Why Record Blended Finance Has Not Closed Africa's Energy Access Gap

Every major climate finance summit of the past decade has included a session on blended finance. Session after session makes the same case: concessional capital, deployed correctly, can mobilise multiples of private investment that would not otherwise flow. And the case is not wrong.

In 2025, the Multilateral Investment Guarantee Agency reported that each dollar of guarantee capacity mobilised $8.40 in private investment, one of the strongest ratios on record, compared with $3.20 for concessional loans. The same year, global blended finance commitments reached $18.7 billion, also a record, according to Convergence.

Set against the $4.2 trillion in annual climate investment that emerging and developing economies need by 2030, $18.7 billion is 0.4 percent. Both facts are true, but the gap between them is the subject of this piece.

ETA's earlier analysis of the creditworthiness trap established why African energy projects face a weighted average cost of capital several multiples higher than equivalent projects in advanced economies, a problem rooted in sovereign credit rating frameworks that systematically misprice African risk. This piece is about the specific instrument designed to address that price, and why, a decade into its role as the headline answer, it hasn't moved the aggregate picture. The two arguments are complementary: one explains why capital is expensive in Africa, the other explains why the main tool deployed to make it cheaper hasn't closed the gap.

The ratios are real, and that is part of the problem

The achievements of blended finance should be stated plainly before they are interrogated. Cumulative blended finance transactions have reached $213 billion across more than 1,200 deals, mobilising an average of $4 of private capital for every $1 of concessional funding deployed. Convergence data shows renewable energy deals in middle-income countries regularly reaching mobilisation ratios of 8:1 or higher. The Green Guarantee Company deployed $800 million in guarantees for solar, wind, and battery storage projects in markets that had previously lacked commercial insurance coverage. MIGA's $8.40 ratio in 2025 represents genuinely effective de-risking, private capital flowing into projects it wouldn't have entered without the concessional layer absorbing the first layer of risk.

These represent years of institutional learning, deal structuring innovation, and risk architecture development. The analytical move is to ask where these ratios actually occur, and to notice the answer. An 8:1 ratio in a middle-income country with developed capital markets is a strong result, but middle-income African countries are not where the continent's electricity access deficit is concentrated. Sub-Saharan Africa's roughly 600 million people without electricity aren't located primarily in the markets where blended finance is producing its most impressive mobilisation ratios. The G20 Independent Expert Group's recommendation that multilateral development banks target 7:1 mobilisation ratios by 2030 is a sensible benchmark for the deals blended finance currently does well. It says nothing about the deals it currently can't reach, and those aren't a small or marginal share of the problem, but the majority of it.

The arithmetic that matters

$18.7 billion against $4.2 trillion is 0.4 percent globally. Africa's share of that $18.7 billion is smaller still. Sub-Saharan African public institutions have contributed $1.38 billion in concessional commitments across 87 transactions recorded in Convergence's market data, a figure that reflects the shallow domestic capital base that blended finance is simultaneously trying to mobilise and implicitly depending upon. The energy share of Africa's portion of global blended finance commitments is smaller still.

The IEA's World Energy Investment 2026 data found that closing Africa's electricity access gap alone requires roughly $22 billion annually through 2030, a single year's requirement for one access goal in one region, in the same order of magnitude as an entire year's global blended finance commitment across every sector and every region on earth. That comparison isn't a reductio ad absurdum: it is a precise statement of the instrument's position relative to the problem it is being asked to address.

This isn't an argument that blended finance was supposed to cover the entire financing need alone. No serious proponent of the instrument claims that, and the piece would be unfair to suggest otherwise. Blended finance is one instrument among several, and its function is to mobilise private capital rather than to substitute for it. But even granting blended finance a generous share of what it could plausibly be expected to contribute, accounting for its catalytic role rather than its direct volume, the gap between its current trajectory and any defensible fraction of $4.2 trillion remains vast. This isn't a matter of needing to accelerate the current approach, but of an order of magnitude.

