4. The state of blended finance in least developed countries (2012–2018)

The latest OECD data show that LDCs, compared with other country groupings, continue to receive the lowest share of private finance mobilised by official development finance interventions. Between 2012 and 2018, around USD 13.4 billion was mobilised in LDCs – a mere 6% of the total. This compares with over USD 84 billion (41%) in upper middle-income countries and USD 68 billion (33%) in lower middle-income countries (Figure 4.1).

As Figure 4.2 shows, in 2018 private finance mobilised in LDCs doubled with respect to the previous year – from USD 1.9 billion in 2017 to USD 3.8 billion in 2018. This represents a remarkable increase with respect to earlier years, where the share of private finance mobilised for LDCs was on a slightly upward trend (2012–2015) or constant (2015–2017). However, gaps in the data series might cause a loss in precision and possible bias in the estimates of yearly changes. While the significant increase in 2018 might reflect an actual improvement, the main reason for the increase is the fact that, in 2018, the International Finance Corporation (IFC) reported project-level data with details on the recipient countries/territories, which was not the case in previous years. Indeed, as pointed out in our 2019 report (OECD/UNCDF, 2019[2]), the data on the amounts mobilised by the IFC in 2016–2017 were not broken down by recipient for confidentiality reasons. This severely hinders comparability of data over the years.1

Analysis by Convergence, which uses its database of concessional blended finance transactions (see Annex C for Convergence’s methodology), points to slightly different estimates of blended finance targeting LDCs, which is likely to be partly due to differences in definitions and in the nature of the datasets (see Box 4.1).

As Figure 4.4 shows, on average in 2017–2018, the largest amounts of private finance in LDCs were mobilised by multilateral providers, mainly the IFC, the Multilateral Investment Guarantee Agency and the International Development Association (IDA), followed by the African Development Bank, the International Bank for Reconstruction and Development (IBRD) and European Union institutions. This is consistent with trends in previous years. While bilateral donors tend to mobilise smaller amounts, they are increasingly engaging in blended finance approaches in LDCs. Among bilateral providers, France ranks first in terms of average amounts mobilised over the same period, followed by the United States, Finland, United Kingdom, Netherlands and Sweden. These are the bilateral donors with the most-established blended finance programmes in LDCs, in which they engage either through their DFI (such as the United States through its new DFI, the Development Finance Corporation) or directly (such as Sweden, whose aid agency carries out most of the development co-operation portfolio, including using blended instruments such as guarantees).

In terms of regional allocation, on average in 2017–2018 the largest share of private finance (70%) was mobilised in sub-Saharan Africa, followed by South-eastern Asia (18%), Southern Asia (12%) and the Caribbean (1%) (see Figure 4.5). In sub-Saharan Africa, an equal share of 34% was mobilised in Eastern Africa and Western Africa, while 2% was mobilised in Middle Africa. Very low amounts were mobilised in Oceania. However, it is important to remember that the figure shows data on LDCs, and most (33) LDCs are in Africa, followed by nine in Asia, four in Oceania and only one (Haiti) in Central America. This regional allocation reflects that of previous years and is broadly similar to the geographical allocation of ODA. As seen in Figure 4.5, while Eastern Africa has been the largest recipient subregion over the 2012–2018 period, Western Africa experienced the largest increase of private finance mobilised from 2017 to 2018, more than doubling and reaching USD 1.5 billion in 2018. Eastern Africa also saw a significant increase in 2018 (+80%), with USD 1.2 billion mobilised, as did Southern Asia (USD 479 million) and the Caribbean (USD 39 million). By contrast, amounts mobilised in South-eastern Asia decreased slightly from 2017 to 2018 (-5%), to USD 492 million.

The data show a significant increase in the amounts received in 2018 with respect to previous years, which, again, is mostly due to the availability of country-level data from the IFC, as well as an overall increase in the amounts mobilised by the World Bank Group, in particular the IDA, the IFC and the Multilateral Investment Guarantee Agency (MIGA). This could be related to the IDA-IFC-MIGA Private Sector Window, which aims to catalyse private sector investment in the world’s poorest countries (i.e. only those eligible for IDA funding), including fragile and conflict-affected situations (see the guest contribution in Section 5.2 from the IFC) – however, this will most likely be reflected in the data in the next years, if data are disclosed at a disaggregated level.

To date, very limited blending has taken place in fragile contexts, with most private finance mobilised in fragile situations being geographically concentrated in Africa and, to a lesser extent, Asia. The OECD has conducted a deep-dive on blended finance in fragile contexts; its main takeaways are presented in Box 4.2.

