Developing Bankable Transport Infrastructure Projects: Case Studies, Experiences and Learning Materials for LLDCs and Transit Countries

Identification and Preparation of Bankable Transport Infrastructure Projects to Improve Transport Connectivity

This learning module was developed for capacity building activities to strengthen capacity to develop bankable transport infrastructure projects and transport connectivity in landlocked developing countries and transit countries. It was commissioned by the United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS) in collaboration with its partners UNESCAP, UNECA, UNECE, UNECLAC, African Development Bank, and Asian Development Bank. UN-OHRLLS and partners worked with Mr. Glory Jonga in preparing the training materials. The views expressed do not necessarily reflect those of the United Nations.

The funding for the preparation of these learning materials was made possible through the project led by UN-OHRLLS entitled: Strengthening the capacity of Landlocked Developing Countries under the “Belt and Road Initiative” to design and implement policies that promote transport connectivity for the achievement of the SDGs which is funded by the 2030 Agenda for Sustainable Development Sub-Fund - United Nations Peace and Development Trust Fund.

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Key Objectives of the Module: § To train participants on how to identify and develop bankable transport projects (business case development).

Defining the term “Bankable”

“The investment gap in infrastructure is not the result of a shortage of capital. Real long-term interest rates are low, there is ample supply of long-term finance, interest by the private sector is high and the benefits are obvious. The main challenge is to find bankable and investment-ready projects.” – The Business Twenty (B20) Taskforce (2017)1

There is no universal or one size fits all definition of the term “bankable” when referring to bankability of infrastructure projects. Although projects are commonly termed “bankable” if lenders are willing to finance them, the definition can vary depending on perspective and financier.

§ From a commercial lender’s perspective, bankability of a project may be defined as the level of willingness of the prospective lender to finance the project, that is, what amount and under what conditions. Higher bankability means access to more funding and/or better conditions in terms of the amount of debt (leverage), the loan term and the loan costs. Lenders are concerned about the risk profiles of the project and as such, the riskiness of their investment decisions. If a prospective lender considers the project to have an unacceptable level of risk and uncertainty, they will not provide finance and the project will not be bankable. § From the private sector perspective, bankability refers mainly to financial returns and determining whether the project will be profitable for an investor. The costs and benefits of the project, and hence the profitability and potential financial returns of the project, are key aspects of bankability for private investors. These factors, together with the potential risk-return ratio often determine private sector interest. § From the public sector perspective, a bankable project can be one that responds to national priorities and considers citizen’s needs and concerns. Emphasis may be placed on social returns, employment, developmental potential as well as financial soundness and cost-effectiveness. But the public sector also has a tendency to fund flagship high-profile projects that are used as a tool for geopolitical strategic interests by politicians. § From the donor’s / development partner’s perspective, emphasis is strongly placed on developmental potential as well as the social impacts and social returns of a project when considering funding. Higher weighting is placed for social considerations such as p