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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