TOR154: Understanding Blended Financing with Joan Larrea of Convergence

For as long as I have been a social sector professional, there has always been a desire to do more partnering with the “private sector.” And, by that I mean traditional, for profit or commercial enterprises like Coke, Toyota or Airbus. In fact, 14 years ago, the capstone project of my Masters degree at American University was, I’m not kidding, “The Role of The Private Sector in Conflict Resolution.” My point here is that this is not a new topic by any stretch.

No matter how you’d like to approach it, the reason why we don’t see more traditional investment in parts of the world where its necessary to send aid or development assistance can be boiled down to one word: risk. Money, or more specifically the individuals who control money, large and small amounts alike, do not like to place that money at risk of being lost. Unfortunately, the places where social sector actors choose to align there sights for action can readily be characterized along a scale of increasing risk.

But here’s the thing - the money, or again the individuals who control the money, are also constantly on the lookout for new opportunities that offer potentially high rates of return. And, funny enough, you guessed it, the places where those of us in the social sector live and work are also places that offer tremendous potential markets and high-return opportunities.

So what’s an investor to do?

Luckily, Joan Larrea has agreed to be my guest on today’s 154th Terms of Reference Podcast. Joan is the CEO of Convergence, an institution that connects, educates, and supports investors to execute blended finance transactions that increase private sector investment in emerging markets. Joan has 20 years of experience in emerging markets investing. She led the U.S. Overseas Private Investment Corporation's efforts to partner with philanthropic and private investors, she was a managing director on the emerging markets team at Global Environment Fund and she began her career as an investment officer at International Finance Corporation.

This episode is a fantastic conversation about how Convergence is attempting to breath life into investments that would otherwise be too risky for the traditional private sector.

We not only discuss the three ways in which Convergence works, but we also touch on several of the deals they have helped bring to life. We also talk about the reasons why this type of investing can be so difficult for everyone involved and where that trepidation comes from.