Blended finance is critical for funding infrastructure projects in Ghana and Africa. Yaw Appiah Lartey, a partner at Deloitte, stated this at the 10th Ghana CEO Summit. He believes this method helps overcome financial barriers.
Mr. Lartey explained that blended finance combines money from governments, charities, and businesses. This strategy aims to fund projects that help the environment and improve lives. It addresses a funding gap for projects needing between US$1 million and US$5 million. Banks and international investors often overlook these projects.
This funding gap is often called the "missing middle." Commercial banks in Ghana have limits on how much they can lend. International investors prefer larger deals due to transaction costs. Deloitte helps connect project developers with suitable investors. They assist in structuring projects to attract funding.
Blended finance involves development finance institutions (DFIs). DFIs often support the early, risky stages of projects. This includes studying if a project is workable and creating plans. These early steps make projects more appealing to commercial lenders. DFIs help reduce the risk for private investors.
For example, a salt mining project might need exploration funds. Investors are hesitant due to the unknown outcomes of exploration. If development institutions provide support, the project's potential becomes clearer. This then encourages commercial banks to invest.
This approach allows important infrastructure and business projects to proceed. It helps overcome limited financial resources. In Ghana, the Ghana Infrastructure Investment Fund supports such deals. Similar organisations exist in other African countries.
Mr. Lartey stressed that these financial tools are vital. They help bring in money and speed up economic growth. Such mechanisms are essential for mobilising investment across Africa. They ensure that projects are safeguarded. This ultimately accelerates development on the continent.