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Diversifying instruments to accelerate transitions concessional financing
To accelerate transitions, private sector and investor access to concessional resources is more and more integrated into international donors’ strategies: the resources they allocate to these activities is growing. For a number of years now, Proparco has seized this opportunity to blend concessional resources with market instruments to diversify and adapt its instruments to needs and to risk levels of the projects and enterprises it wants to finance and support while seeking additional and transformational impacts.
Group
Date of creation
Definition of blending
Principles
Principles for the good usage of concessionality – international references
OECD-DAC blended finance principles for unlocking commercial finance for the sustainable development goals
Adoption of common principles for blended finance in October 2017
"Blended finance is the strategic use of development finance for the mobilisation of additional finance towards the sustainable development goals (SDG) in developing countries" "Combining concessional finance from donors or third parties alongside DFIs' normal own-account finance and / or commercial finance from other investors, to develop private-sector markets, address the SDGs, and mobilise private ressources"
- serve development; - increase private-sector finance mobilization; - be adapted to local context; - strengthen transparency and impacts; - strengthen partnerships between private-sector actors and development actors. DFI enhanced principles for blended concessional finance in private sector projects
2013 (Principles) puis 2017 (Enhanced principles)
- additionality - minimum concessionality - business sustainability - business strenghtening - high standards
Proparco has access to various sources of concessional financing
Since 2015, Proparco has the “7 pillar” accreditation and is therefore entitled to manage the European Commission’s delegated funds. Proparco is currently implementing eight delegated funds, directly or in partnership with AFD and EDFIs, by means of facilities to be used in several financial operations.
Moreover, Proparco has also been accredited since 2016 to mobilize funds from the Green Climate Fund. This partnership represents a strategic opportunity for Proparco to further strengthen support it is providing to the private sector to transition to low-carbon.
The accreditations received from these institutions are a mark of recognition for Proparco. They are the acknowledgment of a capacity to efficiently appraise, implement and manage financings for a wide range of possible operations (in terms of the nature of instruments, risk-sharing and amounts). They positively reflect Proparco’s institutional capacities (banking institution, international mandate management), its technical capacities (fiduciary, oversight, human and logistical capabilities) and its global, thematic and geographic know-how. With the purpose of building an in-depth, global partnership with these entities, facilitating the mobilization of funds through capitalization and feedback from lessons learnt as well as making sure requirements on a very high level of accountability imposed by these delegating authorities are respected, a specific role and means were allocated as early as 2016 to Proparco’s unit in charge of technical assistance, which then became the TA and Resource Blending Unit.
Since 2019, Proparco is also in a position to mobilize funds coming from the French Government through grants and interest rate subsidies which it can use to provide differentiated funding for projects generating additional positive impacts. These different concessional resources are complementary and make it possible to supplement the incentive nature of its own financings thanks to the blending of resources.
Proparco’s operations using concessional resources require a specific analysis regarding the justification for the use of subsidies / concessionalities in favour of private-sector actors. This activity is guided by the doctrine memorandum on the use of concessionality validated by the Board of Directors of the AFD Group at the end of 2018, which complies with international principles and best practices in terms of blending, as formulated by the OECD or the MDBs/ DFIs Working Group on Blended Concessional Finance.
Between 2020 and 2022 Proparco, in line with its new strategy, aims to increase its capacity to mobilize concessional resources which will be used primarily for: • redirecting investment flows and private-sector finance towards sectors, products and services key to economic, social, environmental, territorial, digital… transitions, adding premiums and interest rate subsidies, where appropriate, in relation to the effort and additional impact achieved; • supporting our clients, where necessary, by means of technical assistance and funds to support (i) their progress towards better practices in terms of Corporate and Social Responsibility and (ii) their capacity to innovate, implement and support transitions; • the emergence of tomorrow’s actors and solutions (venture capital; social economy..) including within fragile countries, knowing that concessional resources make it possible to take on risk or innovative nature.
