Since 2018, the United Nations Capital Development Fund (UNCDF) and the Organisation for Economic Co-operation and Development (OECD) have collaborated on research and knowledge on blended finance in the least developed countries (LDCs), with the aim to contribute to the policy debate on blended finance by developing empirical evidence and original research on how blended finance can be best used in LDCs to mitigate risk and attract investment for the Sustainable Development Goals (SDGs).

The Blended Finance in the Least Developed Countries, 2020 report is the second joint UNCDF-OECD report. It builds on UNCDF research and experience, OECD data and analysis, and a series of guest contributions written by a varied range of blended finance experts. The research and analysis in this report was further informed by multiple roundtable consultations held virtually during the spring of 2020. The consultations were held with a wide range of stakeholder groups, namely blended finance experts and practitioners (14 April 2020), anglophone LDCs (14 May 2020), francophone LDCs (18 May 2020); and United Nations missions in LDCs (18 May 2020).

For UNCDF, the report aligns with its mission to mobilise additional finance for the LDCs to support their social and economic transformation. The report analysis informs UNCDF’s work to provide last mile finance models that unlock public and private resources to reduce poverty and support local economic development. UNCDF manages a portfolio of risk-tolerant catalytic loans and guarantees on its balance sheet, which aim to de-risk early-stage enterprises and projects in LDCs to enable them access to additional capital. This support for “missing middle” finance in LDCs fills a unique niche in the development finance architecture. UNCDF now aims to fully capitalise its LDC investment facility to scale up this support, in its capacity as an official international support measure for LDCs. UNCDF is also establishing technical assistance facilities for two blended finance vehicles it helped establish, the BUILD Fund and the International Municipal Investment Facility, to help local partners assess, identify and prepare investments.

This report contributes to the overarching mission of the OECD Private Finance for Sustainable team to build the evidence base and provide policy advice on blended finance, as well as promote dialogue between the members of the Development Assistance Committee (DAC) and the private sector, including through the OECD DAC Community of Practice on Private Finance for Sustainable Development. This report also informs the work on blended finance, including on the OECD DAC Blended Finance Principles and Guidance, adopted by DAC members in September 2020, which will be updated in the future.

This report has been developed at an exceptionally critical juncture when LDCs are facing unprecedented pressures stemming from the COVID-19 crisis. As the Istanbul Programme of Action (IPoA) for the LDCs is coming to end in 2020, the United Nations General Assembly agreed to convene the Fifth United Nations Conference on the LDCs (LDC5) in Doha, Qatar, in January 2022. This report aims to contribute to and inform the LDC5 preparatory process and, eventually, the new Programme of Action for LDCs.

The findings and Action Agenda in this report can also contribute to the next steps in the United Nations initiative on financing for development in the era of COVID-19 and beyond, which has called for increased efforts to promote private investments in the SDGs in developing countries, including through greater support for innovative blended finance approaches in LDCs (UN, 2020).