Convergence, a non-profit organisation headquartered in Canada, is a new platform initiating blended finance deals by connecting and supporting investors.
In her recent article, Joan M. Larrea, Convergence’s CEO, explains the importance of blended finance, and why Convergence is working to create more blended finance transactions with risk and reward characteristics to achieve sustainable development.
Convergence is a platform that connects and supports private, public, and philanthropic investors for blended finance deals in emerging and frontier markets
Prior to Convergence’s official launch early this year, the organisation arranged a discussion/panel/debate on 'Blended Finance for Agriculture' in 2015 in London. The common theme identified was the challenge of attracting and working with public funders. Deal sponsors must convince public funders that their funding is truly additional to private finance, and that their funding is used to attract private capital that would otherwise not be deployed. Given the technical complexity of these funds, substantial time and effort is also required educating public partners on where in the structure their capital sits and what returns they can expect. Furthermore, it is often difficult for public funders to provide financing that will eventually flow to private enterprises. A clear narrative, therefore, is required to detail how public funds will be used to address this market failure.
Even once public funders are on board, there are likely to be further challenges to be overcome. Each public funder has unique policy objectives that must be managed, and expectations around the speed in which funds are deployed must also be managed. Finally, some public funders require governance that is over burdensome which creates inefficiencies.