Blended Finance Is the Future of Development

4 min readApr 18, 2018

By Jonathan Nash, MCC Acting CEO

A worker at Vedeko electricity substation in Benin. MCC’s $375 million investment in Benin seeks to expand access to reliable electricity and crowd-in commercial finance.

At a time when national budgets and donor resources are stretched, finding new sources of capital for investment in public infrastructure and services is critical to helping some of the world’s poorest people rise out of poverty. Governments around the world are looking to private-sector investment, efficiency and expertise to transform critical sectors such as transportation, power and water to better deliver vital services to their people. At the same time, the private sector and institutional investors are looking to enter high-potential markets.

Blended finance — the merging of public and private funds to mobilize private capital flows for the public good — is a key tool in global efforts to reduce poverty. It also offers a unique opportunity for investors to gain a foothold in emerging markets in Africa, Asia and Latin America. But despite emerging and frontier markets contributing 49 percent of global gross domestic product, only a fraction of global capital markets flow to these countries due to risk and market inefficiencies.

Catalyzing private investment for development has been fundamental to the work of the U.S. Government’s Millennium Challenge Corporation, an independent U.S. Government agency founded in 2004 on the lessons of decades of development experience. Our innovative approach, from viability gap financing for infrastructure projects to support of institutional and regulatory reforms, unlocks capital, improves investment environments, and helps create opportunities for firms in emerging markets. And we do that by incorporating the private sector in project development and working to create the right conditions for investment.

Our country partners around the globe are competitively selected developing countries that must meet transparent criteria for selection based on ruling justly, investing in people and economic freedom as evaluated on MCC’s scorecard, creating an incentive for countries to improve their economic and business environments before even a dollar of MCC funding is expended. Performing well on our scorecard is often seen as a seal of approval, signaling to the private sector that the country is open for business.

When we develop our projects, in countries such as Côte d’Ivoire, Liberia and Niger, we first identify factors holding back growth and investment in a country and we customize a program to alleviate those constraints to create an enabling environment for the private sector to amplify and sustain our investments. We hold consultations with the private sector, civil society, and other stakeholders to better understand their concerns and needs. Depending on a partner country’s needs, MCC often creates a customized approach to blended finance.

A night market in Ghana. MCC’s compact with Ghana is focused on strengthening the power sector.

For example, in Ghana, the lack of reliable power has been a barrier to doing business in the country, holding back Ghana’s potential for private investment and partnership with businesses. Domestic and foreign investors expressed concern around the financial strength of the Electricity Company of Ghana, the public electricity distribution utility. Through MCC’s $498 million compact focused on the power sector, we are supporting the Government of Ghana’s efforts to improve the financial and operational health of the utility by bringing in a competitively selected private sector operator who will invest up to $500 million to strengthen the distribution network and improve service quality for households and businesses, and reduce losses. Our investments in Ghana are expected to help catalyze nearly $4 billion in new private investment overall and help the Government of Ghana better deliver reliable electricity services to its people.

In Benin, we are crowding-in and mobilizing commercial finance to increase total financing available for development. Our Off-Grid Electricity Access Project is a competitive grant facility that will fund critical public infrastructure, household solar photovoltaic systems, mini-grids, and energy efficiency measures. Find out how to submit a proposal before the May 22 deadline.

MCC is working with other donors to rehabilitate and upgrade the Mt. Coffee hydropower plant in Liberia.

We also encourage effective partnering in blended finance. In Liberia, we are working alongside the European Investment Bank, Germany’s KfW Development Bank, and the Government of Norway to fund the rehabilitation of the Mt. Coffee Hydropower Plant.

A few months ago, I visited London to advance conversations around blended finance and discuss how we can continue to drive significant new capital flows into high-impact, growth sectors in our partner countries while effectively leveraging private sector expertise in project development. Coordination between the many organizations — from banks, Development Finance Institutions, International Development Agencies, private equity, and foundations — working, or looking to work, in this space is essential to effectively execute blended finance projects. MCC wants to be a convener for those conversations. Through continued dialogue, we can identify actionable strategies for unlocking capital flows.

Blended finance offers a promising solution to meeting the vast development challenges of the twenty-first century. In sub-Saharan Africa, one of the focus regions of blended finance, approximately 600 million people — two-thirds of the population — live without electricity. There is immense potential for investors by partnering with MCC and multilateral donors in emerging markets. By connecting investors to new, underserved markets while expanding access to vital services, blended finance can have a transformative role in reducing global poverty and expanding opportunity for millions of the world’s poorest people.

Jonathan Nash is the Acting Chief Operating Officer of the Millennium Challenge Corporation.

Note: this op-ed was first published by This is Africa, a website affiliated with the Financial Times.




MCC — the Millennium Challenge Corporation — is an innovative & independent U.S. Government agency reducing global poverty through economic growth.