Blended finance is about using public money to de-risk investments and make them more attractive to private money. Governments' and users' payments for WASH services can, if bundled properly, provide the sort of long-term guaranteed financial flows that can tempt local private finance (everything from micro-credit to bonds) to make the big up-front investments. Three characteristics that define blended finance mechanisms are (i) leverage: development finance, public and philanthropic funds are used to attract private capital, (ii) impact: investments aim to achieve social, environmental and/or economic outcomes; (iii) returns: private investments expect to have financial returns which match with market expectations. [Source: Fonseca, C., 2018. Blended finance for beginners : a simplified framework. The Hague, the Netherlands: IRC ; Moriarty, P. 2017. Finance – the unavoidable building block]
This Conference Perspective was co-authored by Patrick Moriarty for the OECD – GIZ Conference: Closing the gap for water in line with SDG ambitions: the role of blended finance, 4-5 October 2018, Eschborn, Germany.