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OVERVIEW


What is it?

NDICI-GE Regulation creates the European Fund for Sustainable Development Plus (“EFSD+”) as a worldwide “integrated financial package” that makes use of blending operations (investment grants, technical assistance, and financial instruments) and budgetary guarantees supporting investments with sovereign, sub-sovereign or private-sector counterparts.

This fiche presents blending, its key characteristics, and the relevant guidance available.

Blending refers to the strategic use of a limited amount of EU funding, which 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. EU blending funds can be provided in non-reimbursable form (investment grant, technical assistance) and/or in reimbursable form in financial instruments (risk capital in equity or equity-type or cash held in escrow as guarantee).

Blending follows the EFSD+ governance, which involves a specific approval process.

The regions covered at INTPA are those laid down in the NDICI-GE Regulation (Sub-Saharan African, Asia and the Pacific, Americas and the Caribbean), and operations are approved in the framework of regional investment platforms:

  • Africa Investment Platform (AIP)
  • Latin America and the Caribbean Investment Facility (LACIF)
  • Asia Pacific Investment Facility (APIF)

 Blending projects are contracted via a Contribution Agreement using the standard Commission template (or a CAFI when it involves an EU contribution in the form of a financial instrument).


What can it be used for?

Blending has traditionally mostly been used for projects in the sectors of energy and transport, environment and water sanitation, and private sector development, especially among micro, small, and medium enterprises (MSMEs). It is also in some cases applied in sectors like health and education, agriculture and agribusiness, and digital.

Blending is particularly well suited to projects that offer high potential for development impact but generate a below-market expected rate of return, making them unattractive to public lenders and/or commercial financiers. In other cases, the actual or perceived risks associated with certain projects may be too significant to attract financing at the required scale. For example, this may include firms adopting innovative energy or resource-efficient technologies, or farmers introducing sustainable agricultural practices—activities that may be deemed too risky due to unproven regulatory frameworks or emerging technologies.

Essentially, blending is beneficial in capital-intensive sectors with significant project costs where cash flow alone isn't enough to cover financing for development goals such as accessibility, gender equality, affordability, clean technology use, environmental protection, and climate change adaptation.

The European Union's contribution through blending enhances project feasibility by making them more bankable, ensuring they meet financial, strategic, technical, organizational, and managerial standards to achieve development goals efficiently and repay financial investments.

Beyond the specific additionality and development objectives defined for each operation, the use of blending reflects the following 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?

A project to be implemented in blending goes through the blending project cycle:

Blending projects have to follow the EFSD+ governance, with the process typically taking between 6 months to a year from concept note to a signed contract. Before this process begins, funds must be allocated to indirect management through the standard Annual Action Plan (AAP) process, either at project level or through fund allocation to the blending platform.

The timeline comprises several main steps, which are outlined in the following flowchart:


Who can use it?

Lead FI

Blending operations are generally implemented in indirect management by a Lead Finance Institution (LFI). LFIs typically include the EIB, multilateral European FIs such as the EBRD, and bilateral European FIs such as the Agence Française de Développement (AFD) and the Kreditanstalt für Wiederaufbau (KfW).

Any Finance Institution entrusted with the implementation of blending operations in indirect management must successfully pass the pillar assessment. They need a positive assessment for the relevant pillars for how they intend to use the EU contribution (e.g. if they intend to deploy it through service contracts, they need the pillar on procurement).   

European preference

In line with the NDICI-GE Regulation, financial instruments, budgetary guarantees and blending operations should be implemented whenever possible under the lead of the EIB, a multilateral European finance institution (such as the European Bank for Reconstruction and Development) or a bilateral European finance institution (such as development banks), possibly pooled with additional other forms of financial support, both from Member States and third parties.

However, non-European institutions (e.g. regional development banks, such as the Caribbean Development Bank and the African Development Bank) may also serve as leads if they demonstrate significant added value, such as local expertise, analytical capacity, or specific sector knowledge. In these cases, the relevant operational board must be consulted.  

