Structured Funds: A balancing act between financial sustainability and development impact

Abstract

It is estimated that up to 4.5 trillion US dollars in global investment are needed every year to achieve the Sustainable Development Goals (SDGs). Innovative financing approaches that aim to increase the involvement of private actors in development finance are therefore increasing in importance. One of these approaches is structured funds. They include different risk categories, in order to meet the needs of different investors. Official donors assume the highest risk category, thus reducing the risk for private investors. So far, only little is known about the development impact of this financing approach, which needs to balance its objectives of financial sustainability and development impact. Against this backdrop, this evaluation examines the alignment of this financing approach with the objectives of German development cooperation, its potential for mobilising private capital, its financial sustainability, and its effects on financial intermediaries (FIs) and the extent to which sub-borrowers are reached. For this purpose a theory-based approach was selected that integrates qualitative and quantitative methods of analysis. Based on its findings, the evaluation makes recommendations concerning financial sustainability, political management, donor coordination, mobilising private capital and managing development impact.