an overview of blending: financing to development final assignment
TRANSCRIPT
Slide 1
An overview of blendingSubmitted as final assignment for Financing for Development Massive Open Online Course (MOOC) offered by World Bank GroupRohan Kumar Ramayad
Introduction
IntroductionWatch the video Blended Finance | The Road to Addis and Beyond at https://youtu.be/Bc0g7HspRw4
Definition
DefinitionBlending refers the combination of grant with loans or equity from public and private financiers.
DefinitionBlending refers the combination of grant with loans or equity from public and private financiers.
Types of Blended Finance:
Types of Blended Finance:Mustapha et al (2014) identifies the following forms of blended finance:
Types of Blended Finance:Mustapha et al (2014) identifies the following forms of blended finance:Direct grants
Types of Blended Finance:Mustapha et al (2014) identifies the following forms of blended finance:Direct grantsConditionality/performance-based grants
Types of Blended Finance:Mustapha et al (2014) identifies the following forms of blended finance:Direct grantsConditionality/performance-based grants Interest Rate Subsidy
Types of Blended Finance:Mustapha et al (2014) identifies the following forms of blended finance:Direct grantsConditionality/performance-based grants Interest Rate SubsidyGuarantee/risk-sharing products
Types of Blended Finance:Mustapha et al (2014) identifies the following forms of blended finance:Direct grantsConditionality/performance-based grants Interest Rate SubsidyGuarantee/risk-sharing products Structured finance first loss financing
Types of Blended Finance:Mustapha et al (2014) identifies the following forms of blended finance:Direct grantsConditionality/performance-based grants Interest Rate SubsidyGuarantee/risk-sharing products Structured finance first loss financingTechnical assistance
Types of Blended Finance:Mustapha et al (2014) identifies the following forms of blended finance:Direct grantsConditionality/performance-based grants Interest Rate SubsidyGuarantee/risk-sharing products Structured finance first loss financingTechnical assistanceRisk capital
Examples of blending facilities:
Examples of blending facilities:Accelerated Co-financing Facility for Africa (ACFA)
Examples of blending facilities:Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund
Examples of blending facilities:Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF)
Examples of blending facilities:Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative
Examples of blending facilities:Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative Neighborhood Investment Facility (NIF)
Examples of blending facilities:Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative Neighborhood Investment Facility (NIF) Public-Private Infrastructure Advisory Facility (PPIAF)
Examples of blending facilities:Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative Neighborhood Investment Facility (NIF) Public-Private Infrastructure Advisory Facility (PPIAF) Western Balkans Investment Framework (WBIF)
Examples of blending facilities:Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative Neighborhood Investment Facility (NIF) Public-Private Infrastructure Advisory Facility (PPIAF) Western Balkans Investment Framework (WBIF)Latin America Investment Facility (LAIF)
Examples of blending facilities:Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative Neighborhood Investment Facility (NIF) Public-Private Infrastructure Advisory Facility (PPIAF) Western Balkans Investment Framework (WBIF)Latin America Investment Facility (LAIF)Investment facility for Central Asia (IFCA)
Examples of blending facilities:Accelerated Co-financing Facility for Africa (ACFA) EU-Africa Infrastructure Trust Fund Global Index Insurance Facility (GIIF) MED 5P Initiative Neighborhood Investment Facility (NIF) Public-Private Infrastructure Advisory Facility (PPIAF) Western Balkans Investment Framework (WBIF)Latin America Investment Facility (LAIF)Investment facility for Central Asia (IFCA)Caribbean Investment Facility (CIF)
Discussion on blending in marign of European Development Days in 2013
Discussion on blending in marign of European Development Days in 2013Watch the video below of Bruno Wenn, the chairman of EDFI, the Association of European Development Finance Institutionson blending:
Discussion on blending in marign of European Development Days in 2013Watch the video below of Bruno Wenn, the chairman of EDFI, the Association of European Development Finance Institutionson blending:https://youtu.be/ZDOM7-fY8BI
Support for blending:
Support for blending:The need to mobilise additional resources for development and global public goods
Support for blending:The need to mobilise additional resources for development and global public goodsThe prospect of closing the financial gap, for projects that could not be wholly financed through loans only
Support for blending:The need to mobilise additional resources for development and global public goodsThe prospect of closing the financial gap, for projects that could not be wholly financed through loans onlyThe possibility of improving the development impact of the investment, through the grant element as complementary funding
Support for blending:The need to mobilise additional resources for development and global public goodsThe prospect of closing the financial gap, for projects that could not be wholly financed through loans onlyThe possibility of improving the development impact of the investment, through the grant element as complementary fundingThe objective of reducing the potential debt burden resulting from the investment, enhancing long term public sector borrowing capacity/sustainability
Support for blending:The need to mobilise additional resources for development and global public goodsThe prospect of closing the financial gap, for projects that could not be wholly financed through loans onlyThe possibility of improving the development impact of the investment, through the grant element as complementary fundingThe objective of reducing the potential debt burden resulting from the investment, enhancing long term public sector borrowing capacity/sustainabilityEconomic crises and increased budget constraints on donors such that leveraging developing financing through blending is often perceived as a means to partly address the requirement to do more with less
