Relationships build upon

1. ReDesigning Development Finance
Blended Finance: The Road to Addis and Beyond
March 2015
Terri Toyota
World Economic Forum

2. 2
Vision
Blended finance is a systematic and structured approach to finance and investment in emerging
and frontier markets
Objectives
• Extend the reach and effectiveness of ODA through the complementary deployment of
philanthropic and private capital investment
• Expand private investment in developing countries through the complementary deployment
of risk mitigation and concessional finance tools by official and philanthropic institutions
• To this end, expand the pool of foreign and domestic capital available for economic
development, including small and medium enterprises, agriculture, infrastructure and key
public services
ReDesigning Development Finance Initiative (RDFI)
The World Economic Forum and OECD-DAC are institutionally committed to
advancing the Blended Finance ecosystem through a multi-year initiative
A scaled-up market where…
private investment flows
beyond niche units
A liquid market with…
standardized products and
investments
A transparent market that…
connects all players on a
virtual active platform

3. 3
Impact
Returns Leverage
Impact: investments in emerging and frontier markets that deliver
transformative social and economic progress
Leverage: systematic and strategic
use of development and
philanthropic funds to mobilize and
engage private capital at scale
Returns: market-based, risk-
adjusted returns that meet
business goals and fiduciary
duties
Blended Finance
The deliberate and strategic alignment of public-private capabilities and capital to
accelerate social and economic growth in emerging and frontier markets

4. 4
Investment Barriers to Scale
There are seven key reasons why supply of capital does not flow at scale to emerging
and frontier markets
Business Case
Not Viable
Not an
intermediated
market
Limited local
market
knowledge
Asset and
capability gaps
Development
needs
outpacing
capital flows
Lack of
mandate and
incentives
Difficult local
investment
climate
Private sector challenges largely
stem from the difficulty to realize
risk-adjusted returns…
…while public sector challenges
are largely due to mandate and
funding constraints.
Both public and private sector face challenges that hinder exponential capital from flowing
to emerging markets and ultimately limit development impact and business goals

5. 5
Variables Affecting Risk-Adjusted Returns
The most significant barrier to private capital flow in emerging and frontier markets is
that returns are often not commensurate with the high level of risk (real or perceived)
Risks
Emerging and frontier markets face a
number of unique risks:
• Macroeconomic
• Political
• Regulatory
• Business
• Hard & Local Currency
• Liquidity
• Tax Conditions
• Market Segmentation
Returns
Returns in emerging and frontier markets
are realised based on several variables:
• Seniority
• Tenor / Exit
• Credit Spread
• Liquidity
• Volatility
• Growth Rates
• Costs
• Sector performance
• Leverage
Private capital providers have a fiduciary duty
to maximize risk-adjusted returns….
….if risk-adjusted returns are less attractive
relative to other markets, investors will not
allocate capital to emerging and frontier markets.

6. 6
An Approach to Mitigating Risks and Managing Returns
However, in blended finance, public capital can mitigate risk or manage returns
bringing risk-adjusted returns in line with investor requirements
Mitigating Risks
Public investors can mitigate risks for the
private sector
• Improving credit worthiness
• Limiting downside loss exposure
• Insuring against unforeseen market and
catastrophic events
• Providing technical assistance and
other advisory services
• Eliminating funding shortfalls
• Encouraging necessary risk taking
• Among others….
Managing Returns
Public investors can also apply mechanisms
that enhance returns for the private sector
• Absorbing transaction and project
preparation costs
• ‘Topping-up’ returns by sharing or
forgoing any returns to public capital
• Providing incentives for successful
performance outcomes
• Providing low cost leverage
• Taking subordinate positions
• Among others….
Note: Blended Finance does not seek to eliminate risks, but rather to encourage necessary risk taking
at acceptable levels relative to opportunities in other markets and investor tolerance

7. 7
Five Institutional Barriers to Scaling
RDFI has identified five key barriers that must be addressed in order to scale up
blending finance as a core business for both public and private sector investors
Blended Finance currently lacks… …impacting success by…
Institutional readiness that provides a clear
mandate to engage the private sector, along with
internal assets and capabilities…
…impeding ability to communicate and collaborate
and the execution of investments in a streamlined,
structured fashion
Education and awareness of the potential for
blended finance to meet return and impact goals,
through evidence and analytics on results of
existing models…
…hindering adoption of best practices without a
champion and evidence to support the business and
impact case
A platform to connect return- and impact-oriented
capital providers for early co-design of structures
and alignment on purpose…
…leaving blended finance fragmented and
duplicative and development challenges persistent
A common language and understanding between
development and private funders…
…missed opportunities and a steep learning curve
for every new opportunity that slows down timeline
Standardized deals and opportunities, as well as a
pipeline of bankable projects…
…limiting commitment of capital due to high
transaction costs and limited opportunities to invest
creating high competition for capital