Grant beneficiaries

When the Commission signs a contribution agreement with the LFI, the funds are channelled directly through the LFI, who is responsible for the implementation of the project. The LFI, in turn, may select, in accordance with its positively assessed rules, grant beneficiaries or contractors. Therefore, the main criteria to identify if a grant beneficiary is eligible lies with the LFIs’ rules that have been pillar assessed.

In practice, grant beneficiaries grant beneficiaries are typically the governments of partner countries. However, there are a limited number of instances where private sector entities have been designated as beneficiaries.

EU blending project cycle - At DG INTPA

At DG INTPA, the Geographical Directorates lead the blending operation through the project cycle, with the support of the geographic Finance and Contracts unit (A6 and C4), Results unit (D4), and EFSD+ governance unit (E5).

The governance process involves a consultation of relevant INTPA thematic units and Commission line DGs, in a framework called the Country Cooperation Team (CCT) consultation.

EU blending project cycle - Stakeholders

The main stakeholders in the EU blending project cycle include:

  • European Commission services (both Headquarters, including thematic units, and EU Delegations),
  • Financial institutions (FIs),
  • Partner countries and regional organisations,
  • EU Member States,
  • Other Commission services, and
  • The European External Action Service (EEAS).

All partners involved in a blending operation have distinct roles and responsibilities throughout the EU blending project cycle, which consists of seven stages. These responsibilities are shared among key stakeholders and clearly illustrated in the Guidelines.
The main stakeholders in blending operations include:

  • European Commission services (both Headquarters, including thematic units, and EU Delegations),
  • Financial institutions (FIs),
  • Partner countries and regional organisations,
  • EU Member States,
  • Other Commission services, and
  • The European External Action Service (EEAS).


What are its strengths?

Blended finance has a strong potential in terms of crowding-in, leveraging or catalysing additional financing, including from private and commercial sources. In selected sectors and countries, EU development resources should be deployed through existing or new financing instruments in order to leverage further resources that would not otherwise support development outcomes and thereby increase impact for sustainable development.

The blending component of EFSD+ makes it possible to support projects that have a clear added value that is not monetised and that guarantees cannot take into account. Blending mechanisms – combining EU financing with non-grant resources - can support investment projects in EU partner countries while enhancing their sustainability, climate resilience and development impact.


What are its limitations?

In some contexts or sectors, blending operations might not be the most suitable approach to achieve sustainable development.

Blending should only be used in situations that cannot be addressed by budgetary guarantees. For example, in situations where support is sought in the form financial instruments, budgetary guarantees are preferred as a risk-sharing tool to mobilise commercial financing. The challenge is to ensure that the potential of the two “tools” is fully utilised based on a solid understanding of the comparative strengths.

A few practical differences between blending and guarantees, beyond their different strategic uses, include the following:

  • Blending foresees a remuneration to the implementing party for using Commission funds, while budgetary guarantees don’t but are accompanied by substantial Technical Assistance to support the build-up of the portfolio.
  • Blending often includes single operations/transactions while budgetary guarantees cover a portfolio of operations; therefore, they have different timelines.
  • Blending is linked to more concessional type of financing while budgetary guarantees pursue market terms unless duly justified.
  • Blending is mostly funded, while budgetary guarantees are unfunded, and a liquidity cushion is provisioned in the EU Budget’s Common Provisioning Fund to enable swift payment in case of losses (these funds are tied for the whole duration of the budgetary guarantees).

For a more detailed explanation of the different cases please refer to the note “EFSD+ blending and budgetary guarantees: Guiding principles on the selection between EFSD+ investment tools”.



PRACTICAL APPLICATION

Key elements

The main reference documents are the Blending Guidelines and the EFSD+ governance and steering mechanism:

  • The blending guidelines (the latest version is November 2023, available internally only). For external consumption, only the 2015 version is accessible;
  • The EFSD+ governance and steering mechanism, explaining the internal processes for blending (as well as guarantees and EIB 3-step approval). It was shared by INTPA DIRGEN to all colleagues in HQ and EUDs, archived on Ares(2022)6650936.

