The Brief

The Brief: Blending capital to stretch public funding and crowd in local investors

ImpactAlpha · May 22, 2025

Greetings Agents of Impact!

In today’s Brief:

Blended finance on the precipice
Bridge fund for affordable housing in Brazil
Supplying informal retailers in Egypt
Community ownership for place-based revitalization

Featured: Catalytic Capital

Blended finance loses a big investor and some of its steam. The last few years may be remembered as the “before times” for blended finance. After 2023’s record-breaking year for mixed capital stacks and catalytic commitments in emerging markets, blended finance transactions last year fell by more than 20%, or nearly $5 billion. And that was before this year, when wealthy countries further cut their commitments to overseas development assistance, and the US government’s $40 billion annual outlay for USAID, one of the largest investors in blended deals, was vaporized. “It is beyond clear that we are on a precipice; how far we fall is up to us,” writes Joan Larrea of Convergence in the organization’s latest “State of blended finance” report. “As development aid constricts, the rationale for stretching the public dollar through blended finance will only grow.” The same goes for tapping local pools of capital. “With traditional sources of global blended finance flows under strain, the opportunity for local capital mobilization has never been greater or more critical,” the report states.

Risk off. Last year started strong, before global political and macro-economic volatility spooked investors, who tend to retreat from emerging markets at the first sign of trouble. In a tough environment, blended finance showed resilience, with the number of blended deals staying roughly on par with 2023. The amount of capital deployed through those 123 deals, however, dropped to $18.3 billion from 2023’s $23.1 billion. A bright spot: Median transaction size was up, hitting $65 million last year, even though the number of “whale” transactions – deals over $1 billion – fell to three from seven the previous year (for background, see “Blending billions: Lessons in catalyzing capital at scale for climate and development”). Those three deals accounted for 25% of all blended finance commitments last year.
Pooling capital. “The shift toward larger deals is promising,” states the report, but “a lack of structural standardization continues to slow the rollout and replication of blended structures” (see, “‘Off the rack’ blended finance: Five models to replicate and scale”). Moreover, concessional capital is largely failing to bring new investors into the fold; instead, the deals are rounding up the usual suspects in development and multilateral bank finance. Multilateral funds like the Green Climate Fund and the Green Guarantee Company attract private investors better than most. This week the Emerging Asia and Africa Infrastructure Fund, which is part of the Private Infrastructure Development Group family, secured $325 million in debt from Allianz, Absa Bank, Sumitomo Mitsui Banking Corp. and Swedfund to invest in infrastructure projects in Africa and Asia. BCG and British International Investment have assembled a shortlist of replicable blended fund structures.
Calibrating concessionality. Blending concessional funds or grants with commercial capital can be a powerful way for impact investments to take on more risk or finance socially valuable investments that are unlikely to provide an attractive commercial return. But providing too much subsidy can deter, rather than encourage, private investment by undercutting commercial sources of finance and signalling that the investments are unbankable. In a guest post on ImpactAlpha, ODI Global’s Neil Gregory shares tools that Asian Development Bank, Industrial Development Bank of India, International Finance Corp. and others are using to set the appropriate level of concessionality to achieve their development objectives. Read his post.
Local investors. USAID’s West Africa Trade and Investment Hub Program helped derisk and mobilize private money for development, providing more than one-third of all investment-stage grant money in blended finance deals in recent years. That funding? Gone. Local fund managers in Africa and other regions are laying the groundwork to engage local institutional investors, family offices and other asset owners, who now contribute 22% of capital in blended deals in East Asia, 19% in Latin America and the Caribbean, and 15% in Africa (see, “African GPs are trading out their LPs“). Convergence identifies green bonds as a particularly effective mobilization tool. A guarantee from GuarantCo enabled IDI Sao Mai in Vietnam to lock in multiple local insurance companies for its sustainable seafood bond. Convergence suggests, “local governments with experience in setting up successful blended finance facilities should share learnings and promote replicable approaches to peers.”
Keep reading, “Blended finance loses a big investor and some of its steam,” by Jessica Pothering.

Dealflow: Affordable Housing

Brazilian lender Makasi lands $21 million to accelerate affordable housing construction. To make up Brazil’s shortfall in affordable housing, the government program, Minha Casa, Minha Vida, for “My Home, My Life,” helps developers and households finance new construction. Makasi, provides credit for up to 80% of the construction costs for small and medium-sized developers and individual households to tide them over before public funding kicks in. The startup raised a second 120 million reais ($21 million) round structured as a real estate receivables certificate, which is debt backed by future rent and mortgage payments. Makasi raised its first round just six months ago.

Social housing. Funding will be used as a credit line, called Credit for Exposure of Caixa MCMV, for low to middle-income households with annual incomes of around 96,000 reais ($17,000), and will prioritize women-led households and vulnerable groups. The government’s MCMV program was recently expanded to provide subsidized financing to nonprofits to construct houses for the families they work with. “Credit for these families via private banks or capital market resources was not viable,” said Makasi’s Caio Bonatto. “The launch of this new range will bring a boost to middle-income housing in Brazil.” The startup aims to finance around 10,000 housing units which will serve around 40,000 people. It says it has financed over 2,800 homes in Brazil.