Over the 2012–2018 period, 45 out of the 47 LDCs received private finance mobilised by official development finance at least once. Since our 2019 report, two additional LDCs – the Central African Republic and Lesotho – have received private finance mobilised by development finance from two bilateral providers. Figure 4.6 below shows an overview of the cumulative volume mobilised in each LDC over the 2012–2018 period. Overall, the LDCs that received the largest amounts of private finance mobilised belong to the lower middle-income group (under the World Bank’s classification), whereas most of those receiving the lowest amounts are low-income. The exceptions are small island developing states, which are lower middle-income countries (as opposed to low-income). Over the period analysed, the top five LDCs in terms of the cumulative amount of private finance mobilised are: Bangladesh, Myanmar, Angola, Senegal and Uganda.

Figure 4.7 shows the top ten recipient LDCs in 2017–2018. Among these, Uganda ranks first, with nearly USD 390 million mobilised, followed by Myanmar (USD 339 million) and Bangladesh (USD 306 million). Among Asian LDCs, Cambodia also figures among the top ten recipients. Among African LDCs, Benin, Mauritania, Togo, Zambia, Senegal and Madagascar are those with the largest volumes of private finance mobilised. The private finance mobilised as a share of GDP3 varies across the top recipients, from 0.12% and 0.45% in Bangladesh and Senegal, respectively, to between 2.4% and 2.6% in countries such as Togo and Mauritania. This quite closely reflects the trends of previous years, but with some notable differences. While Angola was the largest recipient country in previous years, it ranked only 21st in 2017–2018. However, this fluctuation is likely to be the result of relatively large transactions in Angola in previous years in the hydroelectric power and manufacturing sectors (MIGA, 2015[7]); (MIGA, 2016[8]). Angola is the only LDC among those that are scheduled for graduation from the LDC category (Angola, Bhutan, Sao Tome and Principe, Solomon Islands and Vanuatu4) that received significant amounts of private finance mobilised. Among those LDCs that are eligible for graduation but not yet scheduled to graduate,5 Myanmar and Bangladesh have received relatively high shares of private finance over the years, followed by Nepal and the Lao People’s Democratic Republic, while Kiribati, Timor-Leste and Tuvalu are still among the least targeted.

These trends are broadly consistent with the findings emerging from Convergence data on blended finance transactions (see Box 4.3).

While guarantees mobilised the largest share of private finance in LDCs, direct investment in companies and special purpose vehicles (SPVs) experienced the highest increase in 2017–2018.

As Figure 4.9 shows, guarantees mobilised the largest amounts of private finance by official development finance interventions in LDCs, followed by direct investment in companies and SPVs and syndicated loans. In particular, guarantees mobilised on average 46% of the total in 2017–2018, considerably lower than in 2015–2016 (62%). Direct investment in companies and SPVs (i.e. equity investments) mobilised 24% of the total on average in 2017–2018. This represents a remarkable increase (up by 10%) with respect to previous years.6 However, this is likely to be uneven across countries, as LDCs have varying levels of development of equity markets and often challenging business environments. Moreover, while the average share of private finance mobilised by syndicated loans (11%), credit lines (7%) and shares in collective investment vehicles (CIVs) (3%) remained constant over the years, simple co-financing schemes rose from 5% in 2015–2016 to 8% in 2017–2018.

Among CIVs, the OECD distinguishes two types of vehicle: funds and facilities. Box 4.4 explains the difference between a fund and a facility. The OECD conducts an annual survey to estimate the investment size, strategy and other aspects of blended finance funds and facilities (see Annex C: Methodology). According to the latest survey, blended finance CIVs invested USD 7.6 billion in LDCs (i.e. 20% of the total reported in developing countries), comprising both development and commercial finance (Figure 4.10). Of the USD 7.6 billion invested in LDCs, the majority of investments were made by blended vehicles with concessional finance, while only a small portion of finance (4%) was provided from commercial sources (especially through funds). Overall, more commercial finance was mobilised in structured rather than flat funds, particularly those structured as private equity, thereby confirming the benefits of a diversified strategy in attracting different investor profiles. Moreover, structured funds are generally more likely than flat funds to reach a size of USD 100 million or greater. This could support the hypothesis that structured funds may be better suited to mobilising larger amounts of finance. In contrast, investment in lower middle-income countries sourced relatively less concessional finance, while commercial finance accounted for about 10% of the total (Basile and Dutra, 2019[9]).

Moreover, Convergence identifies four ways in which concessional finance can be deployed by public and/or philanthropic actors to mobilise additional financing for the SDGs in developing countries (i.e. through concessional debt or equity, guarantees or risk insurance, design/preparation grants and technical assistance funds). Box 4.5 shows that most blended concessional finance transactions in LDCs benefit from concessional finance, with the share of concessional finance decreasing over time.

