www.ifc.org/thoughtleadership NOTE 105 • JULY 2021 Blended Concessional Finance— The Benefits of Transparency and Access By Arthur Karlin and Kruskaia Sierra-Escalante Blended concessional finance, the combination of commercial finance from the private sector and development finance institutions (DFIs) with concessional finance from public and other sources, is increasingly being used by DFIs to support developmentally important projects where normal DFI or commercial finance is not available because of the high risks involved. This can be especially significant in lower-income and fragile and conflict-affected situations (FCS), where risks are high and innovative and pioneering projects can be critical to economic growth, market creation, and poverty reduction. Blended concessional finance is also being used during the COVID-19 pandemic to help sustain struggling businesses hurt by demand and supply shocks, and to rebuild economies toward green, resilient, and inclusive growth. As blended concessional finance involves the use of concessional public or philanthropic1 funds to enhance the viability of private sector projects, strong processes, particularly in the areas of transparency, access, and governance, are necessary to ensure that these resources are used effectively and without distorting markets. Transparency is critical to blended concessional finance. It IFC has used multiple processes to facilitate broad access allows the contributors of finance and the general public to concessional funds. This can help ensure that the to assess whether concessional funds are being used availability of concessional funds is well known to market appropriately. With robust transparency, stakeholders participants, that good projects with high potential for can determine the reasoning for the use of concessional development impact are funded, and that funds are used funds, whether the funds are used efficiently, and whether efficiently and without distorting markets. When market the projects supported are likely to lead to widespread conditions allow, these IFC processes include competitive development impacts including through demonstration effects. tenders, where many companies compete for a government At the end of the project lifecycle, information can also be concession, as well as investment programs with open provided on whether the funds accomplished the original access that are offered to all qualified parties. goals and anticipated development impact. Transparency also Finally, the implementation of blended concessional finance allows for the assessment of the role of blended concessional programs requires very strong governance to evaluate the finance in the context of other development finance options, need for concessional funds and the appropriate amounts and can provide investors with the information they need to required, and to manage implementation so that markets are assess financing opportunities, which could increase their strengthened and that concessional funds are used judiciously. willingness to finance future projects. About the Authors Arthur Karlin, Consultant, Blended Finance, Economics and Private Sector Development, IFC. Kruskaia Sierra-Escalante, Acting Director/Senior Manager, Blended Finance, Economics and Private Sector Development, IFC. 1 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. This note examines how robust transparency and access advisory services and capacity-building interventions processes can be implemented in the context of IFC’s may be required to address these issues. Furthermore, it provision of blended concessional finance, with illustrative is critical that the specific instrument used for blended examples. A previous note published in March 2019 concessional finance is clearly designed to meet the discussed important aspects of governance. 2 development challenge at hand. 5. Promoting High Standards. All development projects DFI Principles to Guide Efficient and Effective Use should have high standards for environmental, social, of Blended Concessional Finance and other issues. But projects with concessional As discussed above, the use of concessional finance needs to finance have a particularly high burden because of the be carefully governed for maximum effectiveness. Robust direct public contributions. The use of concessional analyses and processes are needed to determine if a project finance also requires strong governance processes and is worthy of concessional support and if the appropriate transparency to ensure that all of the above principles amount of concessionality is being used. are effectively implemented. DFIs that invest in the private sector have thus agreed to Transparency adopt and implement in their blended concessional finance activities a strong set of operational principles—the DFI Areas for Transparency Enhanced Principles—that specifically address these issues.3 Looking at each of the five DFI Principles, IFC has identified These principles include: four areas where various approaches to transparency 1. Economic Rationale for Using Blended Concessional throughout the project cycle can help stakeholders track the Finance. Concessional finance should support appropriate use of concessional funds. projects that have: strong development impact (for 1. Economic rationale for blended concessional finance. example, by creating jobs, providing improved goods A description of the key market failures and analyses and services, or catalyzing new markets), clear DFI that support the use of concessional funds, including additionality (special contribution from the DFI), the expected development impact, the additionality and value-added beyond what is available from the provided by IFC, and the additional constraints to market or DFIs on a commercial basis. This generally the project that are overcome through the use of means that the financing will help overcome market concessional funds. failures and provide benefits to society beyond the investors’ returns. 