By Jonathan M Clarke, Marketing & Communications Manager, MzN International | Human Planet
Development finance is undergoing significant transformation, with the landscape evolving rapidly. In our recent 2026 Donor and Investor Funding Outlook webinar, we examined critical questions regarding investability and bankability, including strategies for organisations to attract private capital as traditional grant funding diminishes. For locally led NGOs, this transition represents both a challenge and an opportunity to reconsider how impact is structured and financed. Given the United Nations’ warning of a $4 trillion shortfall for the Sustainable Development Goals, it is evident that public funding alone is insufficient.
The emergence of blended and impact finance raises important considerations for those working on the frontlines of development. This analysis underscores the growing significance of blended finance, especially for locally led organisations. Blended finance leverages public or philanthropic funds to attract private investment in developing countries. By utilising concessional capital to mitigate risk, it increases the likelihood of commercial investor participation. As a result, projects that are traditionally difficult to finance, such as water, energy, and educational initiatives in rural communities, become viable investment opportunities, thereby creating new funding approaches.
These approaches are especially relevant for medium-sized, locally led organisations positioned between large international NGOs and small community groups. Although these organisations often have strong implementation capacity and deep contextual knowledge, they typically lack the capital and internal resources to structure projects as investable opportunities. For instance, a respected local health NGO in East Africa may face grant fatigue as traditional donors become more cautious, while investors remain hesitant due to perceived market risks. In these situations, blended finance does not require these organisations to create investable vehicles themselves. Instead, it uses appropriate financial structuring and partnerships to de-risk initiatives, allowing their local expertise to be supported by patient and catalytic capital. This model aims for financial returns while also prioritising social impact, offering a more sustainable option than relying solely on grants. A clear understanding of blended finance mechanics is crucial. It combines various sources of capital to achieve shared objectives, typically beginning with catalytic capital from donors or foundations. Instead of just seeking donor funding, organisations can invite others to co-invest in projects that aim for both social impact and financial stability.
This new way of thinking encourages teamwork and treats donors as partners with shared goals. It also helps local organisations take more control over their financial future. In the energy sector, blended finance has helped bring clean energy to places where people have been displaced. In the past, humanitarian groups relied on costly, polluting diesel generators funded by short-term grants. (NRC’s Capital Fund, 2024) With blended finance, organisations can switch to solar energy. They all share the goal of building sustainable, effective solutions. For local NGOs running clinics or schools, this approach means they can access good infrastructure without needing to pay for it all upfront.
While the theory behind blended finance is strong, real-world results also show it works. The Global Investors for Sustainable Development Alliance has shared several success stories, like the Medical Credit Fund. This fund helps small- and medium-sized health businesses in Africa, which often struggle to secure bank loans because they are seen as risky. By using public funds to take on the first risk and adding private capital, the Medical Credit Fund helps clinics secure loans, buy equipment, and expand their services.
The Organisation for Economic Co-operation and Development has noted that blended finance might miss the poorest countries, as most private capital flows to middle-income markets. (OECD, n.d.) To use blended finance in fragile places, there needs to be more willingness to take risks and more concessional capital to encourage investment. For example, in Sierra Leone, concessional layering helped start a healthcare project by lowering the risk for private investors. (British International Investment and Ecobank Sierra Leone sign a $25 million risk-sharing agreement to boost private sector growth, 2024) This shows that, with the right financial setup, successful projects can be achieved even in tough environments, and new markets can become attractive investment opportunities.
The 2026 Donor and Investor Funding Outlook shows that future success depends on taking an investment-focused approach. What story will your balance sheet tell in 2030? This question is a call to leaders to change how they think and guide their organisations toward sustainable growth. Asking for a leadership response can turn passive involvement into an active strategy.
This change does not mean giving up core values. In fact, it helps us keep them strong. Sustainable financing enables organizations to serve communities in the long term and reduces their vulnerability to changes in government aid. To make the most of their community trust and local knowledge, organizations need to invest in their own skills, build strong financial systems, and measure their impact as carefully as they track finances.
Blended finance is not a one-size-fits-all answer, but it is a strong way to help close the funding gap. It can turn billions in aid into the trillions needed for sustainable development.
Development work is increasingly based on partnership, shared risk, and mutual benefit, with local organisations leading delivery and design. The challenging questions raised at the Outlook event highlighted a growing understanding that complex issues require collective responsibility and co-created solutions. This collaborative approach was also clear in our recent webinar, where high engagement led us to schedule a follow-up session. Emphasising joint accountability and shared ownership is essential to involving more partners and ensuring solutions are developed together.
I encourage you to join the follow-up webinar with any questions or concerns you may have. You can register here. If you would like to discuss blended finance support directly, please reach out to jonathan@mzninternational.com.
References
Blended Finance Solutions for Clean Energy in Humanitarian and Displacement Settings. OECD. Blended Finance in Fragile Contexts. GISD Alliance. Blended Finance Best Practice Case Studies. IFC. Blended Concessional Finance: The Benefits of Transparency and Access. Convergence. State of Blended Finance.
