Assessing the effectiveness of private finance blending in ensuring that small-scale farmers are not left behind
To boost agricultural development in developing countries, donors are increasingly resorting to blended finance: the practice of combining public development funds with private resources. Blended finance may open opportunities to inject more resources into the food and agriculture sector, but the assumptions that blended finance is inherently beneficial for agricultural development and that it is an efficient way to finance smallholder agriculture, are not supported by the evidence currently available.
This paper argues that private finance blending should be used with caution in rural development until donors can demonstrate the merits of blending using evidence-based results, in particular the added value of blending for development impact. This is especially important given the obligations of donors to make progress on the reduction of social, economic and gender inequalities. The increasing focus on private finance should not obscure the vital role of public finance in promoting inclusive agricultural transformation that benefits small-scale farmers.