Blended Finance in Fragile Contexts: Opportunities and Risks

This paper explores the potential and pitfalls of using blended finance in fragile and conflict-affected states. It acknowledges that while private investment is crucial for economic development and stability, these contexts present heightened risks that deter commercial capital. The report analyses how blended finance can be structured to mitigate these risks but also highlights the dangers of inadequate due diligence, potential for elite capture, and misalignment with peacebuilding goals. It calls for a conflict-sensitive, context-specific approach to ensure that investments contribute positively to resilience and sustainable peace.