defined climate policy, emphasizing more tailored and cost-effective climate adaptation measures.

__How does I&P apply a gender lens to its blended finance transactions?__  

Our gender-lens strategy encompasses a comprehensive approach, addressing various aspects for all stakeholders. This includes fostering women's leadership and access to corporate governance, promoting access to quality jobs and training opportunities, meeting specific needs for basic goods and services, and enhancing activity for women suppliers and distributors. This approach has been consistently implemented and monitored since the release of our gender policy in 2018, [Opportunities to Address the African Gender Gap](https://www.ietp.com/sites/default/files/Gender-strategy-IP-March-2018.pdf).

Furthermore, I&P is strongly committed to the 2X Challenge and the second I&P impact fund, which is fully invested, is 92% 2X Challenge compliant.  

I&P’s track record includes nearly 30% of women-led or owned portfolio companies. One example is DELTA S.A., a Senegalese sanitation company, established by a female entrepreneur who transitioned from her role in local banking to establish a water and sanitation contracting firm specializing in outsourced municipal contracts. 

__What are some interesting or unexpected challenges I&P has had to navigate in the blended finance space thus far?__  

I&P’s experience as an impact investor providing blended finance to SMEs has revealed some key learnings and challenges, namely: 

__The challenge of sustainability, liquidity, and profitability__ — The positive economic performance of portfolio companies does not necessarily translate into maximized financial value. Financing African SMEs often involves higher costs and longer investment periods than in other geographies because of high levels of human capital and financial investment, associated with significant risk. 

__The challenge of optimal structuring__ — Structuring innovative blended finance vehicles poses several challenges. For instance, defining first-loss tranches among DFI investors can be complex, as fund managers need to reconcile varying investor goals and loss thresholds. 

__What gaps or opportunities do you see in the larger blended finance market in Africa?__  

Blended finance often does not reach frontier markets (mostly fragile countries) SME funds, and is still not sufficiently widespread on the African continent. This is due to the lack of flexibility of financing options, including investment horizon, management fees, return expectations, and fund size. Fund durations are often too short and the main performance indicator, the IRR, pushes investment teams to exit in a premature manner from portfolio companies, even though a longer investment period would maximize impact creation and financial returns, as I&P demonstrates in its last report, [Unlocking Catalytic Capital for African SMEs](https://www.ietp.com/en/content/IP-C3-report-catalytic-capital). 

With the growing emphasis on climate finance and gender-lens investment, there is a need for specialized funding providers to support these initiatives. For example, the funding can be in either concessionary–early-stage support that matches the early build up—or in project capital execution or based on commercial capital rates and tenors. 

__How do you see I&P’s blended finance activities evolving in the future?__ 

I&P will carefully assess trends in blended finance and incorporate the concepts that align with the small and medium-sized company segment.  

The blended finance trends I&P aims to emulate are those facilitating the acceleration of early-stage companies, propelling them into significant contributors to job creation and catalysts for economic growth.  

In the meantime, I&P continuously explores opportunities to collaborate with investors and funders across its diverse business lines:  

__(1) Impact Investment through growth equity models__ — I&P is currently raising about $80 million to finance its third impact fund, “I&P Afrique Entrepreneurs 3”.  This Pan-African impact fund will build on the track record of two previous I&P impact funds and will invest equity and quasi-equity in local African -founded and African-managed champions aiming at scaling-up or having projects to expand regionally and continent-wide.

__(2) Anchor positioning for African impact funds__ — I&P has developed an innovative LP anchor fund initiative (IPDEV). Under this program, I&P sponsors small, single country funds with a target capital of approximately $5 million, acting as a catalyst for local investors. 7 country funds are operational under this program so far—in Burkina Faso, Cote d’Ivoire, Madagascar, Mali, Niger, Senegal, and Uganda. Two additional funds are currently in the fundraising phase—in Guinea and Cameroon.  These local investment vehicles are targeting early-stage SMEs which have almost no access to funding. IPDEV will also commence fundraising in the latter part of 2024 to launch a second generation of country funds.

__(3) Driving acceleration programs__ — I&P oversees incubation, acceleration and seed-funding programs through grants obtained mostly from Donors and Foundations and is exploring additional opportunities and funding sources.

__(4) Supporting local Ecosystem__ — I&P provides Training and Advisory services targeting local Ecosystem players (Accelerators, Incubators or Governments) and is developing a unique expertise of Impact Fund of Funds management and advisory services.

*By Karolyn Xie, Interim Head of Communications*

Hear from Sébastien Boyé from Investisseurs et Partenaires (I&P) on their comprehensive approach to blended finance to support African SMEs, how they measure their impact, the gaps, and opportunities they see in the blended finance market, and more.

Investisseurs et Partenaires (I&P) Member Spotlight

Investisseurs et Partenaires (I&P) Member Spotlight with Sébastien Boyé

Renew Capital has a vision to become Africa’s largest investment firm. Since 2005, Renew Capital has helped to accelerate Africa’s private sector growth by facilitating investments in early-stage enterprises with high growth potential across the continent. 

We spoke with Renew Capital Co-Founder and Managing Partner, Laura Davis, about how Renew Capital leverages blended finance to facilitate investments in Africa while building the ecosystems and infrastructure needed to make these investments possible.

__Please tell us about Renew Capital’s model and approach and your various offerings.__

Our model includes collaborating with Western governments and foundations to redirect a segment of the close to $30B USD allocated as aid to Africa towards kickstarting private investment across the continent. These stakeholders typically look for both financial and social impact returns (such as job creation). Our approach aims to enhance the functionality of the ecosystem, refine operations and foster the growth and capacity building of businesses, and position better pipelines for investors.

To support for-purpose angel investors, foundations and family offices seeking sustainable social impact in Africa alongside financial returns, Renew Capital founded and manages the [Renew Capital Angels](https://www.renewcapital.com/investing). Renew Capital Angels invest through mini venture capital funds and their risk/return expectations vary greatly by investors, though all are committed to using their capital to build Africa’s private sector. 

Top-performing companies may receive an additional growth round and management support. If successful, they may exit to larger funds. 

Through the Renew Capital Exchange, we organize capital, train executives and support investments. With staff in 14 African countries, our hubs help to pioneer new markets across the continent, build private-sector ecosystems and develop investments. We aim to be in half of the continent by 2025.

