Blended Finance: A new international hope, old Egyptian way



Fri, 26 Jan 2018 - 06:19 GMT


Fri, 26 Jan 2018 - 06:19 GMT

Blended finance is key to achieving the UN’s Sustainable Development Goals (SDGs) – Resilience Resources official website

Blended finance is key to achieving the UN’s Sustainable Development Goals (SDGs) – Resilience Resources official website

CAIRO – 26 January 2018: Egyptian firms and companies have been using “Blended Finance” to contribute to the country’s development long before the term was coined.

Blended Finance is when private capital from companies and firms, international, regional or local, are pooled with public funds to invest in projects, programs or initiatives that serve development goals. Blended finance can also relate to pooling resources from the private and public sectors. These resources include all those that are needed to realise the developmental goals.

More recently, the developmental goals have become based on the 17 Sustainable Development Goals (SDGs) spanning from improved infrastructure, access to clean water, protecting life below water and access to clean energy to reduced inequality, gender equality, peace, justice and strong institutions.

The 17 Sustainable Development Goals (SDGs) – Courtesy of the United Nations Development Program official website

Recently, there has been a push for increased blended finance due to a $2-3 trillion funding gap in the annual $6 trillion needed to realise the SDGs. According to Bloomberg, estimations suggest that public sources could provide half; however, the remainder would have to be raised from private investors.

As it stands, blended finance is a $50 billion market, however, to reach the goals for 2018, this figure needs to grow significantly.

Commenting on this, Chair of the Business & Sustainable Development Commission, Mark Malloch-Brown, said, “Action is needed end-to-end across the whole investment system to scale up the use of blended finance if we are serious about closing the funding gap for the Sustainable Development Goals.” Lord Malloch-Brown further indicated that receiving more private capital is essential to achieving the SDGs, especially regarding infrastructure in emerging economies.

In a similar vein, Jeremy Oppenheim, programme director of the Business & Sustainable Development Commission and founder of SYSTEMIQ, an impact-investment firm, indicated that collaboration needs to be significantly higher between public and private funds in order to ensure we – the international community – reach this year’s goals.

The Private Sector - Missing Piece of the SDG puzzle - OECD official website

In their recent paper titled “‘Better Finance, Better World,”, the’ Blended Finance Taskforce suggested that the money needed is easy to attract if we use the right policy. According to the report, most of the money needednecessary, the $2-3 trillion, is needed required for sustainable infrastructure projects in emerging markets, which are usually seen as too risky for conventional investors.

Using the public funds to better improve the infrastructure and improve the surroundings for the private sector will, according to the report, attract private investment by mitigating the risks that they are usually scared of, leading them to give back to the emerging market in which they invest. This will create a win-win situation for both investors and global development.

Furthermore, the Blended Finance Taskforce also called on countries in the developing world to allocate some of the funds towards infrastructure that would increase resilience and enable a higher level of disaster risk reduction (DRR), a view that Practical Action also emphasises. For the taskforce and Practical Action, it is vital for the developing world to be ready for climate change-related disasters or any other man-made disasters in order to both reduce their rebuilding costs and attract foreign direct investment (FDI), which would in turn increase the private sectors’ contributions to developing these countries to maintain their presence in them.

In statements to Egypt Today, policy paper contributors to Practical Action have confirmed that Practical Action is adamant on about pushing for more stable technology, which they translate to be infrastructure and access to water, electricity and other vital services, amongst other things, in developing countries.

Despite the Blended Finance Taskforce concluding that the market for blended finance has already doubled in size over the past five years, the taskforce is calling for leadership to develop the blended finance action plan to achieve the level of contribution and engagement needed. This, as United Nations (UN) research has suggested, will ensure better international development.

Turning to Egypt, it becomes clear that Egyptians have been contributing to the country’s development long before the term ‘Blended Finance’ was coined. Starting from schools, to factories, to import and export firms, all has done their part in helping the country develop.

Turning back to the more conventional blended finance we see two very important examples from holding companies in Egypt: Qalaa Holdings Citadel Capital) and Caron Holdings. Qalaa Holdings has mobilised millions of USD to development finance institutions. Likewise, Basel eEl- Baz’s Caron Holdings’ USD 10 billionnbillion Tahrir Petrochemical Complex is doing the same thing.

Moreover, oil companies and renewable energy companies in Egypt are currently taking part in the same thing, according to Enterprise, although they do not seem to advertise it.

Turning toIn smaller-scale blended finance, we can look at smaller companies and private school and universities in Egypt. For example, the Modern English School, Cairo (MES) and Malvern College, Egypt have, since their foundation, been a pioneers in giving back to the community within which they exist. Taking MES as an example, the school raises money every year for the renewal of public schools.

They also collect winter clothes, toys for children and blankets for Upper Egypt, as well as many more causes. They school focuses on poverty, improving education in Egypt and reaching equality, all of which are SDGs.

Likewise, Malvern College, Egypt, despite being relatively new, has also taken part in giving back to the community through collecting money, which is donated to the appropriate developmental causes, and also through giving away Shoe Box gifts. This, although not the conventional understanding of blended finance,finance is still a type of blended finance, as the term leaves room for the funds to be given through different means, not just money.

Overall, it seems that blended finance is a God-givenviable way out of the fund gap that the international community is currently facing. However, it is important to remember that blended finance is not only about money in billions or money in general. Blended finance can be a land given to SDGs, clothes donated, houses granted or anything that will enable the world to move forward towards achieving its development goals.



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