Blended Finance Facility (BFF)

Objective and Additionality

The Blended Finance Facility (BFF) blends IDA PSW support with pioneering IFC investments across sectors with high development impact, including small and medium enterprises (SMEs), agribusiness, health, education, affordable housing, infrastructure, climate change mitigation and adaptation, among others. The BFF mitigates various financial risks associated with investments in SMEs and agribusiness as well as pioneering investments across sectors1 to unlock private sector opportunities that promote productivity improvements and innovation with strong development impact. The BFF builds on and expands IFC’s existing blended finance platforms, including the Blended Climate Finance programs, the private sector window of the Global Agriculture and Food Security Program (GAFSP), and the SME Finance facilities, and extends support into new high-impact sectors.

The BFF enables IFC to expand its engagements in markets and sectors covered by its current blended finance platforms and enter into new ones critical to enabling high-impact transactions in IDA PSW-eligible markets. In sectors currently covered by IFC’s blended finance program—SME, agribusiness, and climate change—the BFF builds on the current facilities, leverages existing experience and practices, and brings in additional scale and scope of engagement.

Financial Transaction  Mechanics

Existing IFC financial products are eligible for clients under the facility, including senior loans, subordinated loans, equity (direct and through funds), preferred equity and guarantees (e.g., first-loss in risk sharing facilities). The BFF enables IFC to undertake additional projects by providing: i) blended financing to enable IFC to support projects which are not yet able to meet fully commercial financing terms, but which promise to be sustainable and have strong development impact; and/or ii) risk mitigation, through subordination, deferrals, provision of first loss, and structuring flexibility (e.g. longer tenors) enabling IFC to support higher risk projects. Long tenors are particularly important for green-field projects, which typically have higher risk than expansion projects, but which are more common in IDA PSW-eligible markets. The facility can incur losses only up to the designated allocation of IDA PSW’s resources.

Contact: Kruskaia Sierra-Escalante, Manager of Blended Finance Unit, IFC, ksierraescalante@ifc.org

[1] These include investments in areas such as health, education, manufacturing, affordable housing, infrastructure such as energy, telecommunications, technology, water and sanitation, and climate finance (including renewable energy generation and other climate-smart infrastructure investments).