__Renew Capital's investment model has gained recognition and has been funded by Global Affairs Canada and USAID, among others. What is Renew Capital’s investment strategy and how does blended finance fit into this construct?__ 

Renew Capital’s investment strategy is:
1. Partner with international development organizations to accelerate the formation of entrepreneurial ecosystems and pipelines across Africa.
2. Use blended finance to enable investment in smaller deals than typical in Africa—creating a pipeline for investors and potential exit routes to larger funds.
3. Invest in asset-light, growth-oriented tech and tech-enabled businesses through Renew Capital Angels; the best-performing portfolio companies may be considered for investment through a Renew Capital growth fund.
4. Deliver executive and management training for pipeline and portfolio companies;  Train portfolio companies on becoming gender and climate-smart and building their middle management. 

This innovative approach serves as a blended finance solution, aimed at unlocking fresh sources of private capital specifically for African startups. The primary goal is to diminish the impact of the 'missing middle', ultimately fostering a more inclusive financial landscape across the region.

Renew Capital and Renew Capital Angels have emerged as one of the most active foreign equity investors in the region.

__Can you tell us more about your portfolio in terms of investments made and development impact created? Please highlight 1-2 deals that have gone on to raise additional private capital after having received support from Renew Capital.__ 

Our portfolio includes companies in different sectors including technology, tech-enabled, agriculture, light manufacturing, fast-moving consumer goods (FMCG) and services.

Many of our companies have gone on to raise further financing, including [ROAM](https://www.roam-electric.com/) and Badili. As part of our portfolio support program, we assist companies in their cross-border expansion efforts. We aim to contribute to their growth as they venture into new territories. 

__How does Renew Capital integrate gender and climate considerations into its work and investment strategy?__ 

Renew Capital is fully committed to incentivizing our portfolio companies to institute best practices for gender equality and climate considerations. Our approach is to build it into our term sheet and provide related training. We are interested in learning more about what others are doing, so please reach out if you’d like to share related information. 

Our core training programs include [The Gender-Smart Exec’s Program](https://www.renewcapital.com/newsroom/what-is-the-sg2x-playbook). This is customized for executives and managers who are ready to help their companies scale. The program is available through a partnership with 2X Global and USAID.

__What are some lessons that Renew Capital has learned after a decade of operating as a blended finance practitioner? How are you integrating these learnings into your current work?__

- __FIND A BALANCE BETWEEN MONITORING AND EVALUATION AND REPORTING__: Implementers of many blended finance projects face the ongoing challenge of serving two masters which both require robust and specific reporting. Additionally, obtaining timely and accurate financial statements from portfolio companies and other non-investee companies required for reporting can become a challenge.  
*__Tip__: *During the planning stage of a blended finance project, be intentional in what you agree to in terms of reporting. Creating alignment and overlap of reporting requirements for your different stakeholders will lessen the burden of monitoring and evaluation during implementation.**

- __PERSIST ON THE OUTCOMES, BE FLEXIBLE ON THE ACTIVITIES AND OUTPUT:__ Investing in blended finance projects in Africa is a relatively new initiative for government and donor partners. Some approaches that work well in one country may be unsuccessful in another. It’s important to stay focused on the outcomes, remain nimble in the activities and apply lessons learned as you go.  
*__Tip__: *Make sure your donor partner and your investors are flexible and allow you to adjust activities and pivot plans as you begin implementation and apply lessons learned. Be diligent in documenting your failures and reviewing them to extract lessons learned.**

- __DON’T BE AFRAID TO TRY SOMETHING RADICALLY NEW:__ Be willing to try something totally radical. One component of our blended finance project in Ethiopia was to expand our reach to “investment hubs” in larger cities outside of Addis Ababa and to educate SMEs on investing, sourcing deals and creating valuable business networks. Due to unrest, logistics and a lack of local partners in these cities, our efforts had little traction. Instead of continuing down a failed path, we pivoted to a new, radical idea to reach the masses— an edutainment show customized for Ethiopian culture and aired during prime time on Friday evenings. We soon went from minimal touchpoints in four cities outside of Addis with only a few stakeholders, to millions of viewers. By trying something new we were able to raise excitement for entrepreneurship and the formation of local angel networks.  
*__Tip__: *Be open to trying something radical if the status quo is not working. You may end up unlocking impact at a larger scale than you ever thought possible.**

- __80/20 RULE: FOCUS ON A FEW GROWTH COMPANIES, VERSUS TRYING TO HELP EVERYONE:__ Not everyone is meant to be an entrepreneur, and blended finance interventions need to realize this. You’ll figure out quickly which entrepreneurs have the capacity to take on financing and scale.  
*__TIP__: *Be aware that 80% of the impact and results will come from 20% of the SMEs you support under a blended finance model. Focus on the 20% and those who are equipped to grow and create impact at scale.**

For a few more tips, visit our [blog](https://www.renewcapital.com/newsroom/blended-finance-a-key-mechanism-for-mobilizing-private-capital-for-public-good).

__Can you tell us how Renew Capital develops the investment and entrepreneurial ecosystem in the various countries in which it operates? How does this in turn benefit the direct deals side of your work?__

In partnership with Global Affairs Canada, Renew Capital has developed and is testing a framework to regularly measure African investment and entrepreneurial ecosystems based on five critical indicators - Capital, Culture, Connectivity, Conditions and Cohort. We then aim to design our interventions based on our assessment of these indicators in order to have a measurable approach to activating the entrepreneurial ecosystems. Please let us know if you are interested in learning more. We’d love to explore partnerships to regularly measure and report on useful metrics to the wider community of blended finance practitioners.   

__Renew Capital has been a member of the Convergence network for several years, indeed you were present at our inception at the Addis Ababa Action Agenda meeting in 2015. How has your membership with Convergence supported your work and effort to help deliver on the SDGs and scale financing in developing countries?__

We were in Addis Ababa when the Canadian government and other stakeholders announced their commitment to Convergence and it’s been an honor to follow along with the journey. Convergence plays a key role in convening related partners and stakeholders and Renew Capital has benefited from the connections and the wealth of knowledge Convergence collates and reports on to push blended finance forward.  

__Where do you see Renew Capital 10 years from now and how does blended finance fit into these plans?__

Renew Capital is currently pursuing an ambitious growth trajectory. Our plan involves expanding our presence to cover half of the continent within the next two years. We currently have a small and growing presence in 14 countries on the continent. We are cultivating ecosystems that foster entrepreneurship to help expand the pipeline of investible projects that can benefit from blended finance. 

