Blended Finance & Philanthropy: Lighting the Spark for Scalable Impact in Latin America and the Caribbean

The Role of Philanthropy in De-risking Innovation

Blended finance is emerging as one of the most powerful tools to tackle Latin America and the Caribbean’s most urgent development needs. By combining philanthropic or concessional capital with private investment, it absorbs early risks and makes possible projects that deliver both social and financial returns.

For this model to work, philanthropy must lead. Grants, guarantees, or concessional terms that take the first loss create the confidence commercial investors need to step in once impact is demonstrated. That early risk-taking is particularly vital in sectors like K–12 education or climate adaptation, where the benefits for society are immense but the financial returns are uncertain or slow to arrive. As a Peruvian, the news of our national scores in the PISA examinations have often been disappointing, similar to most of the region, which shows the decades-long issue in underinvesting in education. 

Our forthcoming report with McKinsey & Co on EdTech in Latin America and the Caribbean shows just how catalytic blended finance can be, and why philanthropic capital is the key to unlocking its full potential.

A Case from Brazil

Take the Impulsionar program in Brazil, launched in 2021 by the Inter-American Development Bank (IDB), the Lemann Foundation, and Imaginable Futures, a global philanthropic investment firm. The program formed a public-private-philanthropic partnership with municipal governments to integrate digital learning tools and teacher training in under-resourced schools. What made this initiative particularly catalytic was its smart use of blended finance: philanthropic actors absorbed the initial risk by funding the introduction of EdTech solutions in public schools, allowing government partners to adopt and scale the intervention with minimal financial exposure. By piloting and validating the model through private support, the program unlocked long-term public investment and demonstrated a viable pathway to systemic change. The results speak for themselves; a preliminary study showed that students using these tools learned nearly 38% more than before, proving the power of strategic collaboration in driving educational transformation.

Yet, such innovations often struggle to scale. The challenge? A missing middle in financing, meaning further investment to scale up solutions. For instance, most EdTech startups in the region operate under a B2G  model, which entails long procurement cycles and limited commercial viability; what is missing is that extra capital to scale up. Despite K–12 being the segment with the poorest learning outcomes, only 10% of EdTech funding in Latin America goes to this level, compared to 55% globally. This is where philanthropy can play a decisive role. Early-stage grants, seed capital, and de-risking mechanisms can act like co-investment or time-bound subsidies and can in return help these ventures reach sustainability. In fact, in our upcoming report with McKinsey & Co looking at EdTech in the region, leaders across the region report that philanthropy is essential to reaching underserved populations, closing funding gaps, and supporting quality standards and pilot programs.

Blended finance isn’t a silver bullet. But we’ve seen firsthand how catalytic capital can fire-start innovation. Philanthropy acting as the spark, it becomes a powerful engine to launch initiatives that otherwise wouldn’t get off the ground. Whether in the classroom or the clean energy workforce, early-stage investments build pipelines of opportunity, and they’re only possible when someone is willing to bet first on impact.

Ana Krstanovic

Advisor, The Resource Foundation

Columbia University