The main website to find further guidance is the blending page of the EFSD+ Sharepoint site. It is updated on a regular basis.

Blending guidelines

The Blending Guidelines provide a comprehensive overview of EU blending operations. They explain the concept and rationale behind blending and offer practical guidance on implementing blending operations throughout the project cycle, supported by numerous examples.

The Guidelines offer detailed guidance for each stage of the blending cycle, as well as on cross-cutting issues such as risk analysis, visibility, climate change, and private sector engagement. However, all these elements must be assessed within the specific context of each intervention and require thorough, context-sensitive analysis.

 Governance and steering mechanism

This document outlines the key governance steps and steering mechanisms for the implementation of the EFSD+, through blending operations as well as EIB and Open Architecture guarantees.

It describes each step of the approval process that a blending operation has to go through in practice.

It is complemented by the INTPA Vade Mecum chapter 3.2.

 



Requirements

Data/information.  Recent information on the EU blending portfolio (operations approved by the board, overview of results) is provided on the internal dedicated webpage and external website.
Time. N.A.
Skills. Several training opportunities are proposed to EU staff, and presented as an integrated package (link in the resources). It includes a publicly available e-learning course and reference documents, and the training courses can also welcome outsiders on demand. 
Facilities and materials. N.A.
Financial costs and sources. N.A.
Tips and tricks. 


Stage / Theme

Some tips and tricks

Why it matters

Pre-Programming

Align blending with sector and national priorities early on.

Ensures strategic fit and ownership by partner countries.

Pre-Programming

Conduct preliminary financial and risk analysis with FIs.

Helps assess viability and relevance of blending at an early stage.

Programming

Involve EU Delegations, thematic units, and FIs from the start.

Promotes coherence and efficient project formulation.

Programming

Define clear development objectives and blending rationale.

Facilitates justification of the EU contribution.

Design (previously Identification)

Use the blending guidelines to guide early project screening.

Ensures alignment with blending eligibility and criteria.

Design (previously Identification)

Consider potential for financial, non-financial, and policy leverage.

Maximises the impact and value addition of EU support.

Design (previously Formulation)

Use standardised templates (e.g. Project Application Form, Contribution Agreement).

Promotes harmonisation, reduces errors, and speeds up approval.

Design (previously Formulation)

Integrate cross-cutting issues: gender, environment, climate, and private sector inclusion.

Enhances sustainability and policy coherence.

Financing Decision

Engage decision-makers with well-prepared documentation including financial modelling.

Increases likelihood of timely approval and financing commitment.

Financing Decision

Use visibility guidance to plan communication from the outset.

Ensures EU contribution is properly acknowledged.

Implementation

Maintain close coordination with FIs and partner country institutions.

Facilitates disbursement and adaptive management.

Implementation

Apply risk mitigation tools and regularly update risk assessments.

Protects against implementation delays and reputational risk.

Monitoring and Evaluation

Establish M&E frameworks jointly with FIs using common indicators.

Enhances comparability and tracking of development results.

Monitoring and Evaluation

Collect lessons learned and feed them into future programming cycles.

Supports learning and continuous improvement of blending practices.

Private Sector Support

Use blending strategically to de-risk private investment (e.g. first loss, guarantees).

Encourages private sector participation in high-impact, high-risk sectors.

Private Sector Support

Tailor blending instruments to the maturity and nature of the market (e.g. SMEs vs. large infrastructure).

Increases the effectiveness and absorption capacity of funds.

Climate/Environment

Integrate climate risk screening and resilience building in early design.

Aligns projects with EU Green Deal and SDG targets.

Climate/Environment

Use blending to support green finance instruments (e.g. green bonds, energy efficiency credit lines).

Drives innovation and market development for climate action.


EU RESOURCES

Open access


 

locked EU Limited 

For further information, any revision or comment, please contact INTPA-ICM-GUIDE@ec.europa.eu
Published by INTPA.D.4 - Quality and results, evaluation, knowledge management. Last update 06 October 2025