*By Karolyn Xie, Interim Head of Communications*

Hear from Laura Davis on how Renew Capital leverages blended finance to facilitate investments in Africa while building the ecosystems and infrastructure needed to make these investments possible.

Renew Capital Member Spotlight with Laura Davis

MEDA has a 70-year history of market-driven development and deploying impact investing globally. Grounded in their mission to bring business solutions to address poverty, their mandate is to create decent jobs in the agri-food system.

Through a market systems approach to business and technical value creation and access to capital for entrepreneurs, MEDA works across the entire agri-food ecosystem with ’farmpreneurs’ and ‘agripreneurs’ especially women and youth, with a focus on environmental sustainability, gender equality, use of technology, inclusive financial services, and impact investment. MEDA’s goal is to create or sustain decent jobs (direct, indirect, and induced) that allow women and youth to sustainably take care of their needs and build resilient communities.

We spoke with Dorothy Nyambi, President and CEO of MEDA about MEDA’s role in the Mastercard Foundation African Growth Fund, what they hope to achieve, how they apply a gender lens theory of change, how the Fund’s design will catalyze additional investment, and more.

__Can you tell us about MEDA’s mandate and how blended finance fits into that?__

From 1953 to date, blended finance has been crucial to MEDA’s success. We have invested our MEDA Risk Capital Fund in impact-focused funds, financial institutions, and small businesses in agriculture. This catalytic evergreen fund has $24.8 million invested in 26 different investments, both direct debt equity and via investment funds. In 2021, investments under the MEDA Risk Capital Fund contributed to 83,000 decent work opportunities.

As an early leader, MEDA partnered with the Government of Canada in 2013 to pilot the use of concessionary finance, raising private capital for development-related investments in private equity and trade finance. These partnerships also involved providing technical assistance to funds and SMEs, supporting the achievement of the Sustainable Development Goals.

Uniquely, MEDA makes program-linked fund investments to maximize impact. We know attracting commercial capital and leveraging patient capital, such as investments from the Mastercard Foundation, enables us to achieve sustainable development through ecosystem building while delivering attractive returns.

__The [Mastercard Foundation African Growth Fund](https://africagrowthfund.org/) is a unique initiative. Can you tell us about it and what it is that you are looking to achieve? What does present and future success look like?__

The Mastercard Foundation Africa Growth Fund (the Fund) is a unique and catalytic initiative. It offers capital and technical assistance to African fund managers and other forms of intermediary vehicles, some of whom are perceived as risky by the investment community. This fund focuses on creating 15,000 decent jobs with an overall job effect of 250,000 through a very intentional, flexible, and adaptable ecosystem-building approach.

By taking an ecosystem-building approach, the Fund will crowd in additional capital by strengthening African investment vehicles (venture capital funds, small and medium sized enterprise (SME) debt funds, permanent capital vehicles etc.) and de-risk them. The goal is to create and/or sustain dignified and fulfilling work for young people, especially young women, in Africa. The Fund’s investment vehicles (IVs) are working with portfolio companies — a majority of which are high growth SMEs.

To achieve the Fund’s goals and deliver on ecosystem-building and jobs, MEDA was brought into a consortium with specific expertise. MEDA leads the Fund with Investisseurs & Partenaires (I&P) as the Fund Advisor, ESPartners (ESP) as the Business Development Services (BDS) provider, Genesis Analytics as the learning partner, Africa Communications Media Group (ACG) leading communications, and the Criterion Institute as the Fund’s gender diversity equity and inclusion partner. The Fund will invest in 20 IVs based in Africa during the next five years.

__How will the Mastercard Foundation Africa Growth Fund mobilize additional private capital into the various investment vehicles (IVs) that you invest in?__

The Fund's investment policy is designed to enable investment approvals that will catalyze and provide comfort in mobilizing additional investors.

1. The Fund’s investments may be structured as a blend of instruments to de-risk IVs, including straight equity, quasi-equity, concessional debt, and to some extent, risk sharing or first loss capital.  
2. The Fund may anchor an IV to reach its first close ahead of other investors by committing significant capital and dialing back our portion of the funding structure of the IV as other investors commit. 
3. The Fund has the ability to support early-stage IVs with working and warehousing capital facilities to enable fund managers to establish their operations, teams and demonstrate an investing track record.
4. The Fund’s offerings include significant value creation resources that can be applied at the IV or portfolio SME levels – pre and post investment. Accelerator cohorts will support select early-stage fund managers to improve “*investment shortcomings*”, who will then be showcased to like minded investors to consider the opportunities.
5. The Fund works to enhance the ecosystem by collaborating with associations and other stakeholders to convene networking sessions, industry events, knowledge-sharing platforms, and investor education sessions that champion the cause of first time female and early-stage fund managers, demonstrating their viability and mobilizing other investors through our investment decisions.

__How does the Fund apply a gender lens approach to its theory of change?__

We recognize that financial systems are rooted in patriarchal and colonial norms and assumptions that uphold unequal power, privilege, and bias. Traditional Gender Lens Investing (GLI) approaches — that don’t shift investing assumptions and address power dynamics — won’t impact equity and risk being exploitative. Unequal power dynamics that exclude women and youth access to, and benefit from, investments must be dealt with, starting within the consortium and at every stage of investment. We are committed to ending gender and intersectional power imbalances (i.e. gender, diversity, equity, and inclusion) in investment. 

The Fund has embraced 2X Global’s criteria for financing women. It aims for women founders, or 51 per cent ownership; 30 per cent leadership in senior management, boards and investment committees; and between 30 to 50 per cent share of women in the portfolio companies’ workplaces.

Thus, we require that IVs must satisfy one gender-lens criteria within their teams by the time they reach their first close, or, if prior to the first close, in the year following the Fund’s disbursement of IV investment capital:

- For multiple partner teams, at least one female partner (a founding partner with a shareholding in the General Partnership, Chief Investment Officer, or Investment Director) who is part of the decision-making, and women representing at least 30 per cent of the overall team beyond marketing, human resources or investor relations roles; 
- For single partner teams (male or female), at least 30 per cent of the team must be female, beyond marketing, human resources, or investor relations roles. 

Collaborative knowledge gained informs the deepening of Gender Diversity, Equity, and Inclusion (GDEI) and Environmental, Social, and Governance (ESG) capacities and strategies over the life of the program.