2. Evidence of minimum concessionality and crowding-in. This could include, for example, the use of competitive 2. Crowding-in and Minimum Concessionality. Since processes or open-access approaches to determine public or philanthropic funds are scarce, they should concessionality levels and crowd-in private finance, be used in a catalytic manner, providing the minimum and data on the level of concessionality relative to support necessary to make projects viable and attract benchmarks to indicate that concessional amounts are as much private commercial finance as possible. in a typical range. 3. Commercial Sustainability. Projects and sectors need 3. Instrument mix and relevance toward identified market to become commercially sustainable to contribute to distortions. The specific concessional instrument used market development. Investments should thus have a (such as subordinated loans or performance incentives) clear path to economic sustainability, with a plan for and how these help address underlying market how concessionality in the sector can be phased out distortions. over time. 4. Other processes to ensure adherence to the DFI 4. Reinforcing Markets. Concessional funds should Enhanced Principles. How blended concessional create and reinforce markets. Markets started with finance is used in a way that adheres to the five concessional funds can become dependent on subsidies, DFI Enhanced Principles, as well as the governance preventing commercial players from engaging. To processes that ensure compliance. avoid this, attention should be given to all aspects of the market that prevent the viability of commercial Additional items can be disclosed at the aggregate level: projects, including issues related to regulations, • Information on overall volumes of blended concessional suppliers, and skills, among others. Supplementary finance used in different sectors and geographies can aid 2 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. the understanding of how concessional funds support Information in the box addresses many of the key development in different contexts. dimensions of transparency identified above. For each transaction, information is provided on all of the • Disclosed average levels of concessionality in different components of the economic rationale for blended sectors and themes can help create benchmarks. concessional finance: the development impact expected, the • Data on aggregate results for a pool of blended additionality of the project, and the constraints overcome concessional finance projects compared to other projects through the use of concessional finance.6 The development can help determine the overall effectiveness and impact impact described should also be viewed in the context of of blended concessional finance. the country development strategy being implemented by the World Bank Group. All World Bank Group country IFC Project Reporting in the Project Information and strategies, and the private sector diagnostic analyses that Data Portal underpin the private sector aspects, are publicly available IFC recently expanded its reporting on blended concessional on the World Bank and IFC websites.7 finance, particularly to strengthen the rationale for the use With respect to evidence of minimum concessionality of concessional finance in each transaction and to provide and crowding in, the level of subsidies provided for the transaction-specific data on the estimated amount of subsidy transaction are also described in Box 1. To date, IFC is the provided.4 Box 1 below shows a recent example of the public only DFI that regularly discloses the subsidy percentage disclosure that IFC provides on projects benefiting from in its blended finance transactions. The text also refers concessional finance in its Project Information and Data to benchmark data on subsidy levels on the IFC website, Portal, on IFC’s external website.5 which is shown in Table 1. The table provides historical Box 1. Disclosure Example from IFC Portal*: ACLEDA Bank, Cambodia (Portal entry ACLEDA sr 2020; Summary Project Information (SPI) Disclosure Date March 12, 2021) Project Description 0.27 percent of the total project cost of $200 million. Further details and historical information on estimated subsidy levels The proposed investment in ACLEDA Bank Plc. in Cambodia in IFC’s blended finance portfolio can be found at: www.ifc. consists of an up-to $200 million, five-year senior loan to org/blendedfinance. As is the case with all of IFC’s blended support the bank’s expansion of its lending program to concessional finance co-investments, this project has SMEs and women-owned SMEs, which play an important been assessed against the Enhanced Blended Concessional role in the economy and contribute to job creation. The Finance Principles for DFI Private Sector Operations adopted proposed investment will include an IFC A