Supporting capacity building for market development and financing

Infrastructure investment in developing countries is impeded by poorly developed financial markets, products, and institutions, as well as high political, credit, currency, and economic risks, the lack of local capacity to adapt technology, and the lack of infrastructure to deliver services.  Financing has been largely the domain of public agencies and private investment is limited.

To support renewable energy project financing, Bank projects often implement finance mechanisms that can:

• Overcome lending limitations within the local project financing system
• Provide capacity building for participating financial institutions
• Channel grants or concessional financing to support project implementation. 

Grid-connected renewable energy projects have relatively large capital requirements, and effective finance mechanisms are generally designed to improve the access of developers to capital (both equity and debt) and reducing the risk of financial institutions that lend to these projects.   In addition, several international finance initiatives exist for renewable energy.