Blended financing can turn around our fortunes
By Jane Mwangi
| September 11th 2021
Albert Einstein once said that imagination is more important than knowledge. This is particularly true when solving life’s problems.
One problem imagination can solve is financial limitation. The number one explanation that people, governments and organisations give for not attaining their goals, is money.
A degree cannot be attained for lack of fees, a road cannot be built for lack of financing, employees cannot be hired for lack of salaries, and so on. Many unrealised dreams are as a result of financial constraints. This is true even when tackling societal problems. A way to circumvent this problem is to apply Einstein’s philosophy of imagination. People, however, tend to stifle creativity by tunneling in their different sectors when looking for resources.
Development tends to rely on grant financing, government on debt and revenue collection and businesses look for equity from investors. But why not blend these financing elements regardless of the sector?
In the development world, mobilising for resources is even more challenging since it is dependent on some unpredictable factors such as generosity of others and alignment of development priorities with funders. But solving societal problems does not have to be at the mercy of donor agencies and philanthropists. Supposing we tackle these problems with a blended financing approach using business models? Supposing we asked ourselves: “What would a businessperson or an investor do to solve this problem?”
Take lack of access roads in a rural area for instance. The farming community grapples with getting produce to market, and receiving commodities from the market. On the outside it looks like a development problem, or even a government problem. But as a matter of fact, it is also a business problem. Assuming it is government tackling this road issue, the best approach would be to wear a business and development cap. At the design stage, government would partner with development partners to train young people in construction. The workforce development would therefore be a grant. The material inputs could be a combination of both debt and equity investment, where the investor would recover their money through a toll system.
The blended financing ensures the societal challenge of youth unemployment is met though the workforce development is financed by a grant.
CEO at Apprentice Job Work Africa. www.ajwafrica.org
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