__Can you share details of the two GLI funds that you have invested to date?__

Our first investment is with [Aruwa Capital Management](https://aruwacapital.com/), a Lagos-based, female-founded and female-led, early-stage growth equity and gender lens fund, focused on investing equity and equity-linked capital into established and fast-growing companies in Nigeria and Ghana. The company is led by Adesuwa Okunbo Rhodes, the Founder and Managing Partner. Aruwa Capital only invests in businesses that align with its gender lens criteria.

Our second investment is [Inua Capital](https://inuacapital.com/), a gender-lens, ESG-lens, and impact-focused investor managing fund that provides patient growth capital to Ugandan SMEs. Inua was founded in 2021 with a local investment team. It pioneers private equity investment and will accelerate the growth of 30 to 40 local companies into sustainable, responsible, and profitable titans of Uganda. The company is led by [Kim Kamarebe](https://inuacapital.com/about-us/our-team/), Founder and Managing Director. Stay tuned for more investments soon.

__Domiciliation of IVs on the African continent is a big area of focus for the Fund. Can you tell us why this is important? What are some of the obstacles/bottlenecks faced by IVs in domiciling on the continent?__

In addition to the Fund’s objective to catalyze capital into 20 Africa-based IVs and ultimately sustain decent jobs through SME growth, an equally important vision of the Fund is to build the ecosystem of risk capital investing in sub–Saharan Africa, making it easier for local and foreign investors alike to commit to African IVs. Opening up Africa domiciliation is key in attracting local investors including pension funds. 

The Fund believes that, by urging and supporting fund managers to domicile in Africa, either on a parallel, feeder or other basis, other investors will come alongside, mobilizing investor confidence on the continent.

The obstacles and bottlenecks faced by IVs in domiciling in Africa include the complex and varied regulatory environments across different African countries. For the most part, rules and regulations cover the broad financial sector and very few are customized to the needs of investment vehicles — fewer still have established support institutions and specialized services providers (such as legal and accounting firms and management companies) with expertise specific to fund structures in place. Each jurisdiction has unique rules, licensing requirements, and reporting obligations, making it cumbersome for IVs and unpredictable for investors. Another obstacle is the relatively underdeveloped capital markets and limited availability of local investors, which has reinforced reliance on foreign capital. Further, the perception of political and economic risks in Africa can deter potential investors and create additional hurdles for IVs trying to fundraise. 

To improve this ecosystem constraint, the Mastercard Foundation in conjunction with the Fund team has commissioned a study on the various domiciliation options available to IVs on and off the continent to establish characteristics, pathways, and recommendations to support jurisdictions, IVs and investors with guidance on domiciliation options in Africa.  

__What are some interesting or unexpected challenges MEDA has had to navigate in the blended finance space thus far?__

MEDA has had several blended finance challenges. Attracting commercial capital remains difficult due to lingering risk perceptions from in-grained biases. Overcoming these biases is crucial to scaling up investments to the level needed. We’re confident the Fund can change that for more risk averse investors. 

Also, these complex deals require specialized expertise. With complicated regulatory environments, the Fund needs local knowledge. Thus, access to local financial and legal expertise is crucial to success. Finally, like many blended finance initiatives, measuring impact and additionality remains a challenge. For this Fund, we partnered with Genesis Analytics, a learning partner who leads on measuring impact and assessing value.

__Based on MEDA’s involvement in blended finance, what gaps or opportunities do you see in the larger blended finance market?__

Presently, blended finance levels remain stagnant while the Sustainable Development Goals (SDG) funding gap grows. There is opportunity for more blended deals and funds to support SDGs and we need them more rapidly.

One significant opportunity is to bridge the gap between impact investing and traditional donor-led development. The challenge lies in uniting impact investment with existing technical assistance programs, as these two functions operate separately. Bringing them together is vital.

To increase blended finance impact in gender equity, investors can play a large role by expanding Gender Lens Investment capital, improving representation, and demanding robust gender analysis. Building in criteria for GLI for blended finance activities is important to concretely determine investment impact.

__How do you see MEDA's blended finance activities evolving in the future?__

MEDA’s blended finance activities are evolving. We are exploring more funds we want to develop in other parts of the world. We will continue to employ blended finance. We see impact when we match investments with development programs – program linked investments. Our vision for a prosperous, equitable, and sustainable future for Africa, and the world, relies on using blended finance to accelerate economic development, foster market systems that generate sustainable jobs at decent income levels, and ensure food security.

*By Karolyn Xie, Interim Head of Communications*

Hear from Dorothy Nyambi on MEDA’s role in the Mastercard Foundation African Growth Fund, what they hope to achieve, how they apply a gender lens theory of change, how the Fund’s design will catalyze additional investment, and more.

MEDA Member Spotlight with Dorothy Nyambi

Save the Children is one of the largest International Non-Governmental Organization (INGOs). It employs around 25,000 people across 117 countries and is focused on the health, education, and protection of children worldwide. While Save the Children had a number of innovative finance initiatives operating across its offices for many years, these were mostly small-scale and disconnected. In 2022, they launched Save the Children Global Ventures (Global Ventures), a Swiss-based foundation, to grow their innovative finance activities and take their use of new technologies to scale.

Save the Children’s technical expertise in health, education, and child protection as well as its established global networks, are leveraged by Global Ventures to guide and inform its investment decisions. They are currently in the process of launching a range of different products, with a focus on results-based finance, impact funds, and climate financing.

We spoke to Paul Ronalds, former CEO of Save the Children Australia and founder of Global Ventures, about what they're hoping to achieve with Global Ventures, how they measure impact, the challenges and opportunities they faced as an INGO breaking into the innovative finance/blended finance space, and much more. 

__Can you tell us a bit about how Save the Children and Global Ventures engages or plans to engage in blended finance?__ 

After a number of years of investing directly into various social enterprises, in 2019 Save the Children launched our first child-focused impact investment fund, based in Australia. The fund was capitalized with a significant investment from Save the Children itself, and ultimately went on to attract investments from QBE, the global insurance giant, and a range of other private investors, including donor advised funds. Since then, we’ve deployed 60% of the AUD 7.5 million raised into mostly technology-oriented start-ups aligned with Save the Children’s missions. 

