By Damas Makangale, Dar es Salaam, Tanzania 

The UN Capital Development Fund (UNCDF) has designed a Local Finance Initiative Programme (LFI) to support 25 infrastructure projects that are expected to access USD 26 million of domestic capital in the form debt and USD 3 million of grants.

Speaking to the East African Business Week last week in Dar es Salaam in sidelined of three day technical workshop on project finance to financial institutions, UNCDF’s Chief Technical Advisor, Peter Malika said that the LFI is supporting 25 infrastructure projects at different stages of development originated by public and private developers.

“These projects spread across agro-processing renewable energy, community infrastructure, telecommunications and industrial manufacturing sectors,” he said.

He said LFI is designed to unlock the financial sector to finance small and medium sized infrastructure projects that are required to accelerate local development.

Malika noted that the workshop is part of a series UNCDF hosts each year to educate both private and public infrastructure project developers and lenders about innovative tools in the field of project finance.
“During this workshop, UNCDF technical team outlined the innovative tools including limited recourse financing, risk mitigation strategies, the contracting sequence and the basic terms and conditions that can be expected from each contract,” said UNCDF Chief Technical Advisory, Malika.

He underscored that the LFI programme which is implemented in partnership with the government of Tanzania and it is designed to promote sustainable, inclusive and equitable growth by developing local investment opportunities that can deliver transformative impact.

In the process of promoting sustainable growth for local investment the programme also support the projects to get financing through the private sector and preferably domestic capital markets.

Malika went on to say that the design phase of the programme confirmed that domestic capital is not used to support small and medium scale infrastructure investment at the rural and sub national level.

The UNCDF delivers the LFI approach and its methodologies to select group of projects and their developers through development and financing stages. In other words, projects that are otherwise un-bankable are de-risked and taken to an investment read stage where they are prepared to access commercial capital.

He explained further that the selection projects is based on impact to local communities, potential for commercial viability, priority infrastructure areas such as energy, agro-processing, public facilities infrastructure and industrial small and medium size infrastructure.

Malika said that the risks that are present at all stages of project development are pre-feasibility, investment, construction, implementation and operation that require significant capacity and experience of the developer in order to be properly managed and mitigated for investors, lenders, contractors and other third parties.
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