Support for blending:The need to mobilise additional resources for development and global public goodsThe prospect of closing the financial gap, for projects that could not be wholly financed through loans onlyThe possibility of improving the development impact of the investment, through the grant element as complementary fundingThe objective of reducing the potential debt burden resulting from the investment, enhancing long term public sector borrowing capacity/sustainabilityEconomic crises and increased budget constraints on donors such that leveraging developing financing through blending is often perceived as a means to partly address the requirement to do more with lessThe potential for enhancing the partner country governments ownership of the development assistance due to the loan component
Support for blending:The need to mobilise additional resources for development and global public goodsThe prospect of closing the financial gap, for projects that could not be wholly financed through loans onlyThe possibility of improving the development impact of the investment, through the grant element as complementary fundingThe objective of reducing the potential debt burden resulting from the investment, enhancing long term public sector borrowing capacity/sustainabilityEconomic crises and increased budget constraints on donors such that leveraging developing financing through blending is often perceived as a means to partly address the requirement to do more with lessThe potential for enhancing the partner country governments ownership of the development assistance due to the loan componentPotential economies of scale generated as a result of better pooling of resources and coordination among development financiers
Concerns about blending:
Concerns about blending:The risk of financial incentives outweighing development principles
Concerns about blending:The risk of financial incentives outweighing development principlesThe risk to differentiate in favour of middle-income countries against poorer countries
Concerns about blending:The risk of financial incentives outweighing development principlesThe risk to differentiate in favour of middle-income countries against poorer countriesThe risk of crowding out private financing and distorting markets
Concerns about blending:The risk of financial incentives outweighing development principlesThe risk to differentiate in favour of middle-income countries against poorer countriesThe risk of crowding out private financing and distorting marketsThe risk of providing insufficient attention to transparency and accountability
Concerns about blending:The risk of financial incentives outweighing development principlesThe risk to differentiate in favour of middle-income countries against poorer countriesThe risk of crowding out private financing and distorting marketsThe risk of providing insufficient attention to transparency and accountabilityThe risk of unclear or ill-defined monitoring and evaluation methods
Concerns about blending:The risk of financial incentives outweighing development principlesThe risk to differentiate in favour of middle-income countries against poorer countriesThe risk of crowding out private financing and distorting marketsThe risk of providing insufficient attention to transparency and accountabilityThe risk of unclear or ill-defined monitoring and evaluation methodsThe debt risks for developing countries of increasing lending.
Suggestion:
Suggestion:ETTG report (2011) suggests that in order to guarantee an efficient allocation and implementation of blended finance, it is important to:
Suggestion:ETTG report (2011) suggests that in order to guarantee an efficient allocation and implementation of blended finance, it is important to:reduce the complexity of blending mechanisms, for instance by clearly assigning responsibilities (accountability) in order to avoid transparency issues
Suggestion:ETTG report (2011) suggests that in order to guarantee an efficient allocation and implementation of blended finance, it is important to:reduce the complexity of blending mechanisms, for instance by clearly assigning responsibilities (accountability) in order to avoid transparency issuescarefully assess the impact that mixing a loan with a grant element could have on a recipient country in order to avoid crowding-out other potential sources of funding
Suggestion:ETTG report (2011) suggests that in order to guarantee an efficient allocation and implementation of blended finance, it is important to:reduce the complexity of blending mechanisms, for instance by clearly assigning responsibilities (accountability) in order to avoid transparency issuescarefully assess the impact that mixing a loan with a grant element could have on a recipient country in order to avoid crowding-out other potential sources of fundingdefine the percentage of the grant element in such a way as to deter recipient countries from imprudent borrowing
Suggestion:ETTG report (2011) suggests that in order to guarantee an efficient allocation and implementation of blended finance, it is important to:reduce the complexity of blending mechanisms, for instance by clearly assigning responsibilities (accountability) in order to avoid transparency issuescarefully assess the impact that mixing a loan with a grant element could have on a recipient country in order to avoid crowding-out other potential sources of fundingdefine the percentage of the grant element in such a way as to deter recipient countries from imprudent borrowing reach agreement among donors on requirements to provide funds in a timely fashion and avoid delaying decision-making processes
Source:http://www.worldbank.org/mdgs/documents/MDBs-IMF-DevFin-Solutions-11-3-15.pdfETTG (2011) Aid for Trade and Blended Finance. Aid for Trade Case Study submission to OECD/ WTO. London: Overseas Development Institute.http://ecdpm.org/wp-content/uploads/2015-European-Report-on-Development-English.pdf http://ecdpm.org/wp-content/uploads/2013/11/Blending-Loans-Grants-Blend-Not-Blend.pdf http://www.evidenceondemand.info/topic-guide-blended-finance-for-infrastructure-and-low-carbon-development-full-report