Through Global Ventures, we are now developing a ‘family’ of impact funds. In November 2022, we launched the Children’s Impact Multiplier Fund. The multiplier fund is intended to fill the gap between the commercial funds and pure philanthropy. We have raised about USD 2 million in seed funding and are targeting at least USD 10 million within three years. Because this is an open-ended fund and the capital has been sourced through donations, it is much more flexible than the commercial fund. For example, for our results- based finance initiatives, if we need working capital, the Multiplier Fund could provide first-loss capital that would then allow us to ‘crowd-in’ private sector capital from investors that may have a lower risk appetite. 

We are also hoping to raise a second, larger Australian-based commercial fund in April 2023 and a European-based commercial fund in late 2023.

__As an INGO, can you tell us how it was getting these funds set up and approaching investors with your investment thesis? What challenges have you faced?__ 

It was difficult. The first challenge we faced was a degree of skepticism that Save the Children could operate a successful impact investment fund. The second challenge was that some of Australia’s most established philanthropic institutions, who we approached and who were initially very enthusiastic about the fund, have completely separate grant making and investment activities. They inhabited different worlds. So many of these institutions were happy to make six-figure grants to Save the Children but we could not convince their investment committees to make even a five-figure investment in our investment fund. 

Also, at least in Australia, there are very few truly impact-first investors. I can remember talking to one impact investor who essentially said we expect the same commercial returns as any other venture capital fund, but we want all of the deep social and environmental impact on top. These investors didn’t seem to appreciate that generating deep impact and doing robust impact measurement costs significant money and effort. In comparison, after fundraising in Europe, I have engaged with many more investors who appreciate the work that goes into generating deep impact and they are more open to conversations about slightly higher fees on the funds or some sort of modest trade off in relation to returns.

__Do you have any advice for other INGOs that might want to go into this space?__

They should start small and adopt a long-term strategy. Rather that raising your own impact fund, start by identifying investments, perhaps from internal initiatives, that you can make directly from your own balance sheet. From there you can build out your impact investing ‘muscle’ and develop an impact investing record. 

Don’t underestimate the capacity building that needs to happen in your own organization. The Global Ventures team spends a lot of time working with our country offices to help them think through what aspects of their operations could be financed through blended finance or an impact investment. Developing a sustainable business model, thinking through market-fit, competitive advantage, and pitching investment ideas are not traditional NGO skill sets. As a result, it has taken some time to build a solid pipeline of investable opportunities from our country offices. 

You need to bring specialist skills into the organizations to complement your natural strengths. You need to ensure that you bring your organizational leadership, especially boards, on the journey.

However, given the strategic challenges NGOs face, it’s critical that more NGOs consider how they can become more involved in blended finance, impact investing, and climate finance – these new ways of funding and supporting our missions. There is a USD 2.5 trillion annual funding gap to achieve the SDGs, and business as usual isn't going to be enough.

__How do you measure the impact of your blended and innovative finance activities?__

We are seeing increasing concerns globally about impact-washing. We share those concerns. Generally speaking, impact measurement is nowhere near as robust as it should be. As a result, we see robust impact measurement and management as a key competitive advantage for our innovative finance activities. We are seeking to bring Save the Children’s extensive global expertise around monitoring and evaluation together with the best international standards and frameworks to develop a comprehensive impact measurement and management approach. 

How Global Ventures measures and manages impact depends on which product we're talking about. For our results-based finance work, we were very focused about identifying those interventions that satisfied some key criteria: Is it aligned with Save the Children’s mission? Is it something that Save the Children has significant experience in when it comes to implementation? Does it have a really robust evidence-base for every metric we're looking at? Are the metrics for measurement clear and generally undisputed? Then finally, does it offer real value for money? We only want to scale those interventions that make our dollars go as far as possible. 

With our blended finance/impact funds, we use the SDGs as the way to characterize our impact; use the [IMP's five dimensions](https://impactfrontiers.org/norms/five-dimensions-of-impact/) as a starting point but added our own dimensions around serving underserved populations and ensuring additionality (“What’s the added contribution that Save the Children has?”); and also use the Operating Principles For Impact Measurement. So, we use a mix of well-accepted industry standards and frameworks that we then complement with a child-focused investing lens. 

Using the SDGs is really helpful because it allows Global Ventures to consolidate its impact across multiple initiatives and products to understand what the organizational impact is across each of those SDG areas.

__How do you see Global Ventures' blended finance activities evolving in the future?__

I'm excited about our current momentum. By the end of this year, we expect to have a family of impact funds that can be used to meet different capital needs. From a Save the Children perspective, diversifying our funding sources means we are giving our country offices a larger toolbox of options: from pure philanthropy or grants to blended finance and commercial funding. 

I'm also hopeful that the work we are doing will inspire other NGOs, particularly other large INGOs, to follow our lead and see innovative finance, blended finance, impact investment funds, as important complements to traditional funding sources. We really want to bring in other partners and players and help grow the innovative finance market.

Hear from Paul Ronalds, former CEO of Save the Children Australia and founder of Global Ventures, about the challenges and opportunities they've faced in the innovative finance/blended finance space, how they measure impact, and more.

Save the Children Global Ventures Member Spotlight

Save the Children Global Ventures Member Spotlight with Paul Ronalds

Sustainable Access to Markets and Resources for Innovative Delivery of Healthcare (SAMRIDH) is a blended finance facility for healthcare in India. It was developed by USAID in partnership with Indian government, academia and private sector and implemented by IPE Global (a global development consulting group). The Facility arose out of the COVID-19 pandemic, where it became clear that the resources and funds required to strengthen India’s response were beyond what the public sector and philanthropic institutions could provide.

SAMRIDH has formulated strategic partnerships with financial institutions and philanthropic organizations to facilitate platforms for structuring and execution of innovative and financial instruments and transactions. Consequently, in a short span of time, it has used these partnerships to scale over 35 novel innovations that include solutions such as hand-cranked defibrillators, cold-chain technology to strengthen the supply chain, and drones to deliver healthcare services to remote and hard to reach regions of India. In this way, SAMRIDH is playing a crucial role in strengthening India’s healthcare systems and building its preparedness to effectively respond to future health emergencies. 

We spoke to Himanshu Sikka, Project Director, SAMRIDH and Chief Strategy and Diversification officer and Lead – Health, Nutrition & Wash, IPE Global, about scaling health solutions, key learnings from using blended finance in India, and how they see blended finance in India evolving in the future. 

