The strategic use of public resources to increase private investment in the sustainable development of low and middle-income countries is a priority for development co-operation providers. The OECD works with a range of partners to provide data and policy guidance and help create the right incentives.
Blended finance involves the strategic use of development finance to mobilise additional finance for sustainable development. It helps to mitigate risks for private investors in developing countries, encouraging them to engage more with markets and sectors that need their investment the most.
The OECD DAC Blended Finance Principles provide a framework and guidance to make the best use of available instruments and structures.
While the amounts of private finance mobilised by public resources for sustainable development have followed an upward trend over the last decade, total volumes remain below expectations. In addition, regions and sectors that most need these investments are often the least-well served.
To help narrow this gap, the OECD explores potential new sources of finance, including debt markets and institutional investors.
The total amount of mobilised private finance reached USD 62 billion in 2022, confirming the upward trend of the past decade. The two leveraging mechanisms that mobilised the largest volumes were (i) direct investment in companies and project finance special purpose vehicles as well as (ii) guarantees.
Together, these accounted for more than half of the mobilisation since 2016 on an annual basis.
The levels of private finance mobilised by public interventions has grown steadily over the last decade, largely driven by multilateral development banks, which accounted for 70% of the total over 2020-22.
However, those amounts remain insufficient to match the increasing needs of developing countries aiming for their sustainable development goals: in 2020, when that gap was estimated at USD 3.9 trillion, official development finance providers mobilised about 52 bn in private finance.
