Blended finance uses softer capital to absorb first losses, lower interest, or fund technical work so private lenders and equity investors will join a project. The aim is to stretch scarce public money further without pretending commercial risk has vanished.
Key takeaways
- Layers of the capital stack have different returns and different loss priorities.
- Good design targets genuine market gaps rather than subsidising deals that would happen anyway.
- Transparency on subsidies helps avoid hidden giveaways to private parties.
- Complexity and legal costs can erase benefits on small transactions.