8. 8
Education &
Awareness
Blended Finance
Network
 Formalized Blended
Finance Network
with online
collaboration space
 Webinars and
knowledge sharing
Thought leadership
provides evidence and
high-profile forums
generate commitment
and spark big ideas
The RDFI Blended Finance Toolkit
RDFI seeks to overcome these barriers by influencing policy, raising awareness,
creating enabling assets & capabilities and curating a diverse community
The RDFI seeks to overcome barriers to scaling blended finance…
 Primers for private
capital and
development
investors
 Catalogue of existing
models and analysis
of results
 ‘How-To’ Roadmap for
development funders
Curated community of
pioneers and
influencers facilitates
innovation, and new
partnerships
Ecosystem
Infrastructure
Embedding blended
finance in narrative for
policy and reform and
other ecosystem
infrastructure
 GAC on Sustainable
Development
working papers
 Engagement on the
3rd International
Conference on
Financing for
Development the
Financing forcument
Global
Finance Exchange
Provides a platform for
diverse stakeholders to
connect and deal
facilitation
 Pipeline of
transactions and
marketplace
liquidity
 Incubator for new
opportunities
 Development and
maintenance of
necessary systems
Concrete
Opportunities
Creates results and
new partnerships by
placing ideas and
opportunities in front
of investors
 Current ideas and
opportunities for
blended investment
 Large, signaling
opportunities
 Scalable, replicable
opportunities
 ‘Blended Finance
Marketplace’
sessions
…by providing stakeholders with a “blended finance toolkit”

9. 9
Scenarios for Applying Blended Finance
Five identified scenarios for blending that vary based on the maturity of the challenge
at hand are complemented by three supporting mechanisms across the lifecycle
Early stage, high
business model risk
and transaction costs.
‘Soft’ capital with little
to no return
expectations used for
testing innovative
products or business
models, and advisory
services in order to
absorb the highest
risks
High upfront costs and
binary risk a project
will not happen
creates bottleneck.
Grant funded upfront
costs and activities
reduce uncertainty by
creating bankable
projects
Some perceived macro
or sector risk, funding
needed to achieve a
‘first-close’ or
demonstrate viability.
Public needed to
‘crowd-in’ private fund
Public capital seeks
exit from mature
investments to
commercial actors,
provides a pipeline
High perceived sector
or other risks and
expected returns
below market. Public
capital will take a
subordinate position
and may top-up
returns to attract
commercial capital
Explore Build MatureGrow
SUPPORTINGMECHANISMSSCENARIOS
TECHNICAL ASSISTANCE – New or distressed markets require incentives. Public investors attract private capital by offering
incentives or contingent payment in exchange for upfront investment in new products and services
RISK UNDERWRITING – credit-enhancing instruments that fully or partially protect investor capital against various forms of risk
NEW MARKET INCENTIVES – New or distressed markets require incentives. Public investors attract private capital by offering
incentives or contingent payment in exchange for upfront investment in new products and services
PREPARING PIONEERING FACIILTATING ANCHORING TRANSITIONING

10. Set goals
for blended
finance
Build
capabilities
Benchmark your
starting point in
blended finance
Build buy-in and
awareness across
the organization
Partner
and invest
5
1 2
3
6
Each step has:
 Purpose—objectives to initiate
or scale blended finance
 Principles—an approach to
achieving these objectives
 Practical steps—a series of
actions a blended finance
‘champion’ can carry out
A How-To Guide for Development Funders
Seven steps to initiating or scaling blended finance
4. Assess gaps
in capacity for
blended finance
Learn and
scale up
across the
organization
4
7

11. 11
Select, Concrete Examples from Davos Blended
Finance Marketplace (1 of 2)
Abraaj Growth Markets Healthcare Strategy
Opportunity: While demand
for affordable, high-quality,
mass market healthcare in
South Asia and sub-Saharan
Africa is large and rapidly
growing, supply lags and
healthcare businesses require
substantial capital, deep
operational expertise, and
access to high quality clinical
staff.
Structure: Purpose-built team to
deliver strong financial and impact
returns. Impact objectives integrated
into the investment strategy and
governance framework. Invest in
scalable healthcare services models
in low- to middle-income markets
that provide measurable
improvements in health status of the
underserved low- to middle-income
population segments. Work with
various funders to maximize impact.
Danish Climate Investment Fund (DCIF)
Opportunity: While investment
opportunities in renewable
energy and energy efficiency in
developing countries exists, few
projects initially offer risk-
return profiles in line with
institutional investors’
investment criteria.
Structure: DCIF provides risk capital,
including a preferred return for
institutional investors, for climate-
related projects to mobilize further
financing from both public and
private investors. The fund will be an
active minority investor and
contributes only part of the total
project financing in the individual
projects.
Mobilizing Institutional Investments in African Infrastructure
Opportunity: Africa needs
significant investments in
energy and infrastructure but
faces a significant investment
shortfall. Pension funds have
considerable capital but limited
access to and knowledge of
African infrastructure
investment opportunities and
risk-mitigation tools.
Structure: A task force was created
to address this investment shortfall
through public private collaboration.
Joint efforts by public and private
institutional investors, donors
providing risk mitigation tools, and
multilateral agencies with access to
project pipelines offer significant
potential to lever up infrastructure
investments and financing in Africa.
Citibank and SMBC Infrastructure Investment Partnership
Opportunity: In order to
effectively implement
infrastructure projects that
promote real prosperity, quality
of life, and opportunity for
emerging market countries,
players must utilize the best
available expertise and arrange
for the most cost-effective
funding, credit enhancement
and capital resources.
Structure: The U.S. Government, in
partnership with SIDA, Citi, SMBC,
and Capitol Peak Asset
Management, launched a $10B
Infrastructure Investment
Partnership to fund and fast-track
critical infrastructure projects in
emerging markets, with an initial
focus on Africa and Asia as well as
Latin America.

