Experts Suggest Blended Finance for Social Investment Funding

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Sunday Ehigiator

Experts at the recently held impact investment symposium, organised by Impact Investors Foundation (IIF) in Lagos, have suggested blended financing as a tool in addressing several impactful social and infrastructural deficiencies in Nigeria.

In his welcome address at the event, the Executive Director, Africa Capital Alliance and Chairman, IIF, Engr. Afolabi Oladele said blended finance would enhance the building of the ecosystem for successful impact investing in Nigeria.

According to him, “To achieve the United Nations (UN) 17 Sustainable Development Goal (SDGs), a significant scale-up of investment from diverse sources is required.

“The UN estimated that the annual funding needed to achieve the SDGs by 2030 is about $4 trillion, much greater than the current aggregate SDG focused funding of $1.5 trillion from domestic and international sources. The $2.5 trillion gap dwarfs official development flows and philanthropic commitments, which is currently $350 billion by over five folds.

“In Nigeria, the estimate by UNESCO puts the financial requirement to achieve SDG 4 alone, which deals with equitable quality education for children, at about 434 billion per annum between 2015 and 2030.

“Nigeria’s total federal budget for 2018 is $29.9 billion, with education accounting for only seven per cent of this amount. Sub-national governments have even smaller resources at their disposal to fund their budgets.”

Continuing, he said: “This implies that, if public resources are solely depended on for implementing quality education goal, then Nigeria already faces an annual financial gap of over $32 billion, which is more than its annual budget. It therefore means that to achieve the SDGs in Nigeria, a significant scale-up of investment is required and the involvement of the private sector is critical.

“Blended finance is the strategic use of catalytic capital from public and philanthropic sources to mobilise additional private sector investment. It has been presented as an important approach in engaging the private sector for financing the gap in SDGs funding.”

In her keynote address, the President/CEO, Calvert Capital, Washington Dc, Jennifer Pryce said, “If you Goggle the totality of the capital market, it is $270 trillion. To move that money into the community is the goal. How do we do that? What we have seen is, there exist two level of intermediation that helps money move out of the capital markets into the communities.

“There is a certain group called ‘Capital Raising Intermediaries’; they solve what investors need. Investors needs around liquidity, around rescue returns, around volume, and diversification.

“And there is Capital Deployment Intermediaries. These are non-profit organisations or intermediaries that are working close to communities that are sourcing for capital moves, customising capital needs for the market that they are investing in. They provide technical assistance ensuring that those communities, those projects are ready for capital.

“What we observed is that, for both level of intermediation to successfully unlock the private capital of $270 trillion I mentioned earlier, sitting in the capital market and get it to the communities, there are strategies, and one of them is blended finance.

“Blended finance is simply taking all the capital generally provided by philanthropy or public resources, or development financial institutions, and using that money to bring the private sector to the table, to bring in the capital money, and investing it into something different.”