Risk management and other support structures in blended finance for agriculture
Blending aims to help private financiers achieve an acceptable return given the risk of financing (a loan, bond or investment). That can be done by simply mixing capital (if an investment has a return of 12%, and the public financier is willing to accept a return of only 6% on its half of the investment, then the private financier can have a return of 18% on its half). But more often, it also involves the absorption of selected risks by the public financiers and other service providers (such as insurers). Furthermore, public financiers justify their involvement by their impact – which needs to be assessed, often independently (e.g., to determine that a project indeed alleviated poverty or improved climate change resilience). And in the particular case of agriculture, because it is so important for the success of the financing that farmers are profitable, the support of NGOs and others who can help build farmers’ productivity and revenues is often critical. The conference will discuss these various support structures, where there are still gaps that can be addressed through public and private sector action, and what the international community, governments and the private sector can do to fill the gaps.