OECD Development Co-operation Working Papers

OECD Development Co-operation Working Papers cover work on understanding aid flows, strengthening aid delivery and improving development policy. Topics include, among others, aid statistics and architecture, aid effectiveness, capacity development, development co-operation systems and management, evaluation of development programmes, as well as the relationship between development and trade, conflict and fragility, environment, gender equality, governance and poverty reduction.


Blended finance in fragile contexts

Opportunities and risks

The development community agrees on the need to address conflict and fragility for global security and sustainable development. In such complex situations, programming should strive to include multiple actors at various levels of society. Although the use of private investment in fragile contexts has so far been low, the need to address the SDG funding gap makes innovative and more flexible financing methods worth considering. Official Development Aid remains critical, but blended finance can help enlarge the total resources available for development.

This paper analyses the OECD-DAC statistics on amounts mobilised from the private sector by official development finance interventions, from 2012 to 2017, against the multidimensional lens presented in the OECD 2018 States of Fragility Framework. The data shows a positive relationship between blending opportunities and economic, political and environmental security. The amounts of private finance mobilised increase, as a country’s economic, political and environmental fragility decreases. The way blended finance interplays with societal fragility and security remains unclear, as these two dimensions exert more complex influence on the trade-off between perceived risks and anticipated returns, which typically guides private investors.


Keywords: stability, fragile contexts, development co-operation, fragility, development, blended finance, development finance
JEL: F3: International Economics / International Finance; O19: Economic Development, Innovation, Technological Change, and Growth / Economic Development / International Linkages to Development; Role of International Organizations; F68: International Economics / Economic Impacts of Globalization / Economic Impacts of Globalization: Policy; F4: International Economics / Macroeconomic Aspects of International Trade and Finance; F65: International Economics / Economic Impacts of Globalization / Economic Impacts of Globalization: Finance; O2: Economic Development, Innovation, Technological Change, and Growth / Development Planning and Policy; F35: International Economics / International Finance / Foreign Aid
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