Concept of Blended Finance

The term refers to a mixed financing approach that makes use of public or philanthropic capital to stimulate private sector investment in developing countries and in sustainable development goals. The method allows different types of capital (be it impact or commercial) to invest side by side while each achieves its own goals (financial, social or a mixture of the two).

“In the investment and impact business ecosystem, it would be the possibility of bringing different financial instruments into the same partnership between the investor and the business. For example, a foundation could make a donation and then take out a loan. Or an investor could take out a loan and then equity and become a partner in the company. It is a very rich and promising approach ”, explains Célia Cruz, Executive Director of ICE.

The starting capital in this type of approach is patient capital, the one that accepts to take more risks. Generally, the big investor in this phase is foundations and institutes and high-income individuals.

This method can leverage resources that are stuck in high-income families to make it possible to attract more traditional capital.

SITAWI makes use of this tool to develop financial mechanisms that make impact investing (in impact businesses) more attractive to both the impact investor and the impact entrepreneur.

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