Blended finance has emerged in response to an estimated USD 2.5 tn annual gap in financing. Its justification, however, rests almost entirely on the claim that it delivers results which could not otherwise occur. But proving this additionality is a challenge, as it is inconsistently defined, frequently unevaluated, and even where it is evaluated, it is assessed using disparate methods that often fall below normal evaluation standards.
This article draws on the methodologies of major multilateral and bilateral institutions to examine how additionality is currently defined and measured, what structural gaps exist and what best practice ought to resemble.
Defining and measuring additionality
The concept of additionality rests on two fundamental pillars: financial additionality and non-financial additionality. Financial additionality applies where finance is mobilised and an investment is made that would not have materialised otherwise, or where support is extended to borrowers who could not obtain comparable terms or amounts from private capital markets. This can manifest as longer tenors, subordinated debt, local currency financing, or equity in markets deemed too risky by commercial lenders. In the African agro-industrial context, this is particularly relevant as almost half of formal African agrifood SMEs face an acute financing gap, where they are too large for microfinance but too small or risky for commercial bank lending.
Non-financial additionality refers to the development impact arising from investment that would otherwise not have occurred. This might relate to the knowledge, standards, and convening power that a DFI brings beyond its capital. It includes introducing international environmental, social, and governance (ESG) standards, providing technical assistance, de-risking an investment, and fostering policy dialogue. For African agro-industrial projects, non-financial additionality is often more important than the capital itself, as DFIs can help build the institutional and market infrastructure that enables private investment.
Structural challenges and gaps in demonstrating additionality
Several persistent structural challenges undermine the ability to credibly prove additionality in African agro-industrial investments. These include the difficulty of proving a counterfactual and the thin data available to test it, the challenge of evidencing non-financial claims, the incomparability of different frameworks, and the transaction costs of appraising and monitoring small, dispersed agricultural investments.
The most fundamental challenge is proving the counterfactual, namely, demonstrating what would have happened in the absence of the DFI’s intervention. It is inherently difficult to prove a negative. In fact, the World Bank’s Independent Evaluation Group (IEG) has itself acknowledged that in some cases, International Finance Corporation (IFC) investments in more commercially viable agribusinesses may not have been fully additional, as the clients could have potentially accessed similar financing elsewhere.
This challenge is compounded by weak data. Official agricultural statistics across much of Africa are under-resourced and often outdated, leaving assessors without a credible baseline against which to measure an investment’s effect.
Demonstrating non-financial additionality, such as improving environmental and social standards, is similarly hard to establish. To be credible, a claim of non-financial additionality must be backed by evidence of measurable improvement. Claims of “improved standards” only carry substance if they lead to tangible changes in environmental or social performance, such as reduced food loss or improved resource efficiency.
For instance, much of the additionality created by the IFC’s EUR 20 mn investment in Soufflet Malt came via its advisory services. These services were provided to 55,000 smallholder farmers, helping to integrate them into local markets. The project’s additionality was therefore measurable in the volume of malt imports substituted, the number of farmers integrated into the formal supply chain, and the increase in farmer incomes.
But many current frameworks often struggle to capture broad, systemic and catalytic effects such as these. An investment in a single food processing plant, for example, may have catalytic effects on the surrounding agricultural value chain by stimulating smallholder production, encouraging ancillary services, and demonstrating commercial viability to other investors.
These indirect effects are not always measured by existing additionality frameworks and may be difficult to attribute to a single intervention. Instead, stated benefits tend towards the generic, with additionality often being asserted rather than argued. Which is to say that only a few institutions set out how their capital is expected to produce the desired outcome, and fewer still make that argument a condition of approval.
Similarly, whether the additionality claimed at approval was in fact delivered, is seldom evaluated after disbursement, and when additionality is assessed, it is mainly done by asking beneficiaries whether they could have obtained comparable support from the market. This creates an obvious incentive problem as the respondents have every reason to say the support was necessary. Naturally, integrating a more dynamic assessment that tracks additionality throughout the project lifecycle, not just at the point of approval, would provide considerably more assurance and credibility.
Comparing competing frameworks with one another is challenging too, as they rarely define additionality against the same objectives. Some consider how much additional finance was mobilised, others focus on inclusivity, value creation or sustainability. For instance, The International Fund for Agricultural Development (IFAD) tends to look at additionality through the lens of smallholder farmer integration and rural transformation while the IFC’s Anticipated Impact Measurement and Monitoring (AIMM) System emphasises market creation. While both of these are defensible positions, neither produces a number that is directly comparable to the other.
There is also a paradox beneath these measurement problems. Additionality is easiest to generate precisely where it is hardest to deliver: among the smallholders and agri-SMEs. The transaction costs of appraising and monitoring small, dispersed agricultural investments are high and providing additionality in this space is likely to require a greater appetite for risk and an explicit acceptance of higher transaction costs.
Emerging standards and global best practices
For most of the past decade, additionality has been a claim institution made about themselves. The institutions used internal scoring systems that rested on self-assessment and internal processes. The case for additionality was made internally, as was the decision to approve it, and few external parties were involved. This is beginning to change.
The clearest example is the 9 Principles framework, which requires signatories to commission independent verification of their impact at regular intervals. Signatories who fail this requirement are removed from the list.
Similarly, IEG’s practice of evaluating realised additionality as opposed to anticipated additionality, and the OECD’s 2025 update to its DAC Blended Finance Guidance which raises the expected standard of additionality disclosures, impact and financial performance signal that the burden of proof is growing and being tested more rigorously.
Ultimately, these developments point to an emerging standard that would require additionality to be argued at approval against a stated counterfactual, verified independently at the claim level, re-examined after disbursement and then measured after project completion.
Toward a more rigorous standard of proof
Proving additionality in African agro-industrial investments is not easy. Frameworks, standards, and measurement techniques have improved, but structural barriers and significant gaps remain, particularly with regard to capturing systemic, catalytic, and indirect effects. Ultimately, the credibility of these claims will depend on greater transparency and evidence-based reporting. Adopting emerging standards will be essential for building trust among stakeholders and ensuring that resources are deployed where they are most beneficial. By focusing on solving constraints and leveraging blended finance to unlock the missing middle, DFIs can catalyse the transformation of Africa’s agro-industrial sector and turn its agricultural potential into productive capacity.
At Farrelly Mitchell we work with governments, DFIs and NGOs by providing the strategic, technical, and operational expertise required to build resilient, locally anchored food systems. Our advisory work includes green finance, food security, policy and regulation, regenerative agriculture, food loss and waste, agro-industrial parks and much more. Our food security and agribusiness policy experts build the institutional models, technical roadmaps, market intelligence, and regulatory assistance required for our clients to deliver on their food-security and capacity building ambitions. From site selection and policy design through to inspection systems and workforce development, we support delivery at every stage of the project’s lifecycle. Contact our experts today to discover how we can help you build the technical and regulatory infrastructure to safeguard your region’s food supply and boost agricultural productivity.