As Figure 4.12 shows, the top three recipient sectors of private finance mobilised in LDCs are energy (USD 796 million on average in 2017–2018), banking and financial services (USD 672 million), and industry, mining and construction (USD 337 million). Altogether, they account for over 63% of the total volume mobilised on average in 2017–2018. In these sectors, it is relatively easier to identify revenue-generating projects that would attract private investors. They are followed by sectors such as transport and storage, agriculture, forestry and fishing, and communications, together accounting for 24% of the total. In contrast, sectors such as health, water and sanitation, education and other social sectors remain among the least targeted sectors. The data are also in line with findings of overall private sector engagement in projects funded by ODA, including modalities beyond blended finance.7

However, as Figure 4.13 displays, the sectoral allocation of private finance mobilised in LDCs shows significant changes from year to year. This reflects the fluctuating nature of private finance more generally. In 2018, lower shares of private finance were mobilised in the energy, banking and financial services sectors, as well as in communications,8 compared with 2017. In 2018 compared with 2017, a slightly higher proportion of private finance was mobilised in sectors such as industry, mining and construction, and transport and storage instead, as well as agriculture, government and civil society, health, and general environmental protection. Box 3.4 provides insights on a case study of a blended finance project in Bhutan focused on agriculture and Box 3.5 presents a case study on a water-related project financed through a blended finance approach in Uganda.


[9] Basile, I. and J. Dutra (2019), “Blended Finance Funds and Facilities: 2018 Survey Results”, OECD Development Co-operation Working Papers, No. 59, OECD Publishing, Paris, https://dx.doi.org/10.1787/806991a2-en.

[6] Basile, I. and C. Neunuebel (2019), “Blended finance in fragile contexts: Opportunities and risks”, OECD Development Co-operation Working Papers, No. 62, OECD Publishing, Paris, https://dx.doi.org/10.1787/f5e557b2-en.

[3] Convergence (2020), The State of Blended Finance 2020, https://assets.ctfassets.net/4cgqlwde6qy0/s4cNXaFl5n79mevI3Y5Vw/b6f2e14870c002092c2ee4ec2953f958/The_State_of_Blended_Finance_2020_Final.pdf.

[11] GPEDC (2018), Effective Private Sector Engagement through Development Co-operation - Issues Paper, https://www.effectivecooperation.org/system/files/2020-06/PSE-Issue-Areas-Paper-for-Consultation.pdf.

[5] International Dialogue on Peacebuilding and Statebuilding (n.d.), A New Deal for Engagement in Fragile States, https://www.pbsbdialogue.org/media/filer_public/07/69/07692de0-3557-494e-918e-18df00e9ef73/the_new_deal.pdf (accessed on 2 December 2020).

[8] MIGA (2016), Cambambe Hydroelectric Project-Phase II, https://www.miga.org/project/cambambe-hydroelectric-project-phase-ii.

[7] MIGA (2015), MIGA Supports Manufacturing Investment in Angola, https://www.miga.org/press-release/miga-supports-manufacturing-investment-angola.

[12] OECD (2020), States of Fragility 2020, OECD Publishing, Paris, https://dx.doi.org/10.1787/ba7c22e7-en.

[1] OECD DAC (2020), Amounts mobilised from the private sector for development, https://www.oecd.org/dac/financing-sustainable-development/development-finance-standards/mobilisation.htm (accessed on 19 June 2020).

[2] OECD/UNCDF (2019), Blended Finance in the Least Developed Countries 2019, OECD Publishing, Paris, https://dx.doi.org/10.1787/1c142aae-en.

[13] UN (2018), Committee for Development Policy Report on the twentieth session (12–16 March 2018), United Nations (UN), https://undocs.org/en/E/2018/33.

[4] UN (1999), Methodology - Standard country or area codes for statistical use (M49), https://unstats.un.org/unsd/methodology/m49/.

[10] World Bank (2019), World Development Indicators, https://databank.worldbank.org/source/world-development-indicators.


← 1. For 2012–2014, the IFC could provide data only on its commercial-terms mobilisation, including both private and official co-financiers. These data could therefore not be used for this analysis either.

← 2. The OECD characterises fragility as the combination of exposure to risk and insufficient coping capacity of the state, systems and/or communities to manage, absorb or mitigate risks. Fragility can lead to negative outcomes, including violence, poverty, inequality, displacement, and environmental and political degradation (OECD, 2020[12]).

← 3. This is the share of private finance mobilised on average in 2017–2018 against the average GDP in the same period. GDP data are from the World Bank World Development Indicators (World Bank, 2019[10]).

← 4. See the timeline of the countries due to graduate from the LDC category at: https://www.un.org/development/desa/dpad/least-developed-country-category/ldc-graduation.html

← 5. According to the 2018 report of the Committee for Development Policy of the United Nations Department of Economic and Social Affairs (UN, 2018[13]).

← 6. This is also likely to be partially due to the improvement of the methodology and guidance for data reporting in 2019.

← 7. A mapping of 919 private sector engagement projects in Bangladesh, Egypt, El Salvador and Uganda has found that the overwhelming majority of ODA-funded projects involving the private sector, included blended finance, occur in economic sectors, including banking and financial services (GPEDC, 2018[11]).

← 8. The communications sector includes sub-sectors such as ICT, radio, television and print media, telecommunications and communications policy, and administrative management.

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