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Credit Enhancement for Sustainable Development

Credit enhancement is a collective term for de-risking instruments that transfer key project risks of an infrastructure projects to third parties and by this, enhance the financial viability and investment conditions of the project. 

Policy-makers and infrastructure planners are tasked with spurring economic and social development by deploying infrastructure projects and closing the infrastructure gap.

They face difficulties due to budgetary constraints, debt ceilings, narrow capital markets, and a wide range of commercial and political risks. All these challenges affect the financial attractiveness of infrastructure projects.

IISD developed the inventory on credit enhancement instruments to address these challenges. The inventory covers a range of instruments offered by multilateral development banks, bilateral development finance institutions, guarantee facilities, insurance companies and export credit agencies. Explore the inventory online today.

We also interviewed a wide range of representatives of credit enhancement providers to gain a comprehensive understanding of the current landscape. Based on their inputs and IISD´s experience in the space, the research paper discusses key supply and demand side barriers that impede a more widespread use of credit enhancement instruments and highlights possible ways forward. Read the paper online.

Credit enhancement is a collective term for de-risking instruments that transfer key project risks of an infrastructure projects to third parties and by this, enhance the financial viability and investment conditions of the project. 

Over the last four years, IISD’s infrastructure advisory services have shed light on the reality that policy-makers and infrastructure planners have limited expertise in infrastructure planning. This includes a lack of knowledge on how to financially structure infrastructure projects and make use of credit enhancement instruments that mitigate risks and enhance the financial attractiveness of projects. This knowledge gap is particularly problematic in scaling up sustainable infrastructure. In most countries, sustainable infrastructure calls for higher capital costs. Credit enhancement hence becomes even more valuable, as policy-makers can use these instruments to increase the financial feasibility of the project.

 

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