Mobilizing private sector investment is a cornerstone of successful public-private partnerships (PPPs). This section highlights key instruments, strategies, and concepts that help attract and structure private capital for infrastructure development, particularly in emerging and developing markets.

Key topics include:

• Investment Pooled Vehicles
  Collective investment structures that aggregate capital from multiple investors to finance infrastructure projects, reducing risk and increasing scale. Examples include infrastructure funds and special purpose vehicles (SPVs).

Risk mitigation is a critical aspect of project financing, aimed at protecting stakeholders from potential financial, political, and market-related uncertainties. A wide range of instruments and mechanisms are available to manage these risks effectively and enhance the bankability of projects. 

This sector looks at Intercreditor arrangements, financial intermediaries and risk mitigation instruments. 

Government Support in PPP Projects 

PPPs inherently require public sector involvement.  The type and extent of government support differ by context - varying across countries, sectors, and project types - but typically encompass direct financial contributions, in-kind support (such as provision of land or equipment), contingent liabilities, and broader risk mitigation tools and institutional frameworks. These support mechanisms are critical to improving project bankability, managing risks, and ensuring service delivery, especially in developing economies where private capital is most needed. 

Government Financing 

Government financing in PPPs refers to situations where the public sector raises funds, typically through borrowing or budget allocations, and injects them into PPP projects via grants, loans, equity investments, or guarantees. Given constraints on fiscal space and debt capacity, such financing must be used judiciously, focusing on projects that are economically beneficial but lack commercial viability.

Governments often step in with direct financial support when projects face challenges in achieving bankability or when specific risks cannot be effectively managed by private parties alone. This is especially true in developing economies, where capital markets are less mature and risk perceptions are higher.

Key forms of government financial support include:

• Cash or in-kind contributions to reduce upfront capital costs, such as construction expenses, land provision, or procurement of essential assets.
• Fee and tax waivers, including exemptions or deferrals to ease the financial burden on the project company (e.g., tax holidays).
• Loans or equity contributions, including mezzanine debt or Viability Gap Funding (VGF), to address funding shortfalls.
• Tariff enhancements, such as shadow tolls or subsidies to ensure affordability and reduce demand risk—particularly in water, electricity, and transport sectors.

Most PPPs require some form of government backing to become viable. When properly targeted, this support ensures that risks are shared effectively and that high-priority projects move forward where private investment alone would not suffice.

Categories of Government Support Mechanisms

Government support mechanisms for PPPs can be grouped into five broad categories: 

1. Grants and Subsidies

Governments may provide direct financial assistance to reduce the cost burden on the private sector or end users through: 

• Operating Subsidies: regular payments to cover part of the operating costs, especially in sectors like public transport or water supply.
• User-fee Subsidies: compensation when tariffs are set below cost-recovery levels to ensure affordability.
• Output-Based Aid (OBA): performance-linked subsidies disbursed upon delivery or verified outputs, often used in health, education, and rural infrastructure. For example, the Global Partnership for Result-Based Approaches (GPRBA) supports such mechanisms. 

2. Availability Payments

Availability payments are periodic government payments to the private partner based on the availability and performance of the infrastructure, independent of usage levels. These payments:

• Provide predictable revenue streams.
• Are common in social infrastructure (e.g., schools, hospitals) and transport (e.g., roads, rail).
• Incentivize high service quality through performance-linked metrics.

3. Capital Contributions or Viability Gap Funding (VGF) 

Capital support mechanisms help bridge the gap between project costs and expected private returns. These may include:

• Viability Gap Funding (VGF): One-time capital grants provided during construction to make economically justified but financially unviable projects attractive to private investors.
• Equity Contributions: Government may take a minority equity stake to share risks and demonstrate commitment.
• In-Kind Contributions: Provision of land, existing assets, or infrastructure to reduce upfront costs.

4. Project Development Funds 

Governments may consider establishing a semi-autonomous or independent Project Development Fund (PDF) to support the preparation of PPP projects by financing advisory services and other development-related activities. A PDF can play a central role in promoting the standardization of methodologies and documentation, disseminating good practices, and monitoring their implementation across sectors.

Its primary function is to support early-stage project preparation, including project identification, feasibility studies, and the design of financial and commercial structures, through to financial close and potentially beyond, to ensure effective implementation. While a PDF may target specific sectors, regions, or project types, it should be flexible enough to accommodate various PPP models and sectoral needs.

The PDF can offer different forms of support, such as:

• Grants for project development;
• Reimbursable funding, recovered from the winning bidder at financial close (with or without interest); or
• Equity stakes in the project, creating a revolving fund model.

These compensation mechanisms can be tailored to incentivize support for priority projects or underserved sectors. Given that high-quality preparation is critical to PPP success, and that the cost of advisory services often poses a barrier, PDFs provide an essential solution by:

• Financing upstream project preparation (e.g., feasibility studies, legal and financial structuring, transaction advisory);
• Being managed by dedicated PPP units or independent bodies; and
• Recycling resources through grants, repayable contributions, or equity investments to support future pipelines.

A well-structured PDF not only helps mobilize private investment but also contributes to institutional capacity building and the adoption of best practices across sectors. For further guidance, see the World Bank Group’s primer: Project Development Funds – Supporting Project Preparation to Structure Successful PPPs.