Loan of up to by IFC and more than 20 other DFIs in 2017. $100 million for IFC’s own account and a syndicated loan of up to $100 million. Expected Development Impact Blended Finance The Project’s development impact is anchored on increased access to finance for underserved SME segments, including IFC, as implementing entity of the Women Entrepreneurs women-owned SMEs. Beyond the Project, and along with Opportunity Facility (WEOF), is expected to provide a other World Bank Group efforts in the SME segment, the performance-based incentive (“PBI”) of up to $549,723 to investment will foster greater inclusiveness of the SME support ACLEDA in providing women-owned SMEs with financing market via innovation and competition. access to finance. Without WEOF’s support to incentivize on-lending to these women-owned businesses, the level IFC’s Expected Role and Additionality of increased growth in this segment may not be achievable IFC’s additionality for the proposed Project is financial. due to the perceived high risk of lending to women Financial additionality is based on financing structure entrepreneurs. The estimated subsidy to be provided by based on countercyclical longer-term funding to support WEOF assumes that the project will fully reach the impact the SME sector (including women-owned SMEs) to targets and will only be paid out upon achievement of sustain operations and expedite post-COVID-19 pandemic the predefined targets. The level of concessionality (i.e., recovery, as well as resource mobilization, both of which “subsidy”) to be provided by the facility is estimated to be are limited in the market. *Text has been slightly edited for clarity. 3 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. information on the average concessionality levels in a Average Concessional Level as a Percentage of Total sample of IFC’s blended concessional finance portfolio Project Cost or Project Value from FY2010-FY2020 (updated October 2020) and can provide an important context to assess the level of subsidies Overall 3.8% provided in a particular transaction.8 These historical By Product figures are updated yearly to include data points for the Senior Debt 2.7% most recent fiscal year and to reflect any refinements to the calculation approach and methodology. Subordinate Debt 2.6% Box 1 also includes details on the project structure, Guarantee 3.7% the instrument mix and relevance to identified market Equity 3.8% distortions, as well as reference to adherence to the DFI enhanced blended concessional finance principles. Performance Incentive 1.5% Reporting on Results Local Currency 10.1% As mentioned above, information on results of blended By Industry concessional finance projects can help determine the impact Manufacturing, Agriculture, and Services 3.7% of such financing. Both IFC and the World Bank Group’s Financial Institution Group 4.2% Independent Evaluation Group (IEG) regularly review outcomes of IFC projects. This material is then used to Infrastructure and Natural Resources 2.9% perform periodic assessments of different aspects of the IFC Disruptive Technology and Funds 2.5% portfolio, as enough projects reach sufficient maturity for a meaningful analysis (e.g., three or more years of operations By Blended Finance Facility Theme for many infrastructure projects). Agriculture 3.7% For blended concessional finance, IEG recently completed Climate 2.7% and disclosed evaluation findings from IFC’s early experiences with blended concessional finance and with SME Finance 2.5% more recent projects approved from 2012 to 2016. IEG Gender Finance 1.3% found that the blended concessional finance instrument helped set in motion high-risk projects that had the Low-Income & Fragile and Conflict Affected States 5.8% potential to generate positive and measurable social and environmental impact in areas of great need, such as in TABLE 1 Average Concessional Levels in a Sample countries eligible for concessional financing from the Of IFC’s Blended Concessional Finance Portfolio International Development Association (IDA) and in fragile (FY2010-FY2020) and conflict-affected situations (FCS). Source: IFC. Such potentially transformative impacts include higher financed, volumes disbursed, aggregate results achieved numbers of quality jobs; better and cheaper key products (such as number of clients reached, emissions reduced, and services for consumers; a dynamic market that can and beneficiaries impacted), and detailed case studies of facilitate innovation and entrepreneurship; substantial individual projects with results achieved. These reports are reductions in greenhouse gas emissions; and a financial available on the IFC website.10 return on these investments. Those impacts could not likely be achieved through private finance alone because the risks DFI and IFC Reporting on Aggregate Volumes are perceived to be too great.9 IEG is also undertaking an Data on the use of blended finance at the aggregate level early-stage assessment of the Bank Group’s experience with can also provide useful information, including: what the the IDA Private Sector Window. overall volume of concessional finance usage is relative IFC also periodically provides public reports on the to commercial private sector and DFI finance, how much activities and results of individual blended concessional commercial finance is crowded in by the concessional finance facilities, such as those covering small and medium