Blended Finance

Blended Finance

BlueOrchard offers a unique expertise and track-record in designing, structuring, and managing successful blended finance and public-private partnership (PPP) mandates. Our extensive network of DFIs and private investors sets up an ideal business environment where the funding by DFIs, multi-lateral banks (MDBs), bilateral organizations, and foundations is used in a wide range of de-risking instruments -like guarantees, first loss capital, technical assistance, and other forms of capital subordination- to crowd in private commercial capital in emerging and frontier markets in order to accelerate the achievement of the Sustainable Development Goals (SDGs).

Blending public -concessional and commercial- impact driven funding with commercial private capital results in catalytic layered fund structures where risk is distributed and mitigated for all investors. Public funds are leveraged by attracting private investors’ capital. This can accelerate expansion and scaling of impact initiatives that contribute directly to the SDGs, while allowing the private investors to benefit from publicly funded credit enhancements and junior investment tranches to offset private sector risk.

Among the current active blended finance mandates BlueOrchard provides long term financing to sectors varying from financial inclusion, gender lens investing, education finance, climate insurance, energy efficiency, renewable energy and sustainable infrastructure, amongst other.

The below scheme shows the main attributes of a blended finance structure and illustrates how the set-up could look like.

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Specialized Technical Assistance Management

Technical assistance and capital placement go hand-in-hand to optimize investment impact and create an enabling investment environment, ultimately facilitating responsible, sustainable and innovative market development. As such, BlueOrchard offers specialized and customized technical assistance (TA) management services. TA aims to:

  • Strengthen the funds’ investees and thus improve their risk profile
  • Establish market intelligence through applied research
  • Support the respective sector infrastructure with trainings and workshops

BlueOrchard’s extensive experience in TA management includes oversight of projects in sectors such as education finance, energy efficiency and renewable energy. Moreover, BlueOrchard offers general TA management that consists of, but is not limited to human resources process improvements, risk and portfolio management enhancement, product development and strategic analysis, as well as conceptualization of impact measurement tools.

Best practice in procurement procedures and guidelines is used by BlueOrchard in line with the requirements of the different TA capital providers. The TA allocation process is subject to rigorous oversight and governance, in which dedicated TA Committees are involved in the TA decision making process and supervise the TA manager activities.

Benefits for investors

Technical assistance plays an important function in improving portfolio quality, particularly as it benefits investees in emerging markets and sectors. The main added value for BlueOrchard investors are:

  • Ensuring the invested funds are used for the targeted impact objective
  • Reducing the funds’ credit risk through tailored capacity building at the target investee level

TA Facilities are always customized to the objectives of each individual fund. Generally, TA funds are raised from international public and private donors in the form of grant funding. These grants are often allocated with cost sharing mechanisms at the investee level to ensure “buy in” and a strong incentive to collaborate towards the goal of improved operations and enhanced impact.