Blended Finance for Global Health: Summary of a Policy Roundtable


Blended finance – the strategic use of public and philanthropic financing to catalyze private sector investments1 – has been the subject of increasing attention in development and global health, including by the U.S. government. Last year, Congress and the White House agreed to create a new government agency (the Development Finance Corporation, DFC) focused on blended finance and private sector investment, USAID has instituted policy changes to support of more private sector engagement, and the agency recently released a blended finance roadmap for global health. However, growing excitement in this area has not always translated into consistent action, and many remain unfamiliar with how blended finance works and what its potential is. Though we have seen new blended finance projects in health launched over the last few years, the health sector still comprises a small proportion of the blended finance portfolio globally. In the past only a small percentage of U.S. blended finance support focused on the health sector and overall funding amounts for blended finance are small compared to traditional assistance, raising questions of how global health will fit within U.S. blended finance efforts going forward.

Blended finance – an emerging strategy to catalyze private sector investment in low- and middle-income countries – could bridge the gap between available financing and estimated need. A @KaiserFamFound roundtable dug into key questions.

To examine this issue further the Kaiser Family Foundation held a policy roundtable in February 2019 with a group of stakeholders and experts. The discussion focused on the role of the U.S., the potential and the challenges of blended finance for global health, and recommended next steps. This brief provides some background on blended finance and global health, and summarizes key points from the discussion.

Key Messages from the Roundtable Discussion

1) Blended finance is likely to play an increasing role in global health as countries’ health and private sectors mature, governments look for ways to finance ambitious universal health coverage goals, and traditional donor support for global health remains level or even declines.

2) The U.S. government is poised to increase markedly its use of blended finance for global health, with leadership from USAID and, potentially, the DFC.

3) Only a small proportion of overall blended finance deals have focused on the health sector in the past, but global health institutions do have a track record of engagement with the private sector, and could be doing more in this area.

4) Blended finance holds great potential for global health, due to:

  • growing excitement and interest among stakeholders;
  • existence of mutually agreed upon principles and best practices;
  • the prospect that modest amounts of USG development funding can be used to leverage much greater amounts of private sector investment and expertise for health systems;
  • the flexibility of blended finance, which can be can be targeted and scaled as warranted;
  • the ability to draw lessons from other sectors with more experience in blended finance;
  • policy changes and leadership at agencies that enable more support for blended finance.

5) Using blended finance approaches face a number of challenges, including:

  • difficulty in linking health needs with the set of actors best positioned to address those needs;
  • potential for increased misuse of funds and corruption without adequate oversight;
  • a perception among some that health should be a public, not private, responsibility;
  • possible negative distortionary effects of greater private engagement in health systems;
  • achieving the market-competitive returns necessary to attract large-scale investors for scale-up;
  • crafting approaches that address health needs of the poorest and most vulnerable communities;
  • fostering and navigating the additional shifts in policy, staff training, and program approaches that would be required at U.S. agencies to implement blended finance more;

6) Steps the U.S. and other stakeholders can take to further support blended finance include:

  • Recognize that blended finance is not a magic bullet, so be realistic and align expectations among stakeholders regarding investment returns, impact on health outcomes, upfront costs, and other aspects of blended finance deals;
  • Focus on simplicity as much as possible;
  • Foster more communication and collaboration between USAID and the new DFC;
  • Build USAID staff capacity and understanding of principles and best practices, including disseminating lessons from the agency’s roadmap on blended finance for global health;
  • Build partner government capacity to oversee and monitor private sector involvement;
  • Build relationships and trust by creating a “community of interest” for stakeholders, taking advantage of the U.S. role as a trusted partner in many countries to serve in the role of convener.


There is a large gap between the amount of development financing available in low- and middle-income countries and estimated need, with the United Nations estimating that countries need $2.5 trillion in additional funding to achieve the Sustainable Development Goals (SDGs) by 2030. Development institutions and donor nations are increasingly looking at blended finance as a set of approaches to catalyze more private sector investment in development, and a way to help bridge the funding gap. According to the OECD at least 17 Development Assistance Committee (DAC) donors use blended finance in one way or another, and between 2012 and 2015 private capital mobilized through blended finance increased from $15 billion to $27 billion, a 22% annual increase over those three years. All major multilateral development finance institutions such as the World Bank, International Finance Corporation, and Asian Development Bank, have expanded their initiatives in blended finance. In addition, a blended finance working group now brings these institutions together for regular meetings and has worked to develop common principles and best practices.

What is Blended Finance?

