Bankability in Infrastructure Projects: More Than Just a Bank's Concern

Author: Rob Holmes

In my last opinion piece I spoke about the investable project pipeline discrepancy, as highlighted by the World Bank, and how the lack of availability of investible projects was a direct result of the lengthy project development and financial close stages.

Here, I would like to continue along the theme that the investment gap in infrastructure is not the result of a shortage of capital, but in finding bankable and investment-ready projects. But let’s first of all define what we mean by bankability in the context of infrastructure projects in a very simple way.

Bankability means making projects attractive and secure enough to secure financing from banks, investors, or financial institutions. When a project is considered "bankable", it means that it is financially viable and has a solid plan for repaying loans or generating returns on investments.

Project bankability is therefore key to attracting investments from various sources, including banks, private investors, and financial institutions, but also in ensuring that an infrastructure project is financially viable and sustainable for the project owner. The consequences of a project being deemed as “non-bankable” are significant. It means the project will face difficulties in securing financing, which can lead to project delays or cancellations and as a result hinder economic growth and development goals. It also leads to a considerable waste of resources in terms of time, money and expertise, and can cause significant reputational damage in the case of repeated non-bankable projects.

Debunking Common Misconceptions: Bankability Beyond Banks

Another article by the World Bank highlights that there is often a lack of understanding of what factors constitute, and more importantly, which parties contribute the most to - making infrastructure projects bankable. It points to a common misconception: that bankability is solely the purview of banks. In other words, that bankability is exclusively under the control or authority of banks. But in reality, bankability involves more than just the actions or decisions of bankers.?

The task of bankers is to assess the bankability of an infrastructure project by looking at its risk profiles, and, if the riskiness of the potential investment is found to be acceptable, provide the risk capital. This highlights a critical issue in investment decisions, risk, and how designing an optimal risk-sharing protocol at the project development phase is at the crux of ensuring bankability. What this comes down to is if the risks are not allocated to the right stakeholders very early on during the project development phase, the consequences of this initial failure ultimately leads to the inability for projects to find lenders, and having to rectify these issues at a later stage is ultimately an expensive exercise that could render the project not financially viable.

Empowering Infrastructure Finance Professionals with Silta AI

This is where Silta AI comes into play. Our platform will serve financial institutions, professional services firms, and infrastructure developers by providing advanced Artificial Intelligence technology solutions for bankability assessments and project preparation.? It can be used by infrastructure developers as a means for developing bankable, investment-ready projects, supporting the generation of project preparation documents. With regards to project risks, by analyzing a vast array of data points, it will identify and quantify risks related to construction, financing, regulatory compliance, and more. This allows project developers to understand potential pitfalls and take proactive measures to mitigate risks. It will also support the production of risk allocation matrices that align with the market and lenders appetite.

Silta offers two main options for its AI-powered tools:

1. SaaS Solution: Utilizing Silta’s proprietary 360 data point model for comprehensive, AI-powered bankability assessments.

2. Customised Solutions: Tailored AI-powered bankability assessment and project preparation solutions.

In both cases, Silta AI connects to the customer’s databases to feed the assessments, ensuring a high level of customization and relevance.

Infrastructure developers, financial institutions and due diligence providers like law firms can’t afford to ignore this technology. Silta AI will offer such a competitive edge in terms of efficiency and quality of its outputs that traditional service providers will find it almost impossible to compete with their existing manual processes. If you’re involved in infrastructure finance in any capacity, now is the time to consider how Silta’s AI powered tools can make your projects more bankable. Reach out to our team at [email protected] if you’re keen to integrate this technology into your project preparation or loan origination processes.