Attracting private capital
Blended finance is the use of development finance or philanthropic funds to attract private capital. As NWP Finance Manager, Rick Elmendorp, says, “we are running out of time to reach SDG 6. As public and additional concessional funds are insufficient to achieve this goal, clever solutions are needed to attract private capital.” With this in mind, the Netherlands Water Partnership (NWP) and IRC recently hosted a session on the topic at the International Water House in The Hague, the headquarters of both organisations. Aqua for All, IRC, VEI, World Waternet, Waste, and Climate Fund Managers – all members of NWP – attended the session.
Together, these organisations have a vast amount of knowledge, expertise and a large network. These can be used to strengthen the enabling environment, support water and sanitation companies and organisations, and co-finance the sector through funds or otherwise. By collaborating, connecting expertise and using blended finance models they aim to attract commercial financers as well as development finance institutions to help reach SDG 6.
The idea of hosting this session was conceived as a means to connect parties that could increase the efficiency and impact of various Dutch funded organisations as well as connect them to relevant stakeholders such as the Dutch Directorate General for International Cooperation and the Dutch Inclusive Green Growth Department. As part of the session, participants reviewed some successful examples of blended finance solutions, including the following.
- Climate Fund Managers’ Climate Investor Two, which offers an integrated funding solution, comprising a Development Fund, Construction Equity Fund and a Climate Credit Fund.
- Aqua for All’s de-risking solutions to unlock private capital.
- KIFFWA, the Kenya Innovative Finance Facility for Water, a project development facility that provides early-stage funding and expertise for water initiatives in Kenya.
“It was great to find a time with NWP members to discuss how our approaches can be part of the pieces of a greater puzzle,” says Elmendorp.
Top 3 shared ideas
- It is crucial that developing countries’ governments create an enabling environment that allows institutions, companies and service providers to operate in a business-like manner. This requires transparent and adequate regulation, the professionalisation and commercialisation of the sector, and the private sector’s input and funding.
- A knock-on effect is that donors, international and Dutch funded organisations, need to change their approach. Rather than just granting subsidies or providing sovereign loans, they should also enable the sector to become more professional and commercial, and able to raise private capital.
- These Dutch funded organisations already have a vast amount of knowledge, expertise and a large network. These could be used to strengthen the enabling environment, support water and sanitation companies and organisations, and co-finance the sector through funds or otherwise. The next step is connecting this expertise and using blended finance models to attract commercial financers.