Blended finance can be defined as the “strategic use of public or philanthropic resources to mobilize new private capital for development outcomes.” In global health, this refers to using public sector funding (including foreign assistance) in ways that help overcome barriers to private investments in health care systems in low-and-middle income countries – the “blended” aspect refers to this mixing of public and private investment.

A few examples of the kinds of mechanisms and tools of blended finance include:

Credit guarantees and de-risking: Public funding used to provide guarantees or insurance, which can reduce the investment risk faced by private investors and/or improve the expected returns from an investment in a health-focused project.

Development impact bonds: result-based financing instruments that bring together public and private funding, and link payouts to the attainment of pre-determined, desired outcomes.

Debt buy-downs: public funds used to pay part or all of the principal or interest on a loan, contingent on achievement of pre-determined milestones or outcomes.

For further information and discussion of other types of blended finance mechanisms and approaches, refer to the list of resources at the end of this document.

Sources: USAID’s Blended Finance Roadmap; Convergence.

Just as with development finance overall, the global health sector faces significant funding challenges. The World Health Organization (WHO) estimates at least $134 billion in additional funding will be needed annually through 2030 to achieve the health-related SDGs in low- and middle income countries. With the amount of global health donor assistance stagnating and the private sectors in many low-and middle-income countries (LMICs) growing and maturing, there is increased interest in blended finance approaches for health as one way to help societies meet their health funding needs.

Still, the health sector has comprised a relatively small proportion of the blended finance landscape to date. Most blended finance deals over the last several years have been in other sectors, in particular energy and renewables, financial services, agriculture, and infrastructure. According to a 2018 Convergence report, just 5% of blended finance deals for LMICs between 2005 and 2017 were in the health sector, though due to the larger average size of health deals, health comprised 16% of total amount of blended finance capital flows.

U.S. Government and Blended Finance

There has been a marked trend toward greater U.S. support for and adoption of blended finance in foreign assistance. In 2018 a new, $60 billion U.S. government blended finance institution called the Development Finance Corporation (DFC) was created, and is scheduled to begin operations in October 2019. Organizational plans for the DFC describe how it will absorb existing U.S. blended finance activities (such as the Overseas Private Investment Corporation, OPIC and the Development Credit Authority, DCA), and enhance the U.S. ability to employ blended finance for development. The DFC has been designed to provide greater flexibility, access to more capital, and a broader set of financing tools to leverage private investments in development compared with previous U.S. blended finance efforts. It is worth noting that in the past, health has not been a major focus for OPIC (for example, in 2016, just 3% of OPIC’s portfolio was focused on “Health Care and Social Assistance.”); the extent to which the new DFC will engage in health-focused investments is not yet clear.

At USAID, Administrator Mark Green has emphasized the importance of the private sector, and blended finance in particular, for the mission of his agency. In 2018 USAID released a new private sector engagement policy, which outlines the agency’s vision on how its role will shift going forward. The policy notes U.S. assistance makes up a small and declining proportion of financing in LMICs, while private investment makes up a large, growing proportion. According to one analysis, the proportion of financial flows to developing countries from private capital grew from 29% in the 1960s (at USAID’s founding) to 84% in 2016. USAID presents this as an opportunity to re-think its role, moving away from the direct grant assistance model to a more catalytic model that “crowds in” private and other investment for development and sets countries on a “Journey to Self-Reliance”. The agency has already begun to put in place organizational changes meant to grow its engagement with private sector, and promises more such changes going forward.

According to USAID staff, existing funding authorities at the agency already allow a fair amount of flexibility to implement blended finance approaches, but to date these authorities have been little used. Even so, there are already examples of blended finance approaches for health supported by USAID. In late 2017 the agency successfully debuted its first ever development impact bond, which focuses on maternal health in India. Earlier this year, USAID’s Center for Innovation and Impact (CII) released a report titled Greater than the Sum of its Parts: Blended Finance Roadmap for Global Health, which outlines a rationale and a path for USAID staff and missions to further expand their use of blended financing approaches. The report provides step-by-step guidance for blended finance deals in global health, from identifying country archetypes, defining the health issue and financing challenges, to selecting the most appropriate and relevant blended finance instruments to address the issues.

Roundtable Discussion

Given the growing interest in the topic and the evolving global and domestic policy landscape, the Kaiser Family Foundation brought together a group of stakeholders and experts for a roundtable discussion on blended finance for global health and the role of the U.S. Participants included representatives from the U.S. government, financial firms, private companies, multilateral development finance institutions, non-governmental organizations, implementing organizations, and academia.

