Reinforcing private capital mobilization in Africa through blended finance

Despite notable advances over the past decade, such as the increased use of credit guarantees, first-loss mechanisms and targeted funding, Africa still receives a disproportionately small share of global climate finance. The launch of the Sevilla Platform for Action and increased cross-sector collaboration signal a new era of opportunity. If adequately supported, these efforts could shift how private investment is mobilized to meet Africa’s climate and sustainable development goals.

At the Fourth International Conference on Financing for Development (FFD4), held July 2025 in Seville, Spain, global leaders reaffirmed the private sector mobilization goal set at the 2015 conference in Addis Ababa, Ethiopia. At the heart of the discussions was the urgent need to close an estimated $4 trillion annual financing gap to achieve the UN’s sustainable development goals (SDGs).

According to the UN’s “Financing for Sustainable Development Report 2024,” Africa represents about 30% of this gap. However, estimates for the annual funds required to meet the SDGs can range from a few hundred billion dollars to $1.3 trillion, depending on the methodologies used and scope of investment considered (see, for example, the UN Development Programme’s “Africa Sustainable Development Report,” the UN Economic Commission for Africa, the UN Statistics Division’s “Sustainable Development Goals Report” and the Climate Policy Initiative).

Regardless of the estimate, it is evident that current finance flows are insufficient. With official development assistance budgets shrinking globally, the spotlight is on structural reforms, as well as the mobilization of enhanced domestic resources and private capital, to help meet climate finance targets and broader SDG commitments.

FFD4 built on the legacy of the 2015 conference by advancing a comprehensive global agenda focused on mobilizing private sector investment, particularly through blended finance — the strategic use of public and philanthropic funds to catalyze and de-risk private investments at scale. A coalition of governments, international partners and private sector groups unveiled an ambitious action plan at FFD4 to ramp up private capital flows in emerging and developing economies — with an emphasis on the least developed countries, as defined by the UN — and Africa. The plan calls for developing country-specific, scalable blended finance models that address unique contexts and needs.

Despite its promise, blended finance has mobilized only a small fraction of Africa’s vast investment requirements. According to Convergence, a global blended finance network, the continent accounted for 40% of global blended finance transactions in 2024 and about a third of the volumes transacted, reflecting smaller average deal sizes. That same year, blended finance represented annual financial flows of between $6 billion (using Convergence’s narrow definition, which includes only blended transactions with a concessional funding component) and $15 billion (using the Organisation for Economic Co-operation and Development’s broader definition, which includes transactions with no concessional funding). While significant, these figures are far below the continent’s climate and development financing needs, which exceed a trillion dollars.

The successes since the 2015 conference include enhanced capacity building, the establishment of strong public-private partnerships, improvements in deal pipelines, and increased recourse to innovative instruments such as credit guarantees, first-loss risk-sharing mechanisms and targeted concessional financing, which have fostered greater investor confidence. For example, concessional guarantees deployed by multilateral development banks have enabled risk-averse institutional investors to enter sectors such as renewable energy and agricultural finance, which were traditionally considered too risky.

Nonetheless, numerous challenges remain, including weak domestic institutional frameworks, perceived and real investment risks, and a lack of first-loss capital. Local capital markets are often illiquid and fragmented, limiting the availability of long-term financing options. A lack of harmonized standards around blended finance structures also inhibits scale. Furthermore, small average deal sizes reduce transaction efficiency and investor appeal, while insufficient data transparency complicates risk assessment and due diligence. Regulatory barriers are also often mentioned by investors. Crucially, large institutional investors continue to show low appetite for engaging heavily in emerging and frontier markets, including Africa.

No single initiative will revolutionize Africa’s blended finance landscape, and the persistent shortage of first-loss concessional capital will continue to limit growth. However, the synergy among global efforts represents meaningful progress. Together, they offer the foundations for renewed momentum in blended finance. If this momentum continues, private capital could be significantly mobilized to address Africa’s climate and sustainable development financing deficits over the coming decade.

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