The concept of blended finance has gained significant traction across Africa in recent years, emerging as a potential solution to bridge the continent’s estimated $100 billion annual infrastructure financing gap. Despite abundant investment opportunities, traditional capital sources often remain hesitant, perceiving African markets as excessively risky. This gap between potential and execution represents both a challenge and an opportunity.
At last month’s Africa Investment Summit in London, I witnessed firsthand how blended finance dominated discussions among development finance institutions, private investors, and government officials. The consensus was clear: mobilizing private capital alongside public and philanthropic funding could unlock unprecedented growth across African economies.
“Blended finance isn’t simply about mixing funding sources,” explained Ibrahim Mayaki, former CEO of the African Union Development Agency, during a panel I attended. “It’s about strategic risk allocation that enables projects to proceed that otherwise wouldn’t have materialized.”
Recent data from Convergence, a global network for blended finance, shows that while blended finance transactions have mobilized over $160 billion globally since 2015, Africa captures only about 22% of this total. This underrepresentation persists despite the continent housing some of the world’s fastest-growing economies and most promising investment frontiers.
The African Development Bank has been pioneering efforts to change this narrative. Their Africa Investment Forum has facilitated over $110 billion in investment interests since its inception in 2018. During my conversation with Kevin Kariuki, the AfDB’s Vice President for Power, Energy, Climate and Green Growth, he emphasized that “de-risking tools like first-loss guarantees and technical assistance facilities are proving essential to drawing commercial investors into critical sectors.”
Climate finance represents one of the most promising applications. The Climate Finance Accelerator, backed by the UK government, has supported projects like Kenya’s Nuru solar mini-grids and Nigeria’s ColdHubs solar-powered food storage facilities. These ventures demonstrate how blended approaches can simultaneously address climate resilience and economic development.
However, challenges persist. The fragmentation of funding sources creates complexity, while misalignment between investor expectations and project realities often delays implementation. Many projects struggle with the “missing middle” – too large for microfinance but too small or unproven for traditional bank financing.
“We need standardized approaches and coordinated action,” noted Tariye Gbadegesin, CEO of ARM-Harith Infrastructure Fund, during our recent interview. “Currently, each blended finance deal is practically custom-designed, making the process inefficient and time-consuming.”
The data supports this concern. According to analysis from the Boston Consulting Group, blended finance transactions in Africa take an average of 18-24 months to structure – nearly twice as long as in more established markets. This extended timeline adds costs and diminishes the capital efficiency that blended approaches aim to achieve.
Several African countries are developing innovative solutions to these challenges. Rwanda’s Green Fund (FONERWA) has mobilized over $217 million for climate projects by blending government resources with international climate funds and private investments. Morocco’s Noor Ouarzazate solar complex, one of the world’s largest concentrated solar facilities, utilized blended finance to secure $2.6 billion from both public and private sources.
The financial architecture is also evolving. The Africa Finance Corporation recently launched a $2 billion facility specifically designed to de-risk infrastructure investments. Meanwhile, the Sustainable Development Investment Partnership, co-founded by the World Economic Forum and OECD, has established an Africa hub focused on developing replicable blended finance models.
Digital platforms are increasingly facilitating these connections. Kenya-based Raise, for instance, has developed technology that streamlines the investment process for early-stage African businesses seeking blended capital structures. Their platform has reduced the average fundraising timeline from 12 months to under 6 months for participating companies.
The World Bank’s private sector arm, the International Finance Corporation, estimates that properly structured blended finance mechanisms could mobilize up to $12 trillion in investment opportunities aligned with the Sustainable Development Goals across emerging markets by 2030. Africa stands to capture a significant portion of this potential.
For investors considering entry into African markets through blended structures, conducting thorough due diligence remains essential. Political stability, regulatory environments, and governance frameworks vary significantly across the continent’s 54 countries. Partnerships with experienced local entities can help navigate these complexities.
“The most successful blended finance initiatives we’ve seen share common characteristics,” explains Chinelo Anohu, Senior Director of the Africa Investment Forum. “They combine well-structured projects, appropriate risk mitigation tools, and strong stakeholder alignment around clear development outcomes.”
As Africa positions itself for post-pandemic economic recovery, blended finance will likely play an increasingly central role in funding the continent’s ambitious infrastructure and development agenda. By catalyzing private investment into sectors like renewable energy, sustainable agriculture, and digital infrastructure, these innovative financial structures could help realize Africa’s vast economic potential while addressing pressing social and environmental challenges.
The path forward requires greater coordination among development finance institutions, more standardized approaches to risk mitigation, and increased capacity building for local financial intermediaries. With these elements in place, blended finance could indeed become the transformative force that many across Africa’s investment landscape believe it can be.
