This is the first in a two-part series exploring how blended finance can help sustain and scale global health investments amid declining public and donor funding. Part 1 outlines the current funding landscape, key concepts, and the most common blended finance structures in global health.

Global health financing stands at a crossroads. After decades of progress fueled mainly by government and donor funding, we are now confronting a new reality. Public budgets are increasingly constrained and political priorities are shifting, with dramatic impacts for funding and the ambition to maintain progress toward long-held shared goals. This has created an urgent need to reconsider how global health programs are financed, both to fill immediate needs today and to rebuild more sustainable programs going forward.

Official development assistance (ODA) has been the backbone of global health programs; its contraction is a threat to lives and livelihoods. Grant-based funding from public and philanthropic sources has been the core of global health and development investment. Total ODA (all sources) in 2023 reached a record of $223.3B (Source: OECD), of which approx. $64.6B was Development Assistance for Health (DAH) (Source: IHME). In sub-Saharan Africa, DAH is responsible for nearly 20% of all spending on health (Source: IHME, 2021).  Cuts by bilateral funders that have already been announced amount to an estimated 45% of total ODA; further projected shifts could result in an additional 10-20% drop (Source: Dalberg). While the full extent of these cuts for health spending remains to be seen, the impact on health outcomes is already projected to be severe; the Center for Global Development estimates that cuts to United States spending alone could result in 3.3 million preventable deaths per year (Source:  Center for Global Development).

Blended finance offers an approach to use public resources to catalyze private-sector investment for social impact. Impact investment and innovative finance have played a limited but growing role in development finance in recent years. The total annual impact investing market is estimated at approx. $79.3B (Source: Grandview Research, 2022); of this, blended financing is estimated to represent approx. $23B per year (Convergence, 2024). Though small relative to ODA, the ability of blended finance to combine concessional, philanthropic, and market-rate investments gives it the unique potential to attract new funding sources.

However, blended finance has been underused for health. Convergence, the blended finance platform, reports a historical total of 84 health-focused deals to date, with an aggregate value of $17B. Though the number of new deals in the health sector has increased since 2021, total annual financing has still averaged only approximately $400M. Even so, blended funds currently operating with health objectives have raised a total of more than $2.5B in assets to be deployed. These funds offer a significant opportunity to support revenue-generating programs and businesses. And when blended finance is applied to health, it has shown success: blended finance deals tagged to SDG 3 (Good health) have seen an average leverage ratio of 3.3x (Source: Convergence, Dalberg).   While the global health field has a significant gap to fill, if we could triple the funding for every dollar still being spent, it would be an important step forward.

The nature of blended finance means it cannot wholly replace grants. Blended finance requires some level of ‘return’. This can be difficult to ensure in healthcare, as we often consider healthcare a human right and people’s lives are at stake. Therefore, it is best suited to work alongside grants, supporting those investments that can generate revenue while maintaining equitable public access to care.

Given these realities, blended finance is most impactful when deployed strategically. This means identifying where a clear, revenue-generating element exists. To date, blended finance deals recorded by Convergence have included elements focused on health delivery services (including infrastructure, hospital and clinic operations, and innovative delivery models; 74% of deals), medical technology (including devices and diagnostics; 21% of deals), and pharmaceuticals and vaccines (20% of deals). Conversely, blending tends to be less suitable for public goods, like disease surveillance systems, or the provision of routine primary services, especially those focused on serving harder-to-reach communities.

Looking ahead, the role of blended finance in global health has room to expand amid declining public assistance, but challenges remain. Development Finance Institutions (DFIs), while increasingly active, are pivoting toward more transactional and strategic investments, following approaches reminiscent of China’s Belt and Road Initiative (BRI) rather than purely impact-oriented strategies. At the same time, private impact investors continue to grapple with perceived market risks in low- and middle-income countries, hesitant to commit without adequate risk mitigation.

Applying blended finance to health also comes with its own risks. There remain substantial risks of misaligned incentives, as private-sector objectives must be carefully balanced against public health priorities to avoid compromising essential health equity outcomes. Additionally, the complexity and transaction costs inherent in blended structures can deter potential participants, especially smaller or less experienced entities. Moreover, equity considerations may sometimes suffer, as commercially viable interventions often attract funding more readily than less profitable, yet equally critical, public health services. Navigating these challenges requires careful structuring and application of blended finance vehicles to ensure alignment between investor returns and public health objectives.

With those limitations in mind, the pressing question for health stakeholders today is clear: In an era defined by constrained public budgets, how and where can blended finance most effectively step in, filling critical financing gaps and safeguarding hard-won progress toward global health goals? Global health stakeholders can use the following questions to assess whether blended finance is a good fit for a particular opportunity:

1. Need: Is there a clear financing constraint (e.g., high perceived risk, lack of affordable capital)?
2. Revenue Potential: Is there a sustainable revenue stream or cost-saving mechanism (e.g., user fees, insurance, supply chain savings)?
3. Incentive Alignment: Are the goals of investors and implementers aligned with public health priorities and equity?
4. Size and Cost: Is the opportunity large or scalable enough to justify transaction costs?
5. Capacity: Do local actors have the systems and knowledge to engage effectively with blended funding?

If most answers are “yes,” blended finance may offer a smart path forward.

