Beyond the Myths: From Perceptions to Practice in Scaling Blended Finance to EMDEs

Blended finance has long been positioned as a catalytic mechanism to mobilise private capital for sustainable development in emerging markets and developing economies (EMDEs). However, despite growing momentum, private capital mobilisation has remained insufficient to meet global climate and development targets. Misperceptions around risks in EMDEs, fragmented ecosystems and structural inefficiencies continue to constrain private capital, while the urgency for action continues to rise exponentially.

Using a practitioner-led approach to unpack these barriers and identify enablers for scale, CISL engaged stakeholders across the blended finance ecosystem through three closed-door workshops. This included multilateral development banks (MDBs), development finance institutions (DFIs), banks, institutional investors, insurance companies, credit rating agencies and guarantee providers. The discussions focused on unpacking real and perceived risks in EMDEs – contextualising existing literature in this space, identifying practical bottlenecks, capturing evidence-based insights and identifying pathways for impact.

The key findings from the research are summarised below, contrasting some of the recurring challenges in blended finance with promising emerging practices in the field. Reflecting an increasing need for a co-ordinated approach to scale, these findings indicate a growing momentum in the market to address challenges in risk perceptions and unlock greater volumes of private capital across EMDEs. 

However, realising the full potential of blended finance will require continued effort. Strengthening market infrastructure, enhancing local capacity, addressing data gaps in risk assessment, aligning policy and investment mandates and promoting standardisation emerge as critical priorities to accelerate private capital mobilisation at scale.