I n Senegal financing the projects and programs aligned with the ambitious agenda of the Sustainable Development Goals (SDGs) is an enormous challenge for the government. Therefore, examining the potential of blended finance in developing countries such as Senegal and filling the data and evidence gap is a paramount interest of policymakers and practitioners around the world.
Blended finance in this research refers to the strategic use of aid resources to attract, leverage, and mobilise additional private and/or commercial capital for investments in sustainable development projects like those related to the SDGs, both domestically and internationally. However, well informed decision-making on the potential role of blended f inance in LDCs is usually scant and therefore, requires data and evidence on the ground.
The objective of this study is to contribute to the policy debate on blended finance by documenting and sharing empirical evidence on how blended finance can be used in Senegal to diversify risk and attract private capital to support the implementation of the SDGs. Thus, IPAR, a regional Think Thank in West Africa, aims to provide with an overview of the application of blended finance in Senegal. This case study addresses the question of how blended finance is being adopted in Senegal to support the implementation and achievement of the SDGs. In addition, this paper analyses the conditions under which blended finance is an appropriate instrument in the broader development finance f ramework to mobilise private investments for project and programs targeting sustainable development in Senegal.
Methodologically, this research is mostly based on qualitative data from interviews with key actors currently or previously involved in the conceptualisation, development, and adoption of blended finance on specific projects and programs regarding SDGs in Senegal1 . We categorised the analysed actors into three categories: a) private sector, which includes commercial banks, and private equity funds, b) international or bilateral donors, and c) government agencies.
To understand the role of the private sector we first focused on the largest commercial banks in Senegal (Ecobank, Bank of Africa, Citi, Senegal, Microcred, CBAO, and Orabank). Within the private equity funds group, we targeted key players such as AFIG Funds, which manages two funds plus a Senegalese portfolio of companies; Brightmore, an impact fund targeting SDG-focused investments; and Terranga Capital Dakar.
On the international/bilateral donors and government’s agencies category we interviewed representatives from the IsDB (Islamic Development Bank), FONGIP (Priority Investment Guarantee Fund), FONSIS (Sovereign Fund for Strategic Investment), MEF (Ministry of Finance), the Ministry of Investment Promotion, Partnerships and Development of Teleservices, APIX Senegal (National Agency for the Promotion of Investments and Large-scale Infrastructure Projects), BOAD (West African Development Bank), AfDB (African Development Bank), IFC (International Finance Corporation), UNICEF, and AFD (French Development Agency). In addition, follow-up interviews were conducted with people who were identified as important actors by the main stakeholders.
As part of the analysis, this paper looked into existing blended finance instruments, mechanisms and structures. This research analysed instruments such as equity, debt, mezzanine, guarantees, insurance, hedging strategies, grants, and technical assistance; intermediation of instruments such as funds, syndication, securitisation, and PPPs; and barriers in specific sectors such as education, health, agriculture and agri-business, water, and sanitation.
The next section of this study provides with an overview of the financial flows to Senegal and the role of blended finance in the context of development finance. This section also discusses policy and institutional frameworks by examining policies, practices, and the roles of main actors involved in blended finance (public and private, domestic and international Senegal is experiencing a stable macroeconomic situation. or bilateral donors). The third section presents examples of blended finance initiatives and specific projects in Senegal. The fourth section, describes the level of involvement of the domestic private sector in the use of blended finance. The fifth section analyses the development impact and domestic capacity of generating wider blended finance instruments. The last section of the research presents the main findings of this study.
