Description

Bankability barriers are challenges that lead to a lack of investment-ready projects. They include:

Lack of bankable or investable projects: Lack of bankable or investable projects due to innovative or early-stage nature of adaptation businesses and SMEs or inadequate project preparation.

Difficulty in aggregating or securitizing projects: Difficulty in aggregating or securitizing many small-scale projects due to local contexts and disparate level of development.

Lack of transparent and bankable pipelines of projects: Adaptation in ecosystem sectors is often overlapping with flood risks management and land-use planning which have significant public good characteristics making it difficult to build an economic case.

Complexity of project due diligence: High cost of project preparation for large-scale infrastructure projects.

Costs of continued maintenance: Assessing revenue risks can be a significant challenge for project developers especially for product expansion to rural customers with no credit histories.

Risk of negative social impact: The majority of Sub-Saharan African countries have underdeveloped capital markets, meaning the only viable option for financing infrastructure projects is through foreign currencies such as the dollar or euro.

Currency and interest risk: Adaptation projects involve infrastructure that is are often publicly owned and operated and therefore private sector involvement may not be feasible or beneficial in all cases.

Availability of disaggregated climate data: Even in cases where investments in resilience of transport assets is successful, roads and other transport assets face considerable continued maintenance and operations costs requiring very long-term finance structures.

High costs: Lack of transparent and bankable pipelines of projects arises from the absence of long-term development plans and failure by many African governments to communicate infrastructure needs to investors.

Lack of enabling environment: Inadequate risk-adjusted returns where returns do not compensate investors in developing countries for the additional risk associated with unfavorable regulations and policies, including foreign investment restrictions.

Siloed approaches where multi-sectoral, cross boundary solutions are needed: There can be significant licensing barriers and lengthy project development cycles which are even more relevant for projects that also require proof of adaptation and reduce the pool of financeable projects. Multiple rounds of financing for complicated infrastructure increase costs and time to develop.