Arbeitsgemeinschaft für Entwicklung und Humanitäre Hilfe
Outside View (EN)
As traditional aid budgets are increasingly stretched, new approaches are needed to bridge the gap between short-term humanitarian response and long-term development.
Outside view by Celia Cossu
Humanitarian Blended Finance (HBF) has become a promising yet complex frontier in development finance. The idea is simple: use humanitarian resources to attract private investment in fragile contexts. The reality, however, is much complex. For Development Finance Institutions (DFIs) like Proparco, venturing into humanitarian settings requires not only new instruments but also new ways of partnering, thinking, and measuring impact
Humanitarians and development finance have traditionally operated in separate worlds—with distinct timelines, risk appetites, and objectives. Humanitarian aid prioritizes immediacy and relief, while development finance aims for sustainability and systems change. Blended finance seeks to connect them by using concessional or philanthropic capital to de-risk private investment. In theory, this model can unlock resources for underserved markets. In practice, applying it in humanitarian contexts is a balancing act. DFIs must reconcile their financial sustainability mandates with environments marked by uncertainty, informality, and limited data. That tension makes humanitarian blended finance both necessary and profoundly difficult.
Humanitarian Blended Finance does not replace humanitarian action. Each actor has a distinct role. Humanitarian organizations remain indispensable in crisis response, social protection, and service delivery in extreme fragility. DFIs, by contrast, can act further downstream—once basic conditions are met—to support local private enterprises providing essential services such as energy access, health, or financial inclusion. This sequencing is not a hierarchy but a continuum, where humanitarian actors stabilize environments and DFIs help sustain the recovery through financially sustainable market-based solutions. Recognizing and respecting this complementarity is critical.
Not every crisis, sector, or region can—or should—mobilize private capital. In fragile settings, blended approaches must start from a realistic assessment of market readiness, regulatory conditions, and long-term viability.
The experience in Jordan, where Proparco explored renewable energy access for refugee-hosting communities, illustrated this clearly: despite the relevance of the need, regulatory constraints made it impossible to identify a viable model for private sector investment. The key takeaway is that private sector investments can only occur once certain market building prerequisites are in place (such as reliable data, an adequate regulatory framework, enabling environments, and interested local or international private sector partners). These conditions are inherently context-specific, and ambitions for what the private sector can realistically achieve in humanitarian settings should reflect this reality.
Because no single institution can navigate these challenges alone, partnerships are central to HBF. DFI´s must rely on a network of trusted humanitarian partners—to share intelligence, co-design solutions, and pilot new models. These collaborations help a DFI understand contexts better, align instruments, and collectively take on risks that no actor could bear alone. Each brings something essential: proximity to communities, financial structuring capacity, or political dialogue. But these partnerships require patience. Building mutual understanding between humanitarian urgency and DFI diligence is slow, iterative work. This spirit of co-creation is what transforms isolated projects into scalable approaches.
Collaboration between humanitarian and development actors remains limited by structural and cultural silos. Humanitarian organizations, driven by urgency, often lack the financial expertise to structure blended instruments, while DFIs tend to operate within market-based frameworks that can appear distant from humanitarian imperatives. Reconciling these logics requires time, trust, and a shared understanding that social impact and financial sustainability are not mutually exclusive. When aligned, the two perspectives can complement each other and unlock durable solutions for vulnerable populations.
This kind of collaboration is not isolated. In recent years, we and other DFIs have increasingly worked with humanitarian partners in contexts of forced displacement, exploring how market-based solutions can complement traditional aid. Humanitarian actors’ community-level presence and trust enable us to better identify needs, build local buy-in, and determine where investment can meaningfully follow — particularly in sectors like financial inclusion, agriculture, and energy access. PROPARCO are also currently looking at the bridge between financial inclusion and humanitarian cash transfers with ICRC and will publish findings in November 2025.
These partnerships do not replace humanitarian action. Rather, they build bridges between two worlds — the humanitarian, focused on protection and immediate needs, and the development finance world, focused on sustainability and scale. Each has its role. DFIs can help create lasting economic opportunities by supporting private enterprises that deliver essential goods and services in fragile settings — often with the support, or in the wake, of humanitarian actors.
To make these models work, we also need to change our mindset. Refugees, farmers, women entrepreneurs — should not be seen as passive beneficiaries of aid but recognized as economic actors: consumers, producers, entrepreneurs, agents of change.
A private sector approach is not only about providing assistance — it’s about empowering local actors to drive their own development. DFI´s don’t deliver impact to them; they enable local actors to create it. We finance — but ultimately, they are the ones who build the projects, sustain the jobs, and generate the resilience that communities depend on.
In Uganda, a pioneering initiative led by the Grameen Crédit Agricole Foundation, UNHCR, and SIDA has shown that lending to refugees and host communities can be both impactful and viable.During its first phase, financed by SIDA, two microfinance institutions were supported to develop adapted products and build the necessary capacity to serve these often-overlooked populations. The results were clear: repayment rates were strong, client demand was real, and financial inclusion could thrive even in displacement contexts.
Building on this success, we are now financing the second phase of the program. This new stage aims to scale up outreach, with a focus on women, digital financial services, and financial literacy. By 2027, the initiative expects to reach 25,000 clients, demonstrating that access to finance for refugees and host communities is not only socially necessary but also economically sound.
This transition — from a donor-funded pilot to DFI-backed expansion — perfectly illustrates how humanitarian blended finance can turn early-stage, grant-based innovation into sustainable, scalable market solutions.
Beyond finance, technical assistance often determines success or failure. Technical assistance is a catalytic tool to prepare projects, mitigate risks, and align diverse stakeholders. It can support early-stage market building, strengthen local institutions, or help investees meet compliance standards. PROPARCO is proud to be part of the African Resilience Investment Accelerator (ARIA) to do more in frontier markers with British International Investment (BII) and Dutch Entrepreneurial Development Bank (FMO). This hands-on engagement is what makes blended finance truly developmental.
Humanitarian blended finance is not easy. It is time-consuming, resource-intensive, and it often tests the boundaries of DFI mandates and economic models. But it is also a space where innovation is most needed.
As global aid budgets shrink and humanitarian needs rise, DFIs cannot stay on the sidelines. If we are serious about our mandate to fight extreme poverty, promote gender equality, further access to energy and financial inclusion, we must continue to explore, test, and refine these new forms of collaboration — combining humanitarian insight with development finance discipline, and public capital with private initiative.
Celia Cossu is a French development finance professional specializing in impact investing and blended finance in frontier markets. She is part of PROPARCO’s frontier markets investing team, where she structures and coordinates innovative financing approaches to deploy PROPARCO’s capital and catalyze private sector development in fragile contexts. Celia holds a Master in Development Management from the London School of Economics and Political Science (LSE). Before joining PROPARCO Celia held different Advisor and Policy Positions in Belgium, France and Niger.
Inspired by Tom Fletcher’s statement of commitment to the humanitarian community when he resumed his position as Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator (OCHA) in November 2024, this channel provides expert views and impulses that highlight the current importance of listening, efficiency, outspokenness, and innovation in humanitarian assistance.