funds, which sectors and geographic areas are the primary enterprises (SMEs), climate finance, and agribusiness. beneficiaries of blended concessional finance, and what are The data in these reports usually include projects the primary instruments used. This information can help 4 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. $3000 mobilized, and on the donor contributions to different $2500 facilities. The information is available in IFC’s annual report and it shows, for example, that in fiscal year $2000 2020 IFC committed $489 million of concessional donor US$ millions $1500 funds, catalyzing $1.7 billion in investments for IFC’s own account.12 $1000 Other external reports provide additional aggregate IFC $500 blended concessional finance information. For example, $0 other EM Compass Notes in this series show that, similar EAP ECA LAC ME NA SSA OAR SA to the overall DFI results, IFC’s blended concessional Concessional Other public/private concessional contributions finance is used primarily in low-income and lower-middle- income countries, with a broad mix of instruments. DFI Private mobilization Public contribution And for IFC, as country income levels decrease, the instrument mix tends more toward risk mitigation and incentive products (guarantees, subordination, risk-sharing FIGURE 1 Total DFI Blended Concessional Finance facilities, equity, and performance-based incentives) rather Project Cost by Region, 2020 than senior debt. Also, advisory services are used more Source: DFI Working Group on Blended Concessional Finance, November 2020 Update. Note: The “Other Africa” region represents volumes in extensively.13 There has also been a recent trend with IFC’s Africa that are not able to be separately broken out into “North Africa” blended concessional finance toward a greater focus in low- and “Sub-Saharan Africa.” Note: EAP = East Asia and Pacific; ECA = income and lower-middle-income countries. IFC has also Europe and Central Asia; LAC = Latin America & Caribbean; ME = found that tackling risks in low-income and least-developed Middle East; NA = North Africa; SSA = Sub-Saharan Africa; OAR = Other Africa Region; SA = South Asia. countries often requires more pronounced blending, e.g., higher concessionality, multiple instruments, or local assess the overall role of blended concessional finance in the currency solutions, etc.14 development architecture. DFI and IFC Reporting on Processes and Governance to Since 2017 a group of 23 international DFIs, chaired by Ensure Implementation of the DFI Principles IFC, have gathered data on blended concessional finance IFC publicly discloses the major processes and governance use along these lines (with the data series starting in 2014) structures employed throughout the project cycle to ensure and published an annual report. Figure 1 shows excerpts that the DFI Principles are implemented.15 Also, the DFIs in from this data, and the full reports are available on DFI their joint annual reports on blended concessional finance websites.11 In addition to the volume data, the DFI reports report on the various types of processes and governance also provide examples of projects implemented by each used to ensure adherence to the DFI Principles, and DFI, including information on the expected development they report periodically on the progress they’ve made to outcomes and the role of blended concessional finance in strengthen these processes.16 each project. Additional Contributor and Board Reporting Overall, the DFI data show that blended concessional finance is used primarily in low-income and lower- Concessional finance contributors and the IFC Board middle-income countries, and much of the finance is in receive additional detailed reporting on blended Sub-Saharan Africa. Key themes for projects are SME concessional finance transactions. Reports to contributors finance, climate change, and agribusiness. And a large generally include specific information on the projects mix of instruments are used, including debt, equity, and funded, project pipelines, expected impact, and rationale risk-sharing facilities. The predominant reason for the use for blended concessional finance, as well as details on the of concessional finance is to promote important projects concessional co-investment. Board reports for each project in high-risk countries, or in innovative sectors with large include a section discussing the economic rationale for development impacts, that otherwise would not be able to concessionality and how the various blended concessional be financed. finance principles apply. Board reports also include the project structure and the role and amounts of concessional In addition to the aggregate data provided for all DFIs, finance, including the level of concessionality as a percent each year IFC also provides aggregate information on its of total project cost. own use of blended concessional finance and resources 5 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. Access to Blended Concessional Finance However, this method requires a number of specialized project Solutions characteristics: 1) a fairly standardized and known product output, allowing qualified companies to compete primarily One of the critical challenges to managing blended on price, 2) a single buyer, usually a government off-taker for concessional finance is in addressing the “crowding-in and services like infrastructure, that can guarantee demand for