[Regional] Blending: Financing instruments for sustainable development
© INCAE, 2025
The European Union's blended financing instruments are mechanisms that boost the financing of investment projects in countries benefiting from EU external cooperation, as part of the European Fund for European Development Plus (EFSD+). These instruments strategically use a limited amount of grants to mobilise financing from eligible financial institutions and the private sector, thereby increasing the impact of investment projects. In blended operations, EU grants are combined with repayable resources such as loans, equity, and guarantees from development banks, as well as commercial loans and investments to leverage their effect. They are also typically accompanied by technical assistance to ensure the operation and impact of the programs.
LACIF offers: tailored technical assistance, investment grants, and risk-sharing financial instruments. LACIF establishes alliances with European financial institutions (such as AECID, AFD, EIB, KfW) and with regional development banks (such as BCIE, CAF, IDB), to mobilise funds and leverage European financing for sustainable development projects in Latin America.
| Project | Sector | Objetive | Duration | Implementation | EU funding | Countries | Results | Activities in/with Panama | Web page |
| LAGREEN - Latin American Green Bond Fund | Banking and financial services | To finance climate- and natural resource-friendly investments and mobilize local and international private capital for the issuance of more green bonds in Latin America. | December 2020 - December 2035 | KfW | 16.05 million euros - Latin America and Caribbean Investment Facility (LACIF) | Dominican Republic, Bolivia, Brazil, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru | It will contribute to the reduction of greenhouse gases, green local capital markets and the economy as a whole, with an estimated 5,160,000 tons of CO2e avoided by 2029. Through its investments in green infrastructure and especially in transport infrastructure, the Fund will reach a large number of end beneficiaries, estimated at 8.4 million. | The Inter-American Infrastructure Finance Corporation (CIFI), a non-bank financial institution in Panama that provides loans for green infrastructure projects—particularly renewable energy—issued its first long-term green bond. Training for banks on issuing green bonds. | https://www.eulaif.eu/es/proyectos/fondo-de-bonos-verdes-de-america-latina-lagreen |
| Kuali Fund | Banking and financial services | Transforming Latin American and Caribbean countries into resilient, low-carbon economies by fostering the systemic adoption of climate best practices by small financial institutions, including small banks, microfinance institutions, cooperatives, other non-bank financial institutions, and financial technology companies | December 2024 - December 2034 | COFIDES | 12.8 million euros - Latin America and Caribbean Investment Facility (LACIF) | Dominican Republic, Bolivia, Brazil, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru | Kuali Fund expects to directly support more than 486,690 small farmers and 16,200 SMEs, which together will prevent the emission of 14.27 million tons of CO2 equivalent over its planned 10-year lifespan. | #VALUE! | https://www.eulaif.eu/es/proyectos/kuali-fund |
| Implementation of Nationally Determined Contributions (NDCs) in the urban mobility sector in Latin America and the Caribbean | Transport | Improving urban public transport and non-motorized systems (walking and cycling) in major Latin American cities will help each country achieve its Nationally Determined Contributions (NDCs) to the Paris Agreement commitments, reducing greenhouse gas emissions and mitigating the impact of climate change. | December 2022 - December 2027 | KfW, CAF | 4.28 million euros - Latin America and Caribbean Investment Facility (LACIF) | Dominican Republic, Argentina, Bolivia, Brazil, Colombia, Ecuador, Mexico, Panama, Peru | Improve urban transport in major Latin American cities; Enable the implementation of complex fare structures; Develop a regional forum for dialogue on climate policies; Generate additional local investment for urban transport | Support for the development of mass transit projects in Panama City - Extension of the Panama Metro Lines and San Miguelito Aerial Cableway (2024-2026) | https://www.eulaif.eu/es/proyectos/implementacion-de-las-contribuciones-determinadas-nivel-nacional-ndcs-en-el-sector-de-la |
