This Toronto Centre Note provides an overview of blended finance debates, considerations, and issues of interest for emerging markets and
developing country (EMDC) financial supervisors. It examines the constraints on the growth of blended finance in EMDCs including possible regulatory barriers, and it explores the role that supervisors can play in supporting the expansion of blended finance while maintaining the soundness of the financial sector.
This Note highlights the reasons why EMDC financial services supervisors should increase their understanding of blended finance transactions, including:
• the need for EMDC supervisors to raise their awareness of blended finance structures and risks, as their supervised firms may become increasingly involved in blended finance structures;
• EMDC supervisors with a developmental mandate, such as those in many emerging markets, have an even stronger reason to engage;
• the important role that supervisors can play in clarifying regulatory issues that affect the use of blended finance structures in their markets;
• the importance of international organizations aiming to develop blended finance working with national financial authorities on blended finance to maximize alignment;
• the need for practical capacity building to help EMDC supervisors engage with blended finance tools and balance their objectives of financial sector stability and achieving the SDGs; and
• the complementary role blended finance could play in the COVID-19 recovery efforts for EMDCs, for example in scaling up health security measures.