12. 12
Select, Concrete Examples from Davos Blended
Finance Marketplace (2 of 2)
Bank of America (BofA) Catalytic Finance Initiative (CFI)
Opportunity: BofA committed
to help meet the challenge of
scaling up investment in
sustainable energy around the
world. At the United Nations
Climate Summit in September
2014, the bank launched its
Catalytic Finance Initiative (CFI),
designed to catalyse at least
$10 billion of new investment
into high-impact clean energy
projects.
Structure: BofA will commit $1
billion to investment structures that
employ a range of de-risking tools,
developed in conjunction with
development finance institutions,
insurance providers, foundations and
institutional investors. The goal is to
make clean energy investments more
financeable, particularly in emerging
markets where project impact is
often amplified – addressing other
large-scale issues like health,
education and job creation.
Women Entrepreneurs Debt Fund (WEDF)
Opportunity: Women-owned
SMEs are an untapped and
attractive market in developing
countries with a $300 billion
estimated credit gap and as many
as 70% having unserved or under-
served credit needs. Working with
lenders in developing countries,
WEDF accesses a market segment
with higher product cross-selling,
deposit growth and loyalty,
benefiting from the lower risk
tolerance of women-owned SMEs.
Structure: Seeks to empower
women entrepreneurs in developing
countries through investing in a
portfolio of senior loans to
commercial banks. It provides a
platform for investing at scale in
commercial banks in developing
countries, playing a critical role in
bridging the financing gap for
women-owned SMEs and achieving
a greater reach.
The Patient Procurement Platform
Opportunity: Significant
opportunities exist across
agribusiness value chains in
developing markets. In Africa
alone, food systems currently
valued at $313 billion are
forecast to grow threefold to
$1 trillion by 2030. Smallholder
financing also represents a vast
untapped market estimated at
$450 billion, 80% of which is
currently unmet.
Structure: Addresses risks of all
stakeholders, in particular
inconsistent large buyer engagement
and insufficient financing, through a
multistakeholder consortium of
input companies, distributors and
dealers, traders, buyers, capital
providers and smallholder farmers.
The platform aggregates demand
from large buyers using longer than
typical forward contracts to secure
access to finance and inputs.
Atlas Mara (ATMA)
Opportunity: Opportunity to
create a local financial
institution that provides
leadership, liquidity and
technology. Combining global
institutional knowledge with
extensive local insights to
create innovative, well-
designed products can reach
underserved customer
segments (women, rural areas
and youth) that represent a
large commercial opportunity .
Structure: Financial inclusion focus
and goals align ATMA with
development investors and suppliers
of finance. Partnering with the
private sector enables development
finance institutions to mobilize large
amounts of capital quickly for target
markets in sub-Saharan Africa. Low-
cost debt financing from
development institutions catalyses
product innovation in servicing SMEs,
trade finance and mobile banking.

13. 13
Blended Finance Coalition of the Committed
The growing blended finance network includes diverse stakeholders who are pioneers
in blended finance and actively applying blended finance in a mainstream fashion
Hon Christian Paradis (Chair)
Canadian Minister for International
Cooperation and La Francophonie
Julie Sunderland (Vice Chair)
Bill and Melinda Gates Foundation
Dale Mathias
Partners Forum for Private Capital
Charlotte Petri Gornitzka
Swedish International
Development Cooperation Agency
Tom Speechley
Abraaj Group
Gavin Wilson
IFC Asset Management
Corporation
RDFI Steering Group
Corporations & Operating Partners
Development Finance InstitutionsDiversified Financial Institutions
Developing country governments
Financial Intermediaries
Institutional Investors
Philanthropic Foundations
Donor Governments and Agencies
Coalition of
the Committed
Private Sector Capital Providers Development and Philanthropic Funders

14. 14
14
Engaging in the Forum’s Blended Finance Initiative
As Blended Finance gains momentum, there are numerous ways for players to get
involved—and the Forum and OCED-DAC can help you get started
For further information please contact:
Terri Toyota, Director, Foundations and Development
Community, World Economic Forum
terri.toyota@weforum.org
Jens Sedemund, Executive Advisor to the DAC Chair, OECD
jens.sedemund@oecd.org

15. Thank you