minimum concessionality” principle (DFI Enhanced Principle the entire project output, and 3) a number of companies in the 2). This includes identifying the right amount of concessional market that are capable of competing for the business. funds to make an important project successful and achieve significant impact without overspending or allowing private In tenders, concessional fund amounts can either be participants to realize profits beyond those needed to make predetermined, so that competition is based on price to the an investment viable. It is also important to ensure that a end user, or the concessional amount can be determined wide range of qualified firms, including new entrants, have an as an outcome of the bidding process.17 Predetermined opportunity to access concessional funds, in order to crowd in concessional funds can be effective in high-risk contexts private investment, to ensure the best projects move forward, where the prepackaging of all elements of the tender is a key and to “reinforce markets” (DFI Enhanced Principle 4). success factor in attracting a sufficient number of high-quality bidders. Determining concessional amounts as part of the A number of processes have been used by IFC to achieve bidding process may be more uncertain for bidders, but also this crowding-in/minimum concessionality principle and may lead to less need for concessional funds, consistent with reinforce markets. These processes include various types of the minimum concessionality principle. Both processes ensure competitive or open-access processes such as competitive that private companies receive the minimum returns needed to tendering/auctions or programmatic approaches that are make the project viable. The choice of approach will depend open to all qualified firms, as well as one-off negotiations on the specific country and sector context. under very strong governance procedures, in the case of demand-driven market-based opportunities. Each of these Programmatic Approaches with Open Access is discussed below. Many businesses and sectors lack the characteristics Competitive Tendering and Auctions required for efficient auctions—there are often many buyers in the market seeking a wide range of products and Some projects originate from a competitive tendering services, under changing conditions with respect to demand or auction process. Auctions are increasingly being and competition. For these situations, IFC is developing used throughout the world to procure energy and other programmatic approaches with open access. These infrastructure, and they have led to increased competition approaches also benefit from market processes. IFC defines and reduced prices. In some cases, these projects have ex-ante the development impact objective expected and sets involved the use of blended concessional finance. An example clear parameters for the clients to access the program, such is the World Bank Group’s “Scaling Solar” program, under as the type of instrument offered and fee they pay to access which blended concessional finance has been offered to all funds. Market players know the conditions to participate bidders in a tender process for solar power projects. Scaling and can apply when the program is publicized. Clients Solar projects are now operational in Zambia and Senegal chosen for a program must pass IFC’s normal due diligence and, in December 2020, loan and guarantee agreements were process and meet IFC’s applicable environmental, social, signed for the first 100-megawatt solar photovoltaic power and governance standards. plant in Uzbekistan. One example of a programmatic approach is IFC’s Small This approach works well for public services that can be Loan Guarantee Program (SLGP), which includes a $120 tendered such as energy, health, and water. The mechanism million allocation from the IDA Private Sector Window effectively uses market dynamics to allocate concessionality. (PSW) to support financial intermediaries’ expansion into the The development impact objective is defined ex-ante (for SME segment by providing a pooled first-loss guarantee at a example, to offer clean energy in a country at affordable standard fee range. The use of concessional finance from the tariffs); the process to access the subsidy is available to all IDA PSW allows the fee to the financial intermediary to be relevant players in the market; and the choice of the firm set at a range that makes supporting SMEs affordable. IFC accessing the subsidy is part of a transparent process, as is working to expand the use of programmatic approaches, selection criteria are predefined, for example as part of the including a recent “Base of the Pyramid” program to help bidding documents. financial institutions support small businesses, informal The process can encourage competition to find the best firms enterprises, and low-income households that have been hit at the lowest costs and is used by IFC whenever possible. 