| DINAMICA II Initiative - Seed Capital Financing | SMEs | Addressing the bottlenecks identified in the Central American region, specifically regarding the accessibility of new and innovative companies to financial solutions to start operations, consolidate and grow. | December 2018 - December 2027 | KfW, BCIE | 12.35 million euros - Latin America and Caribbean Investment Facility (LACIF) | Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama | It will benefit at least 800 MSMEs, of which 480 are new businesses, 100 of them led by women. | Advanced scalability program for 20 participants, implemented by the City of Knowledge Foundation (2023) | https://www.eulaif.eu/es/proyectos/iniciativa-dinamica-ii-financiamiento-con-capital-semilla |
| Climate Change Innovation Project Preparation Fund | Environment | To provide the countries of the Central American Integration System (SICA) with funds to carry out projects for the care and prevention of natural disasters, since the region is highly vulnerable to climate change. | December 2021 - December 2026 | CABEI | 4.92 million euros - Latin America and Caribbean Investment Facility (LACIF) | Belize, Dominican Republic, Colombia, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama | Minimum 8 projects for technical assistance, 5 for external financing, 8 pre-feasibility and viability studies, 2 environmental and social studies | #VALUE! | https://www.eulaif.eu/es/proyectos/fondo-de-preparacion-de-proyectos-de-innovacion-para-el-cambio-climatico |
| TIF - Triple Bottom Line Inclusive Finance in Latin America: Promoting climate-smart finance and improved access | Banking and financial services | Providing financial services at all levels – taking a more inclusive approach at the base of the pyramid – and promoting climate-smart finance | October 2020 - October 2025 | COFIDES, AECID | 6.05 million euros - Latin America and Caribbean Investment Facility (LACIF) | Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Peru | Improve the scope, scale, and depth of financing for SMEs, and mitigate environmental risk and implement climate-smart practices (better service quality from a climate change perspective), especially in agriculture | #VALUE! | https://www.eulaif.eu/es/proyectos/triple-bottom-line-inclusive-finance-latin-america-promocion-de-las-finanzas |
| Green MSMEs II - Instrument for Promoting the Ecological Initiative for Micro, Small and Medium Enterprises in Central America | SMEs | Reducing carbon emissions in the Central American region by offering financial and non-financial services to support renewable electricity generation and energy efficiency measures in micro, small and medium-sized enterprises. | December 2018 - December 2024 | KfW, BCIE | 14.38 million euros - Latin America and Caribbean Investment Facility (LACIF) | Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama | Reduction of 57,000M tonnes eq/year of CO2 emissions; 26 MW of additional electricity capacity from renewable sources; 44 million euros in new funds available for financial intermediaries; support for 100 project studies and energy audits. | - Seed capital was awarded to 58 entrepreneurs and MSMEs in Panama City. Panamanian applicants received technical support from the City of Knowledge Foundation's Business Development Center to enhance the quality and viability of their proposals (2025). - Six awards were presented in Panama City to 25 women entrepreneurs through a program implemented by INCAE Business School's Center for Inclusive and Sustainable Leadership (2025). - A CIFEm workshop was held in David, Chiriquí, where women from fishing communities learned to transform fish skins—previously considered waste—into accessories with commercial value (2025). - The "Capacity Building for the Energy Transition" panel was held as part of the XII Corporate Social Responsibility Week (2023). |
https://www.eulaif.eu/es/proyectos/instrumento-de-fomento-de-la-iniciativa-ecologica-para-las-micro-pequenas-y-medianas |
| Promoting investments in climate change adaptation and integrated water resources management for the water sector in Latin America, within the framework of the Spanish Cooperation Fund for Water and Sanitation (FCAS) | Water and sanitation | Improving water supply and sanitation infrastructure and contributing to reducing the risk of diseases caused by poor water management in the Latin American region | December 2013 - December 2024 | AECID, IDB | 15.3 million euros - Latin America and Caribbean Investment Facility (LACIF) | Argentina, Bolivia, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay, Venezuela | Support was provided for the inclusion of climate change adaptation (CCA) measures (particularly those related to extreme events such as drought and flooding) in both water and sanitation sector policies and investments. Policy and investment development in the sector was also influenced by promoting solutions tailored to the needs and capacities of the population. Eleven studies in seven countries were funded, and four additional regional initiatives were launched. | Defining a roadmap to improve hydroclimatic services through two pilot projects in Panama and Costa Rica | https://www.eulaif.eu/es/proyectos/promocion-de-las-inversiones-en-la-adaptacion-al-cambio-climatico-y-en-la-gestion y https://www.aecid.es/en/laif-regional |