__How does SAMRIDH use blended finance to scale high-impact health solutions in India?__

By combining commercial capital with public and philanthropic funds, we mitigate barriers to private investment in healthcare and unlock affordable capital for healthcare enterprises in the form of grants, equity, debt, and other financial structures. We have been able to create a blended financing facility with $300 million in grant and debt commitments from philanthropies, leading banks, and non-banking financial companies to support social and market-based health enterprises. Currently, for every $1 of philanthropic capital that has been raised, an additional $8-$10 has been mobilized through contributions from the private sector, project implementers, consumers, governments, and other development partners. In addition, we adopt a "capital plus" approach and provide business advisory services and mentorship for process and product improvements, to ensure financial viability and sustainability of the healthcare enterprises we support.

__One common critique of blended finance is that transaction costs are very high. Could you explain how SAMRIDH overcomes this challenge?__

In a blended finance transaction, each partnering entity comes with its unique objectives and motivations. As an intermediary facilitating these partnerships, SAMRIDH tries to align its solutions with the motives and expectations of each stakeholder to establish a ‘shared value partnership’. It’s a complex and time-consuming effort but we have found it to be crucial for the sustainability of our initiatives, as each entity is then drawn to the partnership with a sense of shared ownership and accountability.  

To execute these complex structures in short timelines and with lower transaction costs, we collaborate and strategize with other structuring agencies. To this end, we have adopted a portfolio-level approach which provides both higher impact and scale. We have already made some headway in this direction with important partnerships that will support in developing blended finance structures, such as portfolio level guarantees and [Social Success Notes](https://www.expresshealthcare.in/news/caspian-debt-samridh-launch-financing-initiative-to-provide-loans-to-healthcare-businesses/436907/). 

One of our key partnerships is with Caspian Debt, a leading non-banking financial institution and provider of collateral-free debt to impact-led Small and Medium Enterprises (SMEs). Under this financing initiative, Caspian Debt and SAMRIDH offer affordable debt capital in the form of Social Success Notes to SMEs in the health sector. This portfolio-level approach has made it possible to simplify complexities associated with a typical result-based payments program and shall be able to drive growth capital to 15+ health businesses within six months. It can be further replicated in other high-impact sectors. 

__What have been your main learnings when it comes to using blended finance in India?__ 

Some of the key learnings include:

- __Leverage the strength of cross-sector partnerships to maximize impact:__ Designing blended finance structures calls for cross-sectoral collaborations involving financial institutions, philanthropic funders, private investors, government stakeholders, public funders, and the investee community. We have learnt the importance of aligning the expectations of all stakeholders in a transaction in an effective manner so that it works for all concerned, while also making sure that we solve all the legal and regulatory issues early in the process. 
- __Transition from tailoring individual transactions to adopting portfolio-level structures:__ Blended finance transactions involve multiple stakeholders with varying expectations and risk appetites. Typically, risk investors will seek returns, while philanthropic donors are focused on achieving impact per dollar. In our experience, creating program-level structures that follow a template and can be executed with multiple partners has proven to be time-efficient and viable to process multiple transactions.
- __Develop financial structures that can be templated but are also flexible:__ A collective effort by the ecosystem to build a central repository of knowledge for blended finance structures can play a significant role in simplifying and replicating successful structures. To drive this objective, we are collaborating with our partners to create templated models and standard operating procedures for each blended finance instrument developed within SAMRIDH. While templated for easy adoption, these models are designed with an understanding of the varied capital needs of social entrepreneurs and allow customization at individual transaction level to meet the unique requirements of each business.
- __Co-create and go beyond offering financial support:__ Enabling affordable scale capital is only half of what's needed to support the scale up of high impact health solutions. Innovators and early-stage businesses also need handholding to design effective go-to-market strategies for long-term sustainability and impact. Recognizing this gap, at SAMRIDH, we compliment the financial assistance provided to enterprises with technical assistance and business advisory support. Through this approach, we work alongside health innovators and businesses to design robust business models, get greater market access opportunities, and align products and services to the demand of vulnerable communities.
- __Adopt a standardized approach to measure impact and enhance uptake of blended finance:__ Lacking a uniform approach for credible measurement of social impact often inhibits the participation of philanthropies and donor organizations in blended finance. To mobilize these additional pools of capital, we need to invest in developing standardized metrics targeting globally aligned goals to strengthen the impact management and measurement practices. This will help promote the advantages of mobilizing blended finance transactions and provide a road map for structuring future transactions.

__How do you see the blended finance market in India evolving in the future?__

Recently, we have seen the emergence of a growing and promising social finance ecosystem in India. We’ve also seen concurrent efforts to use blended finance transactions that have succeeded in securing financial returns and creating social impact in various development sectors. It is evident that blended finance can play a critical role in unlocking greater commercial investments to supplement the limited resources available to India’s ambitious development goals. 

However, in addition to catalytic grant funding such as that of USAID to de-risk commercial investment in so-called high-risk ventures, we also need more private sector players and corporates to adopt blended finance instruments and share their experiences to grant legitimacy and promote widespread integration. This requires concerted efforts among stakeholders to consolidate the learnings from isolated interventions and develop a centralized framework that enables exchanging transaction details and building a better understanding of blended finance. 

I think the onus is currently on the policymakers to back blended finance as a viable tool to achieve socio-economic goals. The ecosystem will grow if the government starts taking a more active role and addresses some of the key legal and operational roadblocks that make the transactions difficult to implement. We are seeing this openness to experimentation play out with the announcement of several landmark initiatives, such as the [Social Stock Exchange](https://www.sebi.gov.in/legal/circulars/sep-2022/framework-on-social-stock-exchange_63053.html) that allows social enterprises to access funds from donors, philanthropic foundations, and corporate social responsibility (CSR) spenders through the zero-coupon bonds . More recently, the 2022 Union Budget  also highlighted plans for setting up thematic funds for blended finance in "sunrise" sectors such as climate action, deeptech, digital economy, pharma, and agritech. 

In my opinion, the time is ripe for a shift in the market narrative for blended finance. This can be achieved through building consensus among government and non-government partners, peers, and large ecosystem players that blended finance can potentially revolutionize the way we conduct development finance in India.

We spoke to Himanshu Sikka, Project Director, SAMRIDH, about scaling health solutions, key learnings from using blended finance in India, and how they see blended finance in India evolving in the future.