Primer on Blended Funds and Their Use in Global Health

There is a diverse range of existing blended funds focused on global health. The blended finance market spans an array of funds and facilities, targeting distinct market needs and gaps across the health sector. We focus here specifically on funds, and their potential opportunity to help fill investible gaps due to ODA cuts in the immediate term. Convergence, the world’s largest network for blended finance, currently reports a total of 33 funds, representing more than $3.1B in assets, investing in global health. These funds operate through four common structures: concessional capital, technical assistance grants, guarantees and risk insurance, and design-stage financing.

This article offers a primer on the four main archetypes of blended finance in global health, with real-world examples, a practical decision-making checklist, and a call to use these tools with strategic intent.

1. Concessional Capital

Approach: Provides below-market-rate loans or flexible equity investments to health enterprises or initiatives that have clear revenue models but limited profit margins

Purposes: Reduces the overall cost of capital to the investee; increases investment viability, including potential reach or scale of impact, beyond what might be possible under only commercial terms; decreases overall risk exposure for private investors and enhances the attractiveness of investments to private capital

Use cases and considerations:

• Ideal for health projects or enterprises with a viable, revenue-generating business model but limited profitability or higher perceived market risk. Examples include expanding networks of healthcare clinics, local pharmaceutical manufacturing facilities, diagnostic labs, or distribution of essential medical supplies in underserved regions.
• May be less suitable for very early-stage or highly innovative projects lacking clear revenue streams, as the focus is generally on scalable, already-validated solutions rather than purely experimental approaches.
• Often dependent on sustained public or philanthropic funding components to maintain concessional terms for the duration of the investment horizon.

Major examples:

• Transform Health Fund: $111M
• SDG Outcomes Fund: $100M
• Global Health Investment Fund: $108M

Sources:

• Transform Health Fund Surpasses $100 Million Target Final Close to Improve Access to Quality Healthcare in Africa
• Transform Health Fund Case Study — Total Impact Capital
• Transform Health Fund – FSD Africa
• Transform Health Fund helps improve access to care in Africa – Philips

2. Technical Assistance Funding

Approach: Provides resources such as training, capacity-building, management support, and operational improvements to healthcare organizations, enhancing their effectiveness and long-term sustainability.

Purposes: Enhances operational efficiency and service quality of healthcare providers; ensures that investments generate lasting impact and measurable improvements; reduces overall risk of the project for investors (public or private).

Use cases and considerations:

• Particularly effective during transitional or scaling phases, addressing operational or managerial constraints; benefits can take time to materialize, and funding should be committed for a sufficient period to achieve impact.
• Effectiveness is highly dependent on the quality and relevance of technical expertise provided; success depends on internal skills and capacity being a root cause of investment risk, and not other external factors that may be more difficult to overcome.
• TA resources are often paired with concessional funding mechanisms or other financial support

Major examples:

• Stichting Medical Credit Fund: $50M
• Deutsche Bank Eye Fund: $14M

Sources:

• Stichting Medical Credit Fund Annual Report 2023
• Medical Credit Fund raises EUR 32.5 million to support health entrepreneurs in sub-Saharan Africa
• Medical Credit Fund – ImpactAssets 50
• Stichting Medical Credit Fund – British International Investment

3. Guarantees and Risk Mitigation Funds

Approach: Guarantees and risk mitigation funds provide financial assurances that investors or lenders will be repaid in the event of default or financial loss.

Purposes: These guarantees reduce the overall risk exposure of an investor, thus improving real or perceived risk/return balances and incentivizing private capital into higher-risk projects.

Use cases and considerations:

• Effective in attracting private investment to sectors and geographies perceived as risky; requires rigorous risk assessment and management frameworks.
• Investors often seek additional incentives or risk-sharing arrangements, limiting overall applicability to the highest-risk markets.

Major examples:

• Investment Fund for Health in Africa II (IFHA-II): $137M
• Women’s and Children’s Health Technology Fund: $90M
• Salt Fund I (SEQI): $47M

Sources:

• Investment Fund for Health in Africa II – European Investment Bank
• IFC and Development Partners Make Landmark Health Care Investment in East and Southern Africa
• Africa’s health fund gets $136.85m from institutional investors
• FMO – Project Details for IFHA-II

4. Seed and Design-Stage Financing

Approach: Early-stage grants or flexible financing to fund business plan development, pilots, and validation of innovative health solutions

Purpose: Provides catalytic support for preliminary planning, testing, and validation to strengthen a business case and attracts more significant subsequent investment.

Use cases and considerations:

• Supports high-risk, high-impact projects that require validation before commercial investors step in.
• Earlier-stage nature of the investment means a higher risk for failure; funders must be comfortable with uncertainty.
• Often necessitates and pairs with ongoing technical and strategic support to refine concepts, business models, and impact measurement before scaling or securing further investments.

Major examples:

• Product Development Partnership III Fund: $855M
• LeapFrog Emerging Consumer Fund III: $743M
• Africa Health Infrastructure Fund (AHIF): $60M

Sources:

• Product Development Partnerships: Case studies of a new mechanism for health technology innovation
• Product Development Partnerships (PDPs): Multi-Stakeholder Collaboration to Develop Essential Health Technologies

Blended finance is no silver bullet. But when thoughtfully applied, it can stretch constrained public budgets, unlock new partnerships, and help scale solutions that improve lives. In this era of financial strain, health leaders must embrace not just more funding, but smarter financing—and blended finance—can be a critical part of that mix.