Blended finance in fragile contexts : opportunities and risks

The development community agrees on the need to address conflict and fragility for global security and sustainable development. In such complex situations, programming should strive to include multiple actors at various levels of society. Although the use of private investment in fragile contexts has so far been low, the need to address the SDG funding gap makes innovative and more flexible financing methods worth considering. Official Development Aid remains critical, but blended finance can help enlarge the total resources available for development. This paper analyses the OECD-DAC statistics on amounts mobilised from the private sector by official development finance interventions, from 2012 to 2017, against the multidimensional lens presented in the OECD 2018 States of Fragility Framework. The data shows a positive relationship between blending opportunities and economic, political and environmental security. The amounts of private finance mobilised increase, as a country’s economic, political and environmental fragility decreases. The way blended finance interplays with societal fragility and security remains unclear, as these two dimensions exert more complex influence on the trade-off between perceived risks and anticipated returns, which typically guides private investors.