4.2. Providers of finance

The main providers of finance for the PPP project are:
  • Equity investment from project promoters and individual investors
  • National and foreign commercial banks and financial institutions
  • Institutional investors
  • Capital markets
  • International financial institutions

Loans provided by national and foreign commercial banks and other financial institutions generally form the major part of the debt capital for infrastructure projects. The rate of interest could be either fixed or floating. Loans are normally provided for a term shorter than the project period. Often two or more banks and financial institutions participate in making a loan to a borrower known as syndicated loan. Refinancing of the loan is required when the loans are provided for a maturity period shorter than the project period.

In addition to commercial banks, international and regional financial institutions such as the World Bank or the Asian Development Bank often provide loans, guarantees or equity to privately financed infrastructure projects.

Institutional investors such as investment funds, insurance companies, mutual funds, or pension funds typically have large sums available for long-term investment and could represent an important source of funding for infrastructure projects either through private placement or via bonds purchases.

 

Copyright © 2008 by Transport Policy and Development Section, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).