In 2015, only 16% of Colombia’s four million farmers had access to any kind of formal loan. Financial institutions knew those rural markets existed and chose not to enter them: the underwriting costs were too high, collateral requirements were impossible for most borrowers to meet, and the infrastructure for serving rural clients at scale simply wasn’t there.
By 2022, more than 1 million Colombians in rural and post-conflict regions (49.8% of them women) had gained access to formal financial services. Some $1.4 billion in new loans, savings, and insurance products reached communities that for decades couldn’t get a bank to return their calls. And 606 of 611 banking access points created through that initiative were still running after the program ended, on commercial terms, without ongoing subsidy.
The private sector kept the infrastructure running because the business case was real. Capital was available to those markets the whole time. What moved was everything built around it.
Why the Private Investment Gap in Emerging Markets Keeps Growing
The annual investment gap for sustainable development has grown from $2.5 trillion to $4 trillion, according to the OECD’s 2025 Global Outlook on Financing for Sustainable Development. Without significant changes to the current trajectory, that figure is projected to reach $6.4 trillion by 2030. Official development assistance will cover a fraction of it; the math on that has been settled for years.
Private capital is the only instrument with the scale to matter. The question is why it isn’t moving in the volumes the moment requires. UNCTAD’s 2024 Financing for Sustainable Development Report documented the scale of the retreat: investment flows to developing economies for infrastructure fell 35% in recent years, renewable energy investment dropped 31%, and water and sanitation declined 30%. These aren’t marginal dips; they reflect a structural hesitation that capital deployment alone can’t fix.
Investors’ objections are familiar: political risk, currency volatility, limited data on returns, uncertain legal protections. These are legitimate concerns. They’re also entirely consistent with markets where the conditions for private investment were never built.
Blended Finance’s Scale Problem
Blended finance has become the dominant policy response to the mobilization problem. The approach uses concessional public money to de-risk individual transactions and draw in private capital alongside development finance institutions. The 2024 market data from Convergence, which tracks global blended finance activity, shows the approach holding steady: 123 deals closed that year totaling $18 billion in financing, with private investors deploying $6.9 billion. Median deal size climbed from $38 million in the 2020–2023 period to $65 million in 2024.
Convergence’s own analysis identifies a pattern worth sitting with: in many cases, concessional money ends up mobilizing commercial capital from other public sources (other multilateral development banks, other development finance institutions) rather than from genuinely private investors. The crowd-in effect on private capital specifically remains smaller than headline figures suggest.
This matters because the goal was never to get public institutions to invest alongside other public institutions. The goal was to bring in the pension funds, the commercial banks, the institutional investors who have the scale to close the financing gap. Blended finance has produced real deal flow. It has not yet cracked the problem of why those investors remain largely on the sideline.
The environment those instruments land in turns out to be the variable that matters most.
What Breaks When the Conditions Are Missing
When there’s no policy foundation, even well-structured deals stall. Uganda’s investment ecosystem had genuine commercial opportunity in agriculture, energy, and health. But investor confidence was constrained by an unstable regulatory environment: unclear tax treatment, investment codes that created friction rather than reducing it, no coherent framework for green finance. Chemonics worked through eight specific policy reforms before capital moved at scale: tax code amendments, revisions to the investment act, accreditation reforms, and a National Climate Finance Strategy that gave investors a credible framework for sustainability-linked deals. Those reforms made the rest possible: 27 investors, 39 closed deals, and $91.6 million in capital mobilized across sectors that had been commercially underserved for years.
When financial products aren’t designed for the actual market, viable customers get systematically excluded. In Colombia, rural smallholders were commercially viable customers, but the financial products available had been designed for a different borrower entirely: urban, with collateral, a credit history, and a branch nearby. The advisory work helped financial institutions redesign their origination models: bundled products combining savings, insurance, and credit rather than credit alone; spousal consent requirements eliminated so women borrowers weren’t procedurally blocked; origination frameworks rebuilt for high-volume, low-margin rural clients. Matching the product to the borrower opened the door to 1 million new clients.
When digital infrastructure is absent, geography becomes a hard constraint. The Transfiya platform processed over 10 million transactions in Colombia, reaching communities too remote to support a physical branch. When COVID-19 lockdowns shut down in-person operations, it kept financial services running. Digital rails don’t create the conditions for investment; they make those conditions reach further than they otherwise would.
The instruments blended finance deploys (guarantees, concessional debt, first-loss facilities) can improve the risk profile of a transaction in an environment that has these foundations. In an environment that’s missing them, the same instruments produce smaller leverage ratios and shorter-lived results.
After the Program Ends
In Colombia, 606 of 611 banking correspondents established through the program remained operational after it ended, on commercial terms, without subsidy. The financial institutions found the rural market commercially viable on its own terms. They kept the infrastructure running after the program that built it had closed.
In Tunisia, Chemonics’ work in finance and investment supported over $458 million in financing for micro, small, and medium enterprises, contributing to more than 87,000 full-time jobs across all regions of the country. In Jordan, targeted support for tourism SMEs catalyzed $44 million in sector investment and created more than 600 jobs. Across each of these, the evidence points the same direction: when policy environment, product design, and digital infrastructure are built alongside capital mobilization rather than after it, the results persist. When they’re missing, they don’t.
The SDG financing gap will not close through public capital alone; the scale simply isn’t there. Blended finance will remain part of the answer. But its leverage ratios will stay modest until the environments it operates in are investment-ready in the full sense of that term. Building those environments is slower and less legible than closing a deal. It rarely makes a press release. But in the markets where it’s been done, the capital moved and kept moving long after the program that built the conditions had closed.