SAMRIDH member spotlight with Himanshu Sikka

[BlueOrchard](https://www.blueorchard.com/) is a global impact investment manager and a member of the Schroders Group. It was founded in 2001 as an initiative of the UN to be the world’s first commercial manager of microfinance debt investments. Today, BlueOrchard manages the largest microfinance fund in the world. They have invested with a long-term time horizon in more than 105 emerging and frontier markets through a network of over 700 financial institutions. 

BlueOrchard aims to find innovative solutions to deal with the most pressing social and environmental challenges. So unsurprisingly, their core expertise has included blended finance for eighteen years and representing as of today more than USD 1 billion in AUM. They use blended finance for innovative and impactful solutions to pressing social or environmental challenges that require blended capital and/or capacity building to attract investors and mobilize capital. 

We spoke to Maria Teresa Zappia, Deputy CEO and Chief Impact and Blended Finance Officer at BlueOrchard, about how they measure the impact of their blended finance activities, how they apply a gender lens, and what they’ve learned from managing blended finance funds. 

__Whose money does Blue Orchard work with/place and what kind of risk and returns do they need?__

BlueOrchard works with a vast array of public and private investors, ranging from Development Finance Institutions (DFIs) and Multilateral Development Banks (MDBs) to private investors such as banks, family offices, insurance companies, and pension funds.

The needs and priorities of public and private investors are different, yet immensely complementary. In our blended finance practice, we have a wide range of means and structures to combine public and private capital. In some cases, public donor capital is subordinated to private capital and at concessional terms. In other words, DFIs and private investors invest pari-passu in mezzanine and senior positions. What really counts is to match the risk-return expectations of different investors, their investment horizons, as well as to deliver on the impact goals set at the start of the strategy. 

__Can you describe one or two blended finance transactions that BlueOrchard has been involved in? In what capacity did you participate?__ 

We have developed a very innovative [climate adaptation strategy](https://www.insuresilienceinvestment.fund/) after we saw the market gap in which most climate finance funding goes to climate mitigation. Our strategy deploys both private debt and private equity investments, ensuring we can best support the development of climate insurance in emerging markets. The private debt strategy provides loans to financial institutions to grow and/or develop products that provide borrowers with insurance against climate risks. For example, through a loan that is bundled with microinsurance, a farmer would receive financing for growing its crops, and said crops would be insured in case a draught impedes their growth. From a private equity side, the strategy is to invest in the value chain of climate insurance in emerging markets. For example, an investment in an insurance company that then develops index-based insurance for the markets in which it operates. BlueOrchard plays an integral role as the investment manager of this strategy, and is extremely involved in the development and monitoring of technical assistance (TA) projects alongside the TA manager. Our key partners in this strategy are KFW and the German Government and a number of DFIs and private investors. We have just launched a follow-up strategy this month given the success of the first initiative, which as of Q2 2022 had reached more than 40 million beneficiaries.

On another impact theme, BlueOrchard is the investment manager and TA facility manager of an education finance strategy for Sub-Saharan Africa, working on improving access to and quality of education via low-cost affordable schools. The blended component of the strategy is its PPP framework with funding from DFIs and impact minded private investors, in which the initiator of the strategy provided subordinated capital at concessional rates, and several investors provided TA grants. This project is particularly exciting due to BlueOrchard’s developmental role in capacity building for this fund, as both investment manager and as more hands-on TA support. 

__How do you measure the impact of your blended finance activities? What does that impact look like?__  

BlueOrchard operates under its proprietary [B.Impact Framework](https://www.blueorchard.com/impact/), which includes ESG, Impact, and SDG contribution analyses. From an impact perspective, prior to an investment, we consider three aspects of a new project: Intent, Contribution, and Measurement. For intent, we ask what the positive change we are trying to create is. For contribution, we consider what the added value will be to our investees. And for measurement, we define how to track the difference we are making. This analysis is specific to each strategy that we manage, given the different impacts that are achieved by our funds. The B.Impact measurement and management framework allows us to track actual performance versus the set impact goals of each strategy. 

__Does BlueOrchard apply a gender lens when it comes to its blended finance activities? If yes, could you shed some light on how this is accomplished (metrics tracked and indicators)?__

At BlueOrchard we operate with a gender lens throughout our investment process, regardless of the strategy. By the end of 2021, 80% of our end clients being financed were female. This lens forms part of both our ESG and impact analyses, including metrics encompassing female participation in the workforce, management, and other areas of the institutions we finance as well as gender data on the portfolio and specific products for end borrowers. In addition, we manage a [strategy that has female financial empowerment](https://www.convergence.finance/resource/japan-asean-women-empowerment-fund-case-study/view) as an explicit and primary impact target in Asia.  We are currently developing a new strategy focused on gender, diversity, and inclusion in Latin America and Caribbean to focus further on gender. We are particularly enthusiastic about this project because it expands beyond gender into diversity and inclusion. The shift from the more conventional gender-focus promotes more diverse and inclusive institutions and markets. 

However, there is untapped potential within the intersectionality of gender-smart investing and blended finance. For example, the 2021 OECD survey on blended finance found that 33% of assets under management do not take gender equality into account in their investment strategies, with 60% of vehicles not reporting impact targets. So, our work is cut out for us. Incorporating a gender lens into our blended finance activities will be key as we develop bespoke blended finance strategies and unlock capital at scale.

__As an impact investment manager, what are some interesting or unexpected challenges BlueOrchard has had to navigate in the blended finance space?__

While bringing public and private investors together for common goals is clearly a unique opportunity to scale-up innovative strategies and push the boundaries of impact investing, it presents certain challenges, such a reconciling the differences between public and private investors. As a blended structure is being formed, the relationship, processes, and timeline associated with working with private organizations and public institutions differ significantly given the nature of the institutions and their funding. For example, the timeline and approval processes of public investors is naturally longer, and this may pose challenges for having early participation from the private sector.

As an impact investment manager with a blended finance strategy, it is important to engage early with both public and private investors to meet their expectations and tailor processes and product features according to their needs while meeting the objective of the theory of change set for each investment strategy. Specific needs vary depending on investor preferences, and by taking the time to understand our investor base preferences we are able to design better solutions for them. As a result of our strategy, our blended finance team has created a very strong blended finance practice of approximately $1 billion of assets under management and growing.

