The Master's thesis examines the effectiveness of blended finance mechanisms as a tool of international development assistance in achieving the Sustainable Development Goals. By placing the concept of international development assistance in the context of North-South relations, it demonstrates that donor countries often promote market liberalization and deregulation and direct investments towards projects that rely on the exploitation of natural resources for international markets, without necessarily contributing to the long-term well-being of local communities. Based on the theory of human development and the capabilities approach, the Master's thesis develops criteria for assessing the effectiveness of projects in terms of the extent to which they enhance the capabilities of local communities to realize their own potential, focusing specifically on the seventh Sustainable Development Goal. These criteria are applied to a case study analysing a portfolio of projects financed by the Neighbourhood Investment Platform in the energy sector in Georgia between 2008 and 2020. The Master's thesis demonstrates that while blended finance mechanisms have the potential to effectively support the achievement of the Sustainable Development Goals, they also reproduce some of the shortcomings of the existing aid practices. They may have a positive impact on the systemic environment in recipient countries, but the strengthening of the capabilities of local communities remains only indirect.
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