Guidelines on EU Blending operations

OVERVIEW

What is it?

The Guidelines on EU Blending Operation presents the EU blending project cycle. Blending is the strategic use of a limited contribution to mobilise financing from partner financial institutions and the private sector to enhance the development impact of investment projects.

In blending, EU financing is combined with non-grant resources such as loans, equity and guarantees from finance institutions (FIs) as well as commercial loans and investments in order to achieve a leveraged development impact. In the context of development cooperation, blending projects are targeted at achieving sustainable development 

What can it be used for?

The guideline provides a full picture of blending operations. It covers concept and rational of blending as well as the practical implementation of blending operations along the blending project cycle, providing several examples. It therefore clearly reflects the instrument specific goals:

• financial leverage: mobilise public and private resources for enhanced development impact and do more with less;
• non-financial leverage: improve project sustainability, development impact, quality, innovation and enable a faster project start;
• policy leverage: support reforms in line with EU and partner countries’ policies and international commitments;
• development effectiveness: improve cooperation between European and non-European aid actors (i.e. donors and FIs) with partner countries;
• visibility: provide more visibility for EU cooperation for development.

When can it be used?

The guideline can be used all along the intervention cycle, from pre-programming onward, when the instrument is deemed appropriate to the context. Blending is particularly suited for projects with a high potential development impact, but a below-market expected rate of return, which cannot attract sufficient funding from public lenders and/or commercial financiers.

Alternatively, the (perceived) risks involved in certain projects may be too high to attract financing at the necessary scale. An example of this would be firms introducing new energy or resource efficient technologies or a farmer introducing sustainable agricultural practices, where the activities would not be undertaken because of their perceived high risk and/or an untested regulatory framework or technology.

Who can use it?

All partners involved in a Blending operation. The EU Blending project cycle comprises seven stages with responsibilities shared by key stakeholders, which are illustrated in the guide. The main stakeholders in blending are EUDs, DG INTPA and DG NEAR (Headquarters, including thematic units), FIs, partner countries and regional organisations, EU Member States, as well as other Commission services and the EEAS.

What are its strengths?

The guideline allows understanding the advantages of blending both in conceptual and operational terms, assessing the advantages for the EU, e.g.:

• Blending allowed the EU to engage more broadly and with strategic advantage - particularly in support of large infrastructure projects.
• Blending has, in many instances, added significant value to the EU’s grant based development cooperation. Where value has been added it has related to: leveraging policy reforms, creating high quality projects, unlocking available finance for improving access to finance and improving coordination to EU development cooperation.
• Blending grants have played a role in supporting private sector development mainly within the finance sector.
• The lead IFIs approved by the EU have internal procedures that are a major element in ensuring the high quality of blending projects.
• To a large extent blending projects, have been successful and have already achieved or are likely to achieve the intended results and there is evidence that the project outputs are being used and appreciated by the beneficiaries

What are its limitations?

The guideline provides detailed input for each stage of the blending cycle and related topics (risk analysis, visibility, climate change, private sector). All those elements must however be assessed in the specific context and require specific in deep analysis

PRACTICAL APPLICATION

Key elements

The guidelines include various instruments and tool supporting the development and implementation of the blending cycle and ensuring harmonisation across different blending operations. Operational manager can find in the guidelines the Project application form and guidance note, the Assessment Framework, sample Delegation Agreement and various management templates.  A list of reference is also provided.

Requirements

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RESOURCES

Where to find it

The European Commission, 2015. Tools and Methods Series, Guidelines N.5 Guidelines on EU Blending Operations

Complementary guides, methodologies and tools

The EU International Partnership Academy - INTPA Academy : see training / webinars on "Blending"