Cambridge Economic Policy Associates (CEPA) completed a yearlong wide-ranging research programme that was funded by the United Kingdom’s Department for International Development (DFID). The aim of the programme was to understand the main constraints on the flow of private capital to infrastructure projects in DFID’s focus countries in Sub-Saharan Africa (SSA), excluding South Africa. The research has included:

A comprehensive literature review of available studies on the barriers to increasing private finance in infrastructure investment in SSA and South Asia.
Detailed country case studies for Ghana, Kenya, Mozambique and Nigeria. These are based on country visits to conduct face-to-face consultations with stakeholders, telephone consultations, and desk research on the constraints on the private provision of infrastructure finance in each country. In addition to these comparator case studies were completed on the Indian and South Africa infrastructure markets.
Research to consider if there are any barriers specific to regional infrastructure projects.
A report on the barriers to finance from OECD countries.
A policy options paper which explores options to address the problems identified.

The main finding of the research is that a shortage of bankable projects is the major constraint on mobilizing private capital and is more significant than the lack of availability of finance on suitable terms in DFID’s focus countries in SSA. The research found that many of the projects that are developed are typically not creditworthy, primarily due to the risk associated with their own revenue streams. To deal with this issue, projects need to be offered to the market with appropriate structures and support packages that mitigate these risks.

In terms of sources of finance, CEPA found that there is a lack of availability of long-term, local-currency bank and institutional finance. The commercial-bank local-currency finance that exists has generally been for the…