Credit Enhancement for Green Projects

This paper looks at infrastructure development from the specific angle of leveraging private finance in order to mainstream green infrastructure financing using existing credit-enhancement schemes.

While there are a large number of credit-enhancement schemes offered by multilateral development banks (MDBs), the uptake of such schemes is minimal due to several factors. Risk mitigation is key to securing private financing. The credit-enhancement method provides a medium wherein the exposure for the lending institution is comparatively less and the benefits for the recipient borrower are high.

This paper seeks to provide an overview of the schemes on offer by MDBs and international financial institutions (IFIs) to create a basis of comprehension for all players involved—governments, project developers, local lenders and MDBs. Anecdotal and analytical information gathered through case summaries and successful projects help provide a path for future projects in mitigating risk and obtaining financing. The case studies include green infrastructure as well in order to understand the steps necessary for success in more technical and technologically challenging projects.

A more effective utilization of available credit-enhancement schemes can be done through innovative combinations with greater knowledge dissemination and clear project risk identification.