6 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. hardest by the lockdowns and economic slowdown caused not lend themselves to competitive or open-access processes by the COVID-19 pandemic. The program is supported by where many of the project parameters need to be known in the IDA PSW to help de-risk credit and foreign currency advance and applicable to many companies. exposures in projects in low-income countries. Another Yet in high-risk environments, these high-impact but example is the Africa Medical Equipment Facility (A-MEF) pioneering projects may be especially difficult to finance risk-sharing facility supported by the IDA PSW, which is due to high implementation risks and first-mover costs, expected to reach the healthcare sector in countries where and may need initial and temporary concessional support access to medical equipment has historically been a challenge to overcome constraints. To achieve the benefits of these and has led to poor healthcare delivery and health outcomes. projects with blended concessional finance, very strong Programmatic approaches provide a mechanism for governance and analytical processes are needed. interested companies and financial intermediaries to access Since the detailed goals of the project are not the program, and can help ensure that the funds support predetermined, the development objective cannot be projects with high impact and positive market dynamics. specified in advance. Instead, IFC verifies the anticipated The structure does, however, still require a well-known type development impact of the project idea proposed by the of project or intervention, and one that can be replicated sponsor. To ensure that concessional funds are used by many firms, so that the rationale for concessional funds, efficiently and effectively in these situations, IFC needs the program structure, and the fees can be determined to evaluate the need for concessional funds, the amounts in advance. Sectors such as SME finance, microfinance, required, and the benefits expected. Benchmarks may and some well-established agribusiness, manufacturing, be useful, such as the amount of concessionality needed or service sectors may lend themselves to this approach. for projects in similar countries and sectors, or the Commodity businesses and provision of local currency risk- required internal rate of return for companies in similar mitigation products may also be good candidates. circumstances. In certain cases, project benefits can A project categorized as either Competitive Tender or be calculated (for example, emissions reductions) and Open Access requires that IFC make all possible efforts compared to the amount of concessional funds used. to inform companies eligible for IFC funding in a Sound governance also requires strong organizational market about the availability, terms, and accessibility of practices such as separate teams and decision-making concessional financing. The broad terms and conditions processes for the concessional and commercial finance can be communicated to eligible participants through tranches to handle potential conflicts-of-interest, special various means, including through inclusion in the bidding processes and analytics to address adherence to the blended documents, IFC’s website, or local sources of information; concessional finance principles, and specialized and well- as well as through organizing events at which eligible trained staff.18 companies are invited and direct outreach. Negotiations for Demand-Driven Market-Based Future Directions on Transparency and Access Opportunities While significant progress has been made in the areas Ideas to solve strategic development challenges (consistent of transparency and access, with IFC having led in with country strategies) can also present themselves establishing many best practices, more can be done. Work “bottom up” through IFC’s regular pipeline origination. is proceeding on improvements in several areas: These bottom-up projects are often innovative pioneering • Sharing experiences. DFIs and other implementers investments that can facilitate market creation, and they need to continue to share experiences with different are typically in the agri-business, manufacturing, ICT approaches to managing blended concessional finance. (information, communication, and technology), and The DFI Blended Concessional Finance Working Group certain service sectors, where project sponsors put forward is one forum used to share experiences. In addition, proprietary investment ideas. a transparency working group comprising DFIs and These projects can be critical to development and raising other global development stakeholders, initiated under standards of living, for example by providing new products Indonesia’s Tri Hita Karana program, has recently and services tailored to local populations or creating new completed a report on transparency in the use of competitive domestic and export sectors that can create blended finance.19 The group looked at global reporting jobs and raise wages. The products and processes and across DFIs and other development actors and provided organizational structures may be unique or proprietary and additional opportunities for organizations involved 7 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group. with blended finance to share experiences and examine PSW. IFC will also highlight in its Project Information different approaches to improving transparency. and Data Portal whether projects were competitively tendered or were part of an open-access program. • Developing simplified approaches to benchmark levels of concessionality in individual transactions. IFC ACKNOWLEDGEMENTS has worked with partners on simplified approaches to calculating levels of concessionality to facilitate The authors would like to thank the following colleagues disclosure and comparison, and it is interested in for their review and suggestions: Aaron