The group was asked to provide opinions focused on three main questions:

  • What is the potential of blended finance for global health?
  • What are the main barriers and challenges to using blended finance for global health?
  • What steps can the U.S. and others take to unlock the potential for blended finance and overcome the challenges?

The remainder of this report provides a summary of the main points to emerge from the discussion.

Blended Finance has Potential…

Participants felt blended finance approaches hold a lot of promise as a way to help countries address health needs, fill finance gaps, and accelerate progress toward meeting global health goals. The participants provided a number of reasons why there might be great potential at the moment, including:  

  • Participants felt there is a certain level of “excitement” and “momentum” behind blended finance in health right now. For one, many private sector investors are eager to engage in the health sectors, as they see opportunities in an underserved market with great potential, and the ability to generate returns while also benefitting societies. Donors expect stagnant or even declining budgets for global health going forward and need to look at different and innovative ways to leverage their assistance. Government leaders in LMICs understand they face serious gaps in providing health services to their populations and are looking for ways to inject new resources into their efforts and spark progress.
  • It was noted that the economies and private sectors in LMICs are growing and maturing, which means there is an increasing potential to adopt these approaches within many countries. As governments seek to achieve the ambitious goals of universal health coverage, many felt blended finance is likely to play an increasingly important role in building health systems.
  • When structured properly, blended finance approaches can effectively leverage assistance to bring in additional financing and expertise from the private sector. Using these approaches, relatively small amounts of U.S. assistance can go a long way to drawing in significant amounts of private investment, which increases the investments in global health and helps fill gaps.
  • Participants noted that blended finance approaches apply to a broad set of areas of health. There are examples and opportunities for blended finance deals that support research and development of new health technologies (such as drugs, vaccines and diagnostics), building physical health infrastructure such as clinics and hospitals, growing the health workforce through education and training, strengthening health supply chains, as well as reducing the financial or other access barriers that individuals and communities face in trying to access health care.
  • There are multiple options for structuring blended finance. They can be tailored, directed, and scaled based on the identified needs and desired outcomes. Instruments can focus on a specific disease (e.g., a microfinance loan facility in India that helps tuberculosis patients cover out-of-pocket costs of treatment) or broader primary health care (e.g., a working capital fund that faith-based health organizations in Tanzania can draw from to support delivery of health services). They can be scaled to address the needs of specific locales and populations (e.g. the maternal health development impact bond in Rajasthan, India), or population-level health needs (e.g. private sector investments as part of Indonesia’s expansion of its national health insurance scheme).
  • Global health can benefit from lessons drawn from other sectors with experience in blended finance deals. The sectors incorporating most of the blended finance activity over the last several years have included energy and renewables, small- and medium-enterprises and business development, infrastructure, and agriculture. While the needs across these discrete sectors vary widely, the approaches and underlying principles and structures of blended finance deals are broadly applicable across all of them, so lessons can be transferred from sectors to another.
  • USAID and other U.S. agencies are well-positioned to champion greater use of blended finance for global health. USAID staff already have deep expertise in the health systems of partner countries and long-standing relationships with key stakeholders. In addition, there is a mandate from USAID leadership for the agency to move more robustly into active engagement with the private sector, as evidenced by new policies and procedures being implemented. The creation of the DFC also is an indication that Congress and Administration more broadly are very supportive of blended finance approaches, and hope to foster the use of these approaches in global health and other sectors. Further, USAID already has a history of successful blended finance deals, including the creation of the maternal health development impact bond, which demonstrate some of the possibilities for the agency.
  • Global health has a history of working with the private sector that can be built upon. Public-private partnerships are already a core aspect of global health, with examples from Gavi (which draws in support from the private sector through its innovative financing approaches such as the International Finance Facility for Immunization and the Advanced Market Commitment for pneumococcal vaccines) to the Global Fund, which has called for greater use of innovative financing and blended finance to support its work going forward. Expanding blended finance for global health will mean expanding on the successes and experiences of past efforts while tapping into new resources and new partnerships.
…though faces Challenges and barriers

Participants also pointed out a number of important challenges for blended finance and global health, including:

