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Blended finance: integrity and anti-corruption standards

Blended finance – the mixture of development funds with commercial finance to fund investments in low- and middle-income countries – has been hailed as a means of filling the finance gap between actual public spending and the resources required to pay for sustainable development. Drawing additional private sector funds into instruments with a development impact is a laudable goal. Yet even advocates of blended finance note the “inherent risk” of conflict of interest involved when mixing the logics of profitability and development (Pegon 2019). This Helpdesk Answer provides an overview of integrity principles, standards, and risks in this form of aid. Alongside frameworks such as the DFI Working Group’s Blended Finance Principles and the OECD-DAC Blended Finance Principles, other relevant anti-corruption safeguards include corruption risk management practices and due diligence processes, as well as obligations relating to anti-money laundering and financial sector regulations. Integrity risks can arise from a misalignment between mandates, incentives and accountability systems between entities involved in blending. Risk factors include opacity, complex networks of financial intermediaries and political exposure. A range of accountability mechanisms can help protect development funds from misuse when these are used to mobilise commercial finance and subsidise for-profit entities. These range from transparency measures, risk assessments and the establishment of grievance mechanisms.

3 November 2022
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Blended finance: integrity and anti-corruption standards

Main points

  • The participation of profit-driven actors in development work entails potentially novel integrity risks, while the complex financing arrangements and multi-layered governance structures involved in blended finance projects make managing transactions and monitoring results difficult.
  • Core principles for the use of blended finance have been established by development finance institutions and the OECD-DAC group.
  • Blended finance practitioners can draw on standards from both the public sector (such as aid effectiveness principles, corruption risk management practices and due diligence) and private sector measures (including anti-money laundering and financial sector regulations).
  • Corruption risk factors in blended finance instruments relate chiefly to widespread opacity, particularly with regard to financial intermediaries. In practice, blended finance projects are considerably less transparent than projects funded using other forms of official development assistance (ITUC 2016: 45).
  • Other integrity risks include the use of offshore financial centres, tied aid, lack of consultation with affected communities and misaligned incentives between the players involved. Where private sector entities manage concessional resources provided by public actors, conflicts of interest can be “particularly acute” (Pegon 2019).
  • Relevant accountability mechanisms include greater disclosure of project level data, robust risk assessments, stringent due diligence, grievance mechanisms and competitive procurement processes.

Cite this publication

Jenkins, M.; (2022) Blended finance: integrity and anti-corruption standards. Bergen: U4 Anti-Corruption Resource Centre, Chr. Michelsen Institute (U4 Helpdesk Answer 2022:15)

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About the author

Matt Jenkins is a Research and Knowledge Manager at Transparency International, where he runs the Anti-Corruption Helpdesk, an on-demand bespoke research service for civil society activists and development practitioners. Jenkins specialises in anti-corruption evaluations and evidence reviews, he has produced studies for the OECD and the GIZ, and has worked at the European Commission and think tanks in Berlin and Hyderabad.


All views in this text are the author(s)’, and may differ from the U4 partner agencies’ policies.

This work is licenced under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International licence (CC BY-NC-ND 4.0)