Government-Investor Networks (GINs)
Short-Hand Tool to Assess Project Funding Sources
Objective
At the early stage of project definition, enable an initial short-hand assessment of project fundamentals and the resulting potential funding sources.
Description
This excel-based evaluation tool is designed to help project owners and their consultants in the very early stages of project definition to assess a project’s fundamentals and likely funding sources, identifying the types of finance most suitable.
The tool uses key six project fundamentals that are used by financiers in their evaluation of project creditworthiness (often referred to as “bankability” or “investability”). The tools asks the user to answer questions on the project fundamentals using a simple scoring approach. The resulting score indicates the funding source that may be suitable for the project based on the user’s answers. If the project fundamentals are improved, a greater range of funding sources may be available.
Partners
The tool was developed by GlobalDF with the support of the Covenant of Mayors in Sub-Saharan Africa, GIZ, and the European Union.
Invitation to Partner
GlobalDF invites interested parties to help refine and apply tools early in the project definition process to improve the bankability of projects.
Details
Six project fundamentals influence what funding approach is most suitable:
–Revenue certainty: Return is a key determinant for securing finance from the private sector. In the case of debt investors such as commercial banks, they will need to ensure that the project generates sufficient revenues to cover debt service in a timely manner (interest and principal payments) even under adverse conditions.
–Four key risk factors: Operational, capital expenditure, technology, environmental & social
–Ability to access guarantees and/or credit enhancements and extent of coverage: Risk mitigation interventions can mitigate risks and increase the project’s revenue certainty.
The tool sets forth questions for each of the above six fundamentals as detailed below.
Revenue certainty has seven scoring factors totaling a maximum of 35. Each factor is scored 0 to 5, with 5 being the highest score.
Revenue Certainty: Key Factors & Scoring
The four key risk factors are scored a maximum of 35 points, underlining key project characteristics that determine the level of risks.
Four Key Risk Factors of a Project & Use of Scoring
An example of risk factors is provided in the table below for projects for integrated waste management (IWM) or waste treatment and reuse (WWT&R).
Illustration of the Scoring Approach for Risk Factors of IWM and WWT&R Projects
Guarantees and Credit Enhancements: The last factor used to generate a total project score is the extent to which the project can access guarantees and/or credit enhancements. Such interventions can mitigate risks and increase the project’s revenue certainty. As with the other questions, a score between 0–5 can be assigned based on whether a guarantee and/or credit enhancement mechanism is available to mitigate project risks and the extent to which risks are mitigated.
Final Scoring
The average of the six above scores will produce a total score that is divided to provide a total average score between 0–5. This average score is used to indicate an initial assessment of potential funding sources for the specific project.
In the illustrative project provided below, the average score of 3.8 out of a range of 0–5 indicated that the project may be implementable via a PPP provided it can access grants and/or concessional finance.
Final Tool Evaluation
The table below provides an example of what the excel-based short-hand tool provides to the user based on their responses to the questions
Examples of Tool Evaluation for Selected Project
For more details on the approach, click here.
Tool extract (extract)
To download the tool, click here.
User guide (extract)
To download the user guide, click here.
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