This document discusses various sources of financing for local infrastructure projects in developing countries, including pensions funds, remittances, foreign direct investment, aid, and climate funds. However, it notes there are inadequate policy and regulatory frameworks that prevent private capital from flowing to local infrastructure. Specifically, capital markets are reluctant to provide funding due to perceptions of high risk, inexperience with financing approaches, and lack of information about projects and sponsors. The document argues these market imperfections must be addressed by supporting project development to meet bankability standards, providing structuring and advisory support, and using tools like credit enhancements and risk guarantees to mobilize private financing for local infrastructure in developing countries.

1. Pensions funds (2015) : 14,8 Trillions
Remittances (2016, WB) : 575 Trillions
FDI (WB, 2015) : 2,1 Trillions
Aid (DAC, 2016) : 146 Billions
Green Climate Fund (to be mobilized) : 100 Billions
Cities growth : from 5 to 10%
Transformative agenda of LDCs
From fiscal decentralization to Inclusive dvt
Inclusive development
Local Economic Development
Urban-Rural linkages
Address the missing link
Domestic Finance ?
External Financing

2. INADEQUATE POLICY, LEGAL AND REGULATORY FRAMEWORKS
Problems ? Solutions ?
Capital
markets
Reluctant to
provide
capital for
investment in
local
infrastruc-ture
Project
sponsors
Unable to
raise capital
for local
infrastruc-
ture
Lack of confidence about the technical ability of the project
sponsor(s) to complete/ run the project and service the loan
Lack of confidence about the bankability (feasibility and
profitability) of the project
Lack of investment products that allow affordable and longer-
term loans for local infrastructure investments
We need to address in a systematic way the imperfections in capital markets that prevent private
debt and equity investments in local infrastructure
• High perceived risks of investment
• Lack of experience with advanced financing
approaches
• Lack of information about project sponsors
• Lack of information about investment
opportunities in local infrastructure
• Lack of own capital
• Lack of relevant technical expertise
• Lack of relevant financial expertise
• Inadequate access to capital, whether equity or
debt, particularly at the local level
• Lack of investment experience with development
sector
High transaction costs of investment in small local infrastructure
Support to project development to meet the bankability standards of
feasibility and profitability
Support to project structuring: organizationally (SPV, PPP, etc.) and
financially (the optimal capital structure)
Credit enhancements, risk guarantees and “equity” loans
Pipeline assessment and development

3. What to Target?
New flows of
private capital
for LD
Project sponsors
(private companies, local
government, co-ops)
Governments and
Local Governements
Local TS Providers
(research, legal and financial
advisory firms)
Investors
(domestic financial sector : banks,
pension funds, equity providers)
Development partners
Support in development,
financial and legal
structuring of bankable
projects ; technical
studies; de-risking
projects
Support in preparation (minimize
transaction costs) and risk
reduction through credit
enhancements, guarantees,
pipeline development
Support in identification and
realization of opportunities for
financing local infrastructure with
private capital; inform enabling
environment, develop PPP
Support in structuring and delivering
technical and advisory services to meet
bankability criteria
Support in design and establishment of
financial support mechanisms to
unblock private capital for local
infrastructure; support for alignment
of aid along development and finance
continuum.