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MaxAB-Wasoko acquires Fatura to serve informal retailers in Egypt. Fatura is an online marketplace that links manufacturers and wholesalers to small retailers in Egypt. The company, a subsidiary of Egyptian financial services provider EFG Holdings, has been acquired by e-commerce company MaxAB-Wasoko, which was formed through a merger last year between Egypt-based MaxAB and Kenya-based Wasoko, formerly Sokowatch (see, “Sokowatch nabs $125 million for economic inclusion for Africa’s informal retailers”). MaxAB and Wasoko both were digitizing and providing stocking and credit solutions for informal retailers; their merger created a network of over 450,000 informal retailers across Kenya, Tanzania, Rwanda, Egypt and Morocco.

Strategic integration. Fatura’s network of over 626 wholesalers serve 25,000 retailers of fast moving consumer goods in 16 cities in Egypt. Retailers place orders via a mobile app; Fatura aggregates these orders for delivery by the wholesalers’ own logistics fleet. It had secured $3 million in a pre-Series A round in 2021 to begin offering working capital loans for retailers. With the acquisition, MaxAB-Wasoko will solidify its presence in Egypt.

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Dealflow overflow. Investment news crossing our desks:

Brazil’s Re.green which restores degraded land through reforestation, raised 80 million reais ($14.1 million) from the Brazilian development bank, BNDES. The funding will support Re.green projects generating carbon removal credits for Microsoft. (Argus Media)

Canadian VC firm Inovia Capital led a $27 million Series C round for Novisto, a software platform that helps companies like Meta and Emirates Group collect, manage and track their ESG data. (The Logic)

Senegalese poultry producer L’Africaine de Production Animale, received 3.2 billion West African francs ($5.4 million) in debt from the International Finance Corp. to widen its network of smallholder farmers. (IFC)

Rhizome, a climate risk modelling platform for American utilities landed $6.5 million in a seed round led by Base10 Partners. (Rhizome)

Signals: Overheard at the Total Impact Summit

Place-based investors lean into ownership for community revitalization. As some 450 local impact leaders gathered last week in Philadelphia for ImpactPHL’s Total Impact Summit, developments a short Amtrak ride away in the nation’s capital hung over the proceedings. “I think we’re all coming here right now a little bit shaken, if not stirred,” said Jonathan Tower of Arctaris Impact Investors, “with the withdrawal of federal funding for a lot of the programs that enable the great work that everybody in this room does.” ImpactAlpha’s Roodgally Senatus and Erik Stein were on the scene at ImpactPHL’s largest gathering to date, where participants focused on wealth building in low-wealth communities, including bipartisan opportunities such as the extension of Opportunity Zone legislation in the tax bill haltingly making its way through Congress.

Community ownership. Ownership was a recurring theme at Total Impact, as more place-based investing strategies give communities a stake in the projects taking shape in their backyards. “We are identifying strategies to give folks community wealth by ownership,” declared Otho Kerr of the Federal Reserve Bank of New York. In Atlanta, Nikishka Iyengar of The Guild has been working with communities of color to build community ownership of land, housing and real estate since 2015. Iyengar kicked off a $30 million fundraise to bring capital to neighborhoods “where land has been systematically devalued,” she said. “It’s not just a question of exclusion for these communities, it’s a question of extraction.”
Opportunity Zone 2.0. Arctaris, which has carved out a specialty for investing in Opportunity Zones, has been raising capital in anticipation of an extension for OZs (see, “Investors look for Opportunity Zones to get an extension and a fresh dose of tax-advantaged capital”). Towers is excited about the legislation’s impact reporting requirements. Another feature: a provision that allows individuals that invest in Opportunity Zones to defer taxes on up to $10,000 of ordinary income, not just on capital gains. “The new feature,” he said, “brings OZ to the masses.”
Collective action. The head of Climate United, Beth Bafford, urged attendees to stand up when policy threats put high-impact projects at risk. The Calvert Impact-led coalition, which had been awarded $7 billion under the Greenhouse Gas Reduction Fund, sued the Environmental Protection Agency to preserve the congressionally approved green lending program and the clean air, energy savings and jobs it was bringing to communities (see, “Climate United carries legal banner in battle for the green bank”). “We are in a collective action challenge where it is scary to speak up and speak out, but the more we do that, the more it reduces the risk for everyone else,” Bafford said. “This field is built to do the hard stuff and solve hard problems.”
Keep reading, “Place-based investors lean into ownership for community revitalization,” by Erik Stein and Roodgally Senatus.

Agents of Impact: Follow the Talent

Jennifer Kilpela will become interim chief investment officer of The Nature Conservancy following the departure of Bola Olusanya, who joined MacArthur Foundation as CIO last week… Blue Impact, Familia Fund, Good Trouble Ventures and Rising Capital are among the first-time fund managers selected for the 2025 VC Include Fellowship… Forest Carbon is hiring a structured finance expert, business strategy consultant and market analysis consultant in contract roles.

Project Equity seeks a business development lead for employee ownership acquisitions… Adasina Social Capital is hosting “Racial justice in municipal bonds,” with Adasina’s Rachel Robasciotti, Danielle Burns, Maya Philipson and Clarion Call Capital’s Eric Glass, Wednesday, June 11… Congressman Sean Casten is among the keynote speakers at the US SIF Forum, June 25-27 in Washington, DC.