5. Public Infrastructure Funds 

Public Infrastructure Funds (PIF) are a specific type of infrastructure financing fund that uses public resources to leverage much larger amount of private financing for infrastructure development. The design and objectives of PIFs can vary depending on the country context and the specific market failures the PIF is trying to solve. 

PIFs can serve a range of distinct purposes. Some are designed to support structured financial instruments—such as risk mitigation mechanisms or credit enhancements like partial credit and partial risk guarantees—while others focus exclusively on providing debt financing. Despite these differences, four overarching and often overlapping categories of objectives can be identified:

1. Optimizing Public Support: Streamlining the use of public resources—such as subsidies, grants, and contingent support—by consolidating them into a unified platform for more effective deployment.
2. Managing Fiscal Commitments: Enabling centralized oversight to manage and contain financial commitments and contingent liabilities (FCCL), particularly those associated with public-private partnerships (PPPs).
3. Addressing Market Failures: Supplying financing or financial products to help well-structured projects secure private investment in contexts where market gaps exist.
4. Addressing Government Failures: Creating a specialized entity, independent of the civil service, with the institutional capacity to implement infrastructure projects and overcome administrative limitations.

The performance of PIFs varies across case studies, revealing a mixed track record. However, several key design features consistently emerged as critical to their effectiveness:

• Transparent and Autonomous Governance: Ensuring financial and decision-making independence is essential for enabling sound investment decisions.
• Capitalization and Funding Strategy: A well-structured approach to capitalization—regardless of the funding source—supports financial autonomy and efficient use of resources.
• Product-Market Fit: The financial instruments offered by a PIF should be tailored to address the specific market failures it aims to resolve.
• Project Preparation and Technical Expertise: High-quality project development depends on skilled in-house teams and a reliable funding stream for project preparation activities.

For a comprehensive review of Public Infrastructure Funds (PIFs), please refer to the following reports: PIF Global Review – Volume I and PIF Global Review – Volume II (Case Studies)

6. Fiscal Risk Management and Contingent Support 

Effective management of fiscal risks - particularly those arising from contingent liabilities in PPPs - requires governments to address several challenges. These include collecting relevant data, facilitating inter-agency dialogue, analyzing fiscal exposures, setting clear policies, and establishing appropriate incentive structures. Given the complexity of these tasks, many governments, especially ministries of finance, have established specialized units - often within debt management departments - to oversee and manage these risks which already possess expertise in risk analysis.

To further strengthen oversight, governments may also establish dedicated guarantee funds. These allow for more transparent management of contingent liabilities and help ring-fence fiscal exposure. (See: Management of Government Risk for more detail.)

Contingent support mechanisms allow governments to absorb specific project risks without immediate fiscal outlay. These instruments include: 

• Guarantees: Covering risks such as debt repayment, exchange rate volatility, tariff adjustments, and demand shortfalls.
• Indemnities and Insurance: Protecting against non-performance by public entities or unexpected cost overruns.
• Contingent Debt Instruments: Such as take-out financing (where the government commits to providing refinancing at a future date) or revenue support arrangements (where the government lends to the project company to ensure debt obligations are met in times of revenue shortfall).
• Hedging instruments: To mitigate  risks related to interest rates, exchange rates, or commodity prices.
• Fiscal Risk Assessment Tools: Such as the World Bank’s Debt and Fiscal Risks Toolkit, including the PPP Fiscal Risk Assessment Model (PFRAM), which help quantify and disclose fiscal exposures. 

Effective management of fiscal support instruments is critical. Governments must carefully balance the need to attract private investment with the imperative of maintaining fiscal responsibility. Excessive reliance on public guarantees can expose governments to hidden fiscal risks, particularly when such backing reduces the incentive for lenders to conduct thorough due diligence. As such, robust project assessment and prudent risk allocation are essential to ensure that public support is justified, well-designed, and fiscally sound.

The publication Managing the Fiscal Implications of Public-Private Partnerships in a Sustainable and Resilient Manner: A Compendium of Good Practices and Lessons Learned from the COVID-19 Pandemic provides detailed guidance on applying the Fiscal Commitments and Contingent Liabilities (FCCL) Framework. This framework supports governments in systematically identifying, evaluating, managing, and reporting the fiscal risks associated with PPPs. By embedding these practices within broader public financial management systems, the FCCL Framework strengthens institutional resilience. The compendium draws from real-world experiences during the COVID-19 pandemic, when fiscal pressures were especially acute, to illustrate how countries have effectively mitigated PPP-related fiscal risks. It highlights how sound governance structures, analytical tools, and transparency can enhance long-term sustainability and accountability in infrastructure financing.

Strategic deployment of financial and contingent support mechanisms is critical for attracting private investment in infrastructure while preserving fiscal sustainability. Most PPP projects require some level of government involvement—whether to enhance bankability, appropriately allocate risks, or address market gaps in underserved sectors. A carefully balanced approach enables governments to drive impactful infrastructure development without compromising long-term fiscal responsibility. By leveraging these tools effectively, governments can reduce investor risk, mobilize capital, and ensure that PPPs deliver lasting value