The occasion for this blog is the attached 4-page paper by Rajesh K. Advani, Scaling Up Blended Financing of Water and Sanitation Investments in Kenya(World Bank, 2015). As municipalities in emerging countries seek funding solutions for their projects, this paper provides an excellent overview and example of hybrid financing schemes, i.e. the complementary use of both concessional and commercial finance to make below market rate investment funding available to sustainable, financially feasible infrastructure. The purpose of blended financing is to use the concessional element (or the blend) to catalyze additional commercial investment. These mechanisms can also be seen as an intermediate option for sub-national entities that are not yet fully creditworthy.
The paper is particularly useful as it blends (pun intended) transaction-level details with considerations at the corporate and enabling-environment level. If you're interested specifically in output-based financing approaches, note there is a dedicated community of practice on this topic (LINK).