  • Making links between a health need and the set of public and private actors able to address that need can be difficult. Health systems and financial sectors are complex and feature disparate sets of actors who may not have a history of working together, or even visibility of one another. A successful blended finance approach requires bringing these often disparate actors together to work toward a common goal, and it may be hard for a single actor to be in a position to understand the health and financial problems involved, and also know the relevant public and private actors needed to solve the issue, and begin a dialogue.
  • Some participants worried about blended finance deals opening the door for greater misuse of funds and other corruption in the absence of effective public oversight and regulation. Fraud and abuse are a feature of all health systems and both public and private actors but blended finance deals, which can potentially involve large amounts of new, private investments in health, need to be created with relevant principles and safeguards, and monitored closely to avoid undue corruption and waste.
  • Expanding the roles for private capital and for-profit companies – which emphasize return on investment rather than health outcomes – can be perceived as in conflict with standard approaches in global health. Many believe health should be a public sector responsibility, and do not support an increasing role for the private sector. This perception and potential resistance to increased private sector investment adds a set of political, social, and communications challenges to putting together blended finance deals for global health, on top of the technical considerations.
  • To date, blended finance deals for health have involved relatively small amounts of private financing, with investment coming mainly from impact investors. Greatly expanding private investment in health will likely entail tapping into commercial banks and other large-scale investors, who will expect risk-adjusted returns on any blended finance investments to be consistent with the returns available in the open marketplace. Market-comparable returns may be difficult to achieve for global health projects, making it more difficult to bring blended finance to scale in the health sector.
  • Developing measures of success for blended finance deals can be difficult. Investors contributing capital will be primarily interested in investment returns, while governments and donors involved will be focused on health outcomes. Clearly defined metrics agreed upon by all parties, along with Independent and trustworthy outcome monitoring, is needed but can be challenging.
  • Participants warned against seeing blended finance as a “magic bullet”; rather, it offers a set of tools and approaches that may or may not be applicable in different situations. Serious consideration of the issue, the context, and the effectiveness of blended finance in addressing the issue at hand are essential.
  • Within global health, sector specific “stovepipes” for funding can hinder the use of blended finance approaches, especially those efforts at building broader health system capacities instead of focusing on a specific disease or health outcome.
  • Making blended finance deals work effectively to address the health needs of the poorest, most vulnerable populations can be difficult. There may be an inverse relationship between the scale of health needs and difficulty of reaching a population, and the investment returns on projects that address those populations’ needs. This indicates there may be a limit to how for the blended finance model may go in some cases, leaving traditional public financing/donor grant financing as the preferred approach.
  • Some participants worried about potential unintended negative consequences. Incentivizing private sector solutions to achieve short-term health goals could distort health systems toward privatization, potentially hindering progress toward broader, more equitable universal health coverage.
  • Implementing a pivot in U.S. global health programs toward greater engagement with the private sector and blended finance entails a sizeable shift in thinking and approach by staff in D.C. and at overseas missions. Traditionally staff have not thought about delivering health solutions in this way, and many have little or no experience in working with private sector actors. Therefore, fostering and navigating this shift is a long-term challenge that likely requires sustained leadership and potentially disruptive changes to training, guidance, and personnel policies.
Unlocking the Potential and Overcoming Challenges

Participants discussed a number of steps that U.S agencies and other stakeholders could take to help unlock the potential of blended finance for global health, and overcome the barriers and challenges identified. These included:

  • Always keep in mind that blended finance approaches need to be used strategically where they make sense, address the core issue at hand, and provide a benefit compared with an alternative approach. Participants warned against putting together blended finance deals just “because you can.”
  • Be realistic and align expectations among all stakeholders regarding investment returns, impact on health outcomes, upfront costs, and other aspects of blended finance deals. Sometimes returns, impacts, or other aspects of blended finance deals can be oversold, so participants suggested taking care when making claims without proper evidence to back those claims. Being open and transparent also helps partners go into the deal with common shared understanding.
  • Focus on simplicity as much as possible. Sometimes blended finance deals can be overly complex, so making sure the approach is as straightforward as possible is likely to result in a more efficient use of scarce foreign assistance funds.
  • Foster more communication and collaboration between U.S. government blended finance actors such USAID and the new DFC. Participants felt that regular communication between these two key actors in blended finance can help build capacity, share lessons, and identify areas for collaboration. This is especially important as the DFC is in the process of standing up in the coming months and years.
  • Learn from and engage other development finance institutions with experience in blended finance, and take note of and incorporate the mutually agreed upon international principles and guidelines for blended finance.
  • Train and build staff capacity at USAID on principles and best practices, including disseminating the lessons contained in the agency’s new roadmap on blended finance for global health. This capacity-building within the agency has to be sustained, and empowered by leadership in order to be successful.
  • Make investments to help fill gaps in country and donor capacity to craft and oversee blended finance and the expected future growth in private sector involvement with LMIC health systems.
  • Build relationships and trust among key stakeholders by creating a “community of interest” bringing together U.S. agencies, private investors, country partners, and others. Take advantage of the U.S. role as a trusted partner in many countries to serve in the role of convener in support of blended finance.

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