Why the ratios that work do not transfer to where the need is concentrated

The mechanism explains the pattern, and it is worth being precise about. Mobilisation ratios depend on the existence of a private capital base willing to co-invest once risk is partially absorbed. The logic of blended finance is that concessional capital absorbs early risk, thereby changing the risk-return profile of an investment to the point that private capital, which was on the sidelines due to risk perception, now enters. The de-risking activates existing capital rather than creating new capital.

In markets with developed pension funds, insurance markets, and institutional investors, such as South Africa, Morocco, Egypt, and Kenya, this mechanism performs as designed to a meaningful degree. Concessional capital changes the equation for capital that exists but hasn't been deployed, private co-investment follows, and ratios are high.

In markets without that capital base, which describes most of Sub-Saharan Africa outside a handful of economies, there is no sideline capital to activate. A first-loss guarantee in a market with no institutional investor base doesn't produce private co-investment. Instead, it makes the deal cheaper for the concessional funder to do alone, while still being recorded as a blended finance transaction with a mobilisation ratio that reflects the structural absence of private capital rather than the success of the instrument.

The OECD data on this point is direct and should be held against every presentation of headline ratios. In least developed countries and fragile states, private capital mobilisation per dollar of concessional capital fell from $1.80 in 2022 to $1.40 in 2024, declining in precisely the markets where the electricity access deficit is most acute, in the period when blended finance was setting global records elsewhere. Convergence's data showing that adaptation projects in LDCs mobilise less than 2:1, against 8:1 or higher in middle-income renewable energy deals, is the same structural pattern viewed from a different angle.

Blended finance's mobilisation mechanism presupposes a domestic or regional private capital market of a certain depth. That presupposition isn't unreasonable in the markets where the ratios are strong, but it is structurally unavailable in the markets where Africa's energy access problem is concentrated.

The additionality problem underneath the headline ratios

A further complication sits underneath the mobilisation figures. The OECD's 2025 assessment found that 25 to 35 percent of transactions labelled as blended finance exhibited unclear additionality, meaning a major share of the reported mobilisation may reflect capital that would have flowed on commercial terms regardless, restructured at the deal level to claim a blended finance label.

This isn't an accusation against specific institutions. MIGA, AfDB's Sustainable Energy Fund for Africa, the Green Guarantee Company, and IFC are operating as designed. The problem is structural: without rigorous additionality verification as a standard condition of counting a deal toward mobilisation targets, a reported ratio can reflect relabelling of existing flows as much as genuine expansion of the capital directed toward Africa's energy transition. A decade of headline ratios without systematic additionality verification is a decade in which the instrument's actual marginal contribution to closing Africa's financing gap has been impossible to distinguish from its reported contribution.

What would change the picture?

Three changes would reposition blended finance honestly within the broader financing architecture.

First, a portion of concessional capital should be directed at building domestic capital market depth: local pension fund and insurance capacity, local currency bond markets, and institutional investor capacity in African economies where these are underdeveloped, rather than only at individual project transactions. This addresses the actual structural constraint identified throughout this analysis: blended finance cannot mobilise private capital that doesn't exist, and that problem compounds with every passing year in which concessional capital is deployed around it rather than toward resolving it.

Second, honest segmentation of where blended finance can and cannot be the primary instrument. In markets with institutional capital depth, blended finance plus mobilisation is the right tool and deserves scaling. In markets without it, which is the majority of Sub-Saharan Africa by both geography and population, the more honest prescription is direct DFI balance sheet deployment at scale, not mobilisation-dependent structures whose performance depends on a private capital base the market doesn't yet contain.

Third, additionality verification as a binding condition of counting any transaction toward mobilisation targets and international climate finance pledges. The G20 IEG's 7:1 target is a useful benchmark. A target without additionality verification can be met by relabelling capital flows that would have occurred regardless; one without verification would require demonstrating that private capital entered where it otherwise wouldn't. That is a harder standard to meet, and a more honest measure of whether blended finance is actually closing Africa's cost of capital gap or reporting against it.

Africa's cost of capital problem is structural, and blended finance is a powerful instrument. But, at its current scale and its current geographic concentration, it can't answer the question the problem actually requires. That is not a reason to abandon it, but it demands being precise about what it can and cannot do.