| eco.business Fund for the Development of SMEs in Latin America | SMEs | Promote investments that offer both financial and environmental returns | December 2016 - February 2023 | KfW, Finance in Motion | 16.41 million euros - Latin America and Caribbean Investment Facility (LACIF) | Dominican Republic, Brazil, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru | 4,059 loans granted by the fund's partner institutions with resources provided by the fund, USD 489 million in accumulated loans to partner institutions, 271,000 hectares of cultivated land under sustainable management, 380,000 direct jobs supported, 169,000 m³ of liquid waste treated or recycled | Satellite monitoring to guarantee forest protection safeguards in carrle end-borrowers; Training Sponsorship Programme; Client feasibility assessment for sustainable agricultural finance; Green financial products to enhance transformation | https://www.eulaif.eu/es/proyectos/ecobusiness-fund-para-el-desarrollo-de-pymes-en-america-latina |
| DYNAMICS I - Development of Business Ideas and Acceleration of Central American MSMEs | SMEs | To promote the development of the private and business sector to generate jobs and income, thereby contributing to economic development and poverty reduction in Central America | December 2013 - September 2022 | KfW, BCIE | 3.95 million euros - Latin America and Caribbean Investment Facility (LACIF) | Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama | More than 10 Business Development Centers, more than 93 innovative new companies, and 9 financial institutions | #VALUE! | https://www.eulaif.eu/es/proyectos/desarrollo-de-ideas-para-negocios-y-aceleracion-de-las-mipymes-centroamericanas-dinamica-i |
| Urban Public Transportation Improvement Program | Transport | Promote public investment in urban mass transit systems in major Latin American cities, based on the use of clean technologies and energy efficiency to meet the growing demand for public transport — particularly from the most vulnerable segments of the population — while mitigating its environmental impact | December 2013 - December 2019 | KfW, CAF | 3.15 million euros - Latin America and Caribbean Investment Facility (LACIF) | Panama, Peru | Improvement of transport infrastructure in the main urban areas of the beneficiary countries, including reduction of journey times, energy consumption and CO2 emissions | - Formulation of the Comprehensive Sustainable Urban Mobility Plan (PIMUS) for the District of David and the surrounding areas of the province of Chiriquí - Study for the definition of a new public transportation system (STP) in the historic center of Panama City |
https://www.eulaif.eu/es/proyectos/programa-de-mejoramiento-del-transporte-publico-urbano |
In addition to LACIF, other European Union blending instruments also support activities in Panama.
| Huruma Fund | Agriculture | Improve access to finance in rural areas and the financial offer to small or excluded farmers | Since 2020 | COFIDES, GAWA Capital, AECID | 10 million euros - AgriFi Thematic Facility | Latin America, the Caribbean, Sub-Saharan Africa and Asia | The Fund would contribute to poverty relief for approximately 45,000 agricultural producers. | - Business Finance Center (CFE), one of Panama's most inclusive microfinance institutions, offering financial products to micro, small, and medium-sized enterprises (MSMEs) in the central-western region of Panama: €3 million in loans for projects that contribute to meeting the needs of underserved farmers (2021). - Microserfin, a leading institution focused on financial inclusion for the most vulnerable micro-entrepreneurs in all regions of Panama: €2 million in loans (2021), and technical assistance to improve credit methodology and agricultural risk management (2023-2025). |
https://fondohuruma.com/ |
| Better Futures Programme | Energy, Manufacturing, Agriculture, Climate | Mobilise private investment at scale for innovative solutions to climate change, fragility, conflict and crisis response, job creation, and inclusive growth, with focus on (a) resilient livelihood: conflict and fragility; regional and global impacts and (b) innovation for climate: decarbonisation and climate resiliency | April 2025 - April 2028 | International Finance Corporation (IFC) | Guarantee volume up to €291 million; Technical assistance up to €4 million - Better Futures Programme | Asia and the Pacific, Latin America and the Caribbean, Sub-Saharan Africa, Eastern European Neighbourhood countries, Southern European Neighbourhood countries, Western Balkans, Türkiye | https://international-partnerships.ec.europa.eu/funding-and-technical-assistance/funding-instruments/european-fund-sustainable-development-plus/better-futures-programme_en |
