The Sustainable Development Goals (SDGs) have become global goals in 2030. As a form of the Government of Indonesia’s political commitment to implement the SDGs, the Government of Indonesia has issued an umbrella regulation in the form of Presidential Regulation (Perpres) SDGs Number 59 of 2017 concerning the Implementation of Achieving Development Goals Sustainable.
Huge funding is needed to achieve this goal. With the limited government budget, support from the private sector or business entities is needed to be able to complement each other’s funding from the public sector budget.
On the other hand, business entities as involved partners still have obstacles to achieving the SDGs due to high risks and an unattractive rate of return on investment.
Thus, the Government must find ways to facilitate project investment related to SDGs by involving a number of other financing sources that are able to reduce risk and increase investment appetite while at the same time responding to the need for SDGs achievement through modalities that integrate various funding source schemes or also known as blended finance.
The International Finance Corporation (IFC) defines blended finance as the use of relatively small amounts of donor funds to reduce specific investment risks and help rebalance the risk-reward profile that cannot be sustained under stringent commercial terms.
Meanwhile, according to The Organization for Economic Co-operation and Development (OECD), blended finance can help bridge the investment gap to achieve the SDGs goals in developing countries such as Indonesia.