Blended Finance and Impact Investing in Fragile States

Kruskaia Sierra-Escalante is a Senior Manager of Blended Finance at the International Finance Corporation (IFC), which is the private arm of the World Bank. The blended finance unit manages more than $1 billion in donor-contributions for climate-smart co-investments in IFC projects. In this interview, we talk about what blended finance is, and how it generally supports high-impact projects in fragile and conflict-affected states that cannot attract financing on strictly commercial terms. By balancing the risky investments with concessional co-financing from donors or third parties, the IFC can tailor lending packages to address the needs of private sector firms in fragile areas. What makes these loans more attractive to borrowers include pricing (i.e. below-market interest rates or a longer grace period), volume, and a local currency structure. On the creditor side, IFC’s role as a co-lender also mitigates some of the risk that private investors face. Blended finance, Kruskaia noted, is key to delivering on the IFC’s new strategy, which targets climate initiatives, women-led enterprises, and investment in fragile areas.