Ladé Araba, Managing Director for Africa at Convergence, talks to COVID-19 Africa Watch about blended finance’s potential role in building back after the pandemic, the core policy priorities, and her views on leadership.

Key Takeaways

Below are a few of the main takeaways from COVID-19 Africa Watch’s conversation with Ladé Araba, Managing Director for Africa at Convergence, a global network that works to advance blended finance solutions through generating proprietary data and market intelligence; helping investors to understand better how blended finance works and how they can participate; and providing grants for early stage innovative blended finance vehicles that have the potential for scale and replication.

• In recent years, blended finance, the use of development and philanthropic finance to catalyze increased private investment, has mobilized over US$140 billion in investment towards sustainable development. And it will likely be a key tool in the toolkit for pandemic rebuilding.
• One early and notable use case is vaccine distribution. Through blended finance mechanisms, GAVI, the Vaccine Alliance, is creating a global risk-sharing mechanism for pooled procurement of the vaccine called COVAX. The mechanism guarantees an advance market for the sale of these vaccines, but also ensures that they are affordable for populations in developing countries.
• Blended finance will also play an important role in shoring up government fiscal capacity, given an increased demand for concessional capital at a time when time investors are seeking greater credit enhancement in order to invest in African countries. That said, development partners must think about applying their resources strategically (avoiding for instance requiring excessively high volumes of first loss protection or over-collateralizing transactions, unless that is really needed) in order to avoid distorting the market.
• Traditionally, blended finance has supported transactions in the energy and financial services sectors, due to their clear and predictable cash flows. But since the onset of the pandemic, the health sector has become increasingly of interest, and now comprises about 19% of Convergence’s database of fundraising transactions.
• In 2021, developing countries have a lot of work to do to recover from the pandemic and need to better position themselves to weather the next global shock. Governments need to take a long-term view, which means investing limited public funds to catalyze private investment, build resilient systems, and considerably strengthen both physical and social infrastructure.

The interview was conducted by Obiageri Christiana Ndukwe, an IFC-Milken Institute Capital Market Scholar from the Central Bank of Nigeria.