• Discussion paper
  • 5 October 2016

Aligning blended finance to Busan principles

This discussion paper is the second we’ve published as part of our project on the use of blended finance in development. It provides a proposed framework for approaching and understanding blended finance
in development effectiveness. Its starting point is that principles of effective development cooperation can and should apply to all forms of cooperation, including blended finance.

This paper is based on the principles established in the 2011 Busan Partnership Agreement (country ownership; transparency and accountability; a focus on results; and inclusive partnerships). We’ve analysed what is known about policies, strategies and principles for blended finance against these principles to see where they align.

Key learnings

  • All development effectiveness principles are conceptually reflected to some degree in blended finance approaches.
  • However, three key barriers to delivering on the principles may exist:
    • Lack of agreement between all stakeholders (or appropriate dialogue platforms for reaching agreement) on the role of blended finance in delivering sustainable development objectives and therefore on what ‘effectiveness’ means.
    • Recognition that the principles are important, but lack of consensus between stakeholders on how they should be operationalised in blended finance.
    • Practical challenges in applying the principles in the same way as traditional development cooperation, due to institutional constraints of different actors participating in blending.
  • Certain indicators used in traditional development partnerships may need to be shaped and adapted to ensure they are relevant and useful in new partnerships and contexts.
  • Incorporating new indicators that reflect the institutional strengths and responsibilities of other actors involved in blending can add value to the final framework.
  • All principles must be considered holistically when assessing effectiveness in blending and the approach must be mutually agreed between partners.

In this paper we attempt to adapt the traditional development effectiveness indicators as options for discussion. Our analysis and proposals aim to stimulate debate that generates more evidence to inform substantive policy dialogue, learning and mutual understanding. This dialogue can drive progress in overcoming the challenges set out above.

While the paper is targeted at development effectiveness stakeholders,  we hope it can be useful for other key actors – such as development finance institutions – involved in blending activities.

Read our discussion paper in full

Read the first discussion paper in this series, ‘The role of blended finance in the 2030 Agenda: setting out an analytical approach’.

Find out more about our blended finance project

Homepage image credit: CDC, 2016