How We Do It

Blended Finance: Turning One Plus One into Three

At Finance in Motion, we pioneered a layered fund structure that combines public and private capital. This mobilizes more development finance than either sector can achieve on its own.

Here is how. Public monies create a risk cushion to enable investments from the private sector. In other words, government entities and donors provide the initial financial foundation by investing early on in the fund’s equity, junior, or mezzanine shares. Private investors then purchase notes whose risk is buffered by the other layers.

This way, the fund allows initial catalytic investments to unleash a larger volume of money – enabling more impact – than would have been possible alone. And private investors can enter new markets for ethical investments thanks to a risk buffer. This blended finance model thus multiplies the potential of both groups to achieve social and environmental impact, creating a whole that is more than the sum of its parts.

A Systemic Approach for Sustainable Impact

To best reach our target groups and support financial sector development, the impact funds typically channel debt or equity investments through local financial intermediaries. These on-the-ground partners lend the money to end beneficiaries according to strict impact parameters. In some cases, funds invest directly in, for example, green energy projects, or lend money directly to selected investees.

Grant-based technical assistance complements financial activities by promoting the conditions that help investments generate the most impact. These can involve systems, people, multipliers, or tools. Projects range from risk management training for local banks and business skills workshops for entrepreneurs, to awareness raising events for sustainable agricultural practices or research on green energy technologies. 

What About Local Currency?

Where possible, our funds provide loans to investees in local currency. This cushions them from the risks attendant to exchange rate fluctuations, stabilizing local financial institutions and protecting small borrowers.