Rosenberg, continuing these efforts. Disclosure of concessionality Principal Communications Officer, Risk and Public Affairs, data at the transaction level and better benchmarks are Partnerships, Communication and Outreach, IFC; Federica two important potential outcomes of this work. Dal Bono, Lead Strategy Officer, IDA Mobilization and IBRD Corporate Finance, Development Finance, World • Expanding use of competitive tenders and open access Bank; within New Business and Portfolio, Blended Finance, approaches. IFC has committed to expand the use of Economics and Private Sector Development, IFC: Gonzalo competitive tenders and open-access approaches in its Gutierrez, Associate Investment Officer; and Tingting use of blended concessional finance. New standardized Hu, Program Assistant; and Thomas Rehermann, Senior and streamlined platforms with open access are being Economist, Thought Leadership, Economics and Private developed, especially for projects supported by the IDA Sector Development, IFC. 1 For MDBs and DFIs, most concessional funds come from governments, but some are also from foundations and other philanthropic entities. 2 Sierra-Escalante, Kruskaia, Arthur Karlin, and Morten Lykke Lauridsen. 2019. “Blended Concessional Finance: Governance Matters for Impact.” EM Compass Note 66, IFC, March 2019. 3 DFI Working Group on Blended Concessional Finance for Private Sector Projects. Summary Report, October 2017, pp. 5-8. 4 Philippe Le Houérou. 2019. “Opinion: In Blended Finance, Transparency and Rigor Must Rule the Day.” Devex. https://www.devex.com/news/opinion- in-blended-finance-transparency-and-rigor-must-rule-the-day-95776 5 The portal is at https://disclosures.ifc.org/. 6 For a discussion of the components needed to support the economic rationale for blended concessional finance, see Emelly Mutambatsere and Philip Schellekens. 2020. “The Why and How of Blended finance,” IFC. Also, Chapter 1 of “Using Blended Concessional Finance to Invest in Challenging Markets,” IFC, February 2021. 7 See https://www.worldbank.org/en/projects-operations/country-strategies and https://www.ifc.org/wps/wcm/connect/publications_ext_content/ifc_ external_publication_site/publications/cpsds 8 The figures (updated October 2020) may not be reflective of future trends as they are based on a limited sample size, and are likely to change as IFC introduces new products to expand the portfolio in low-income, fragile and conflict affected countries where blended concessional finance resources have become available at scale only in the last couple of years and where the level of subsidy required tends to be larger. 9 Hatashima, Hiroyuki and Unurjargal Demberel. 2020. “What is Blended Finance, and How Can it Help Deliver Successful High-Impact, High-Risk Projects?” January 27, 2020. 10 See IFC website “Blended Concessional Finance”: https://www.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corporate_Site/BF/ 11 See IFC website about “DFI Working Group on Enhanced Blended Concessional Finance for Private Sector Projects”: https://www.ifc.org/wps/wcm/ connect/topics_ext_content/ifc_external_corporate_site/bf/bf-details/bf-dfi 12 IFC Annual Report 2020. p. 82 and pp. 101-104. https://www.ifc.org/wps/wcm/connect/96e182ec-887a-4ee9-8071-c1a1681c40fb/IFC-AR20-Full- Report.pdf?MOD=AJPERES 13 IFC. 2021. “Using Blended Concessional Finance to Invest in Challenging Markets,” IFC, February 2021, pp. 46-47. 14 OECD, UNCDF. 2020. “Blended Finance in the Least Developed Countries 2020: Supporting a Resilient COVID-19 Recovery.” p. 93. 15 See IFC EM Compass Note 66, “Blended Concessional Finance: Governance Matters for Impact.” https://www.ifc.org/wps/wcm/connect/6b593cec- 3175-4448-9748-d38cfac0df37/EMCompass-Note-66-Blended-Concessional-Finance.pdf?MOD=AJPERES. Also, Chapter 1 of “Using Blended Concessional Finance to Invest in Challenging Markets,” IFC, February 2021. https://www.ifc.org/wps/wcm/connect/publications_ext_content/ifc_ external_publication_site/publications_listing_page/using+blended+concessional+finance+to+invest+in+challenging+markets. 16 The reports can be found on the IFC blended finance website: https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/bf/ bf-details/bf-dfi 17 For an example of a solar power program where the subsidy amount is determined as part of the bidding process, see the Uganda FIT program in “Renewable Energy Auctions. Cases from Sub-Saharan Africa,” International Renewable Energy Agency, pp. 24-38. 18 For a full discussion of governance for blended concessional finance, see Sierra-Escalante, Kruskaia Arthur Karlin and Morten Lykke Lauridsen. 2019. “Blended Concessional Finance: Governance Matters for Impact.” EM Compass Note 66, IFC, March 2019. https://www.ifc.org/wps/wcm/ connect/6b593cec-3175-4448-9748-d38cfac0df37/EMCompass-Note-66-Blended-Concessional-Finance.pdf?MOD=AJPERES. 19 https://assets.ctfassets.net/4cgqlwde6qy0/3ePrF9LNWIPwl16wxxlQeC/f580fe16c1488b4f563692c47b04c4a8/THK_Transparency_report_12_ May_2020_-_final_1_.pdf. Note this THK report covers both blended concessional finance as discussed in this note, along with the blending of development finance at commercial rates with private finance, such as IFC does in its core business. Thus, the scope of finance discussed in the THK report is much broader than in this note. 8 This publication may be reused for noncommercial purposes if the source is cited as IFC, a member of the World Bank Group.