__You have designed and managed a range of blended finance products including Japan ASEAN Women Empowerment Fund (JAWEF) and Regional Education Finance Fund for Africa (REFFA) amongst others. What learnings/reflections have emerged through this process and how will this inform BlueOrchard’s blended finance activities in the future?__ 

JAWEF was successful in attracting private institutional capital from the 
region for impact in the region. JAWEF’s investors were also at their initial engagements in impact investing and both public and private investors partnered very closely in the definition of their impact and financial goals. We would like to incorporate this regional approach into our future initiatives, such as the Latin America and Caribbean gender and inclusion strategy we are developing. 

Part of our idea of [Blended Finance 2.0](https://www.blueorchard.com/wp-content/uploads/181016_BlueOrchard_Blended_Finance-2.0.pdf), is to benefit from having local private investors who bring knowledge, connections, and comfort of investing in their own region. This regional approach is a strategy we deem relevant in the design and implementation of our products. 

We spoke to Maria Teresa Zappia, Deputy CEO and Chief Impact and Blended Finance Officer at BlueOrchard, about how they measure the impact of their blended finance activities, how they apply a gender lens, and more.

BlueOrchard member spotlight with Maria Teresa Zappia

[Gojo & Company,Inc.](https://gojo.co/) (“Gojo”) is a for-profit Tokyo-based holding company of inclusive financial institutions and companies in Asia, including Cambodia, Sri Lanka, Myanmar, India, and Tajikistan. What makes Gojo unique is that as a holding company, rather than a fund, they are able to provide permanent capital to their partners, providing them with the capital and timeline they need to grow and scale.   Since launching in 2014, Gojo has worked with over 1.3 million clients; of these clients, 87% live in rural areas, and 95% are women. Gojo’s 2030 goal is to extend financial services to 100 million unserved and underserved people in over 50 countries. Gojo seeks out financial service providers, who serve unbanked and underbanked households and businesses as their end clients, and provides capital to enable them to scale faster. In addition to providing capital, Gojo works with its partners to improve operations, strengthen governance, and support digital transformation. 

Gojo’s group companies are typically beneficiaries of blended debt finance. For example, their Sri Lankan and Cambodian group companies received term loans from IIX’s Women’s Livelihood Bonds. An Indian group company also secured debt funding from the JAPAN ASEAN Women’s Empowerment Fund (JAWEF). Finally, another Indian group company received funds from the agroforestry blended finance programme led by IFC.   

We spoke to Sayuri Aoyama, Investor Relations at Gojo, about the experience of a for-profit company in the blended finance space and how they measure their impact and blended finance for gender equality.

__Can you describe Gojo’s role in the Japan ASEAN Women’s Empowerment Fund (JAWEF)?__

Satya MicroCapital Limited., Gojo’s Indian group company and one of the fastest growing microfinance institutions (MFIs) in India’s microfinance history, received debt financing from [JAWEF](https://www.convergence.finance/resource/japan-asean-women-empowerment-fund-case-study/view), which is a blended fund that provides loans to MFIs that serve female entrepreneurs in the ASEAN region and beyond. We were pleased to receive financing from JAWEF because the terms on the senior loan were quite competitive. Interest rates from blended debt vehicles are often expensive, which means that sometimes it does not make economic sense for local MFIs to participate, as they make every effort to reduce the cost of funds to reduce the interest rates for their borrowers. However, because of JAWEF’s large $240 million deal size, the cost of debt was lower, making the terms for the senior loan comparatively favourable. Thus, the funding from the JAWEF was a great deal for us.  

From a beneficiary’s point of view, we are proponents of large transactions like JAWEF. This is because when transactions are small, the legal and structuring costs make up an outsized portion of the deal, making it difficult to offer lower interest rates to the beneficiaries of the financing. 

__How do you measure the impact of Gojo’s blended finance activities? What does that impact look like?__ 

Gojo’s group companies that received financing from blended finance vehicles report quantitative and qualitative impact. For example, Gojo’s operating company in Sri Lanka, which received term loans from [IIX women’s livelihood bond](https://www.convergence.finance/resource/iix-women's-livelihood-bond-case-study/view), the world's first gender-lens impact investing security listed on a stock exchange, provides regular quantitative reporting, including the number of clients, percentage of female clients, operating expense ratio, portfolio at risk 30 days, the proportion of [Gross Loan Portfolio](https://www.lawinsider.com/dictionary/gross-loan-portfolio) (GLP) for productive use, average loan size, SMART Client Protection Principles. In terms of qualitative reporting, we conduct interviews with sample customers by asking how micro-loans have affected their lives. This impact reporting showed that over 98% of the GLP counts the number of female clients, and over 93% of the GLP are used to support small businesses.

This is just one example of the impact reports our companies need to provide to funders. Oftentimes, the impact metrics that the funder requires Gojo’s group companies to track are different from, and in addition to, what they already collect regularly. This process can often be onerous and time-consuming. We hope to see standardization of the impact metrics in the future, so that Gojo can adopt these standardized reporting metrics, and reduce the added burden on our group companies.

__As a for-profit entity, what challenges have you had to navigate in the blended finance space?__ 

We once endeavoured to structure a blended debt vehicle to channel commercial, institutional capital to agriculture finance in India. The deal was ultimately unsuccessful, but we learned a lot: 

- As Gojo is a commercial, for-profit entity, it was not realistic to ask for concessional equity commitments from governments or philanthropic sources.  
- Structuring blended debt vehicles at the holding company level to downstream the proceeds to the operating companies was too complicated and not cost-effective. The challenges included foreign currency mismatching, foreign investment regulations that vary across countries, and double taxation. If Gojo were a dedicated debt fund, not a holding company, it might have been a different story. 
- We initially received good feedback from prospective investors, but it was challenging to align everyone’s interests. At the same time, some investors preferred to be closer to cash flow, i.e., make direct investments in the operating companies instead. 

__Promoting women’s empowerment is at the core of Gojo’s work. Over the past couple of years, have you seen investors’ interest in gender equality increase? What role do you see for blended finance in supporting women’s empowerment?__

Gojo has raised USD 160 million from international and Japanese investors until today since inception, and is currently conducting Series E equity fundraising despite the current adverse macro-environment, which shows investors’ growing interest in social impact, including gender equality.  

We believe that blended finance is a powerful tool to channel institutional capital to inclusive finance and women’s empowerment. We hope the blended finance market will expand to make more debt funding available for local microfinance institutions so that more women can gain affordable and reliable access to financial services.

We spoke to Sayuri Aoyama, Investor Relations at Gojo, about the experience of a for-profit company in the blended finance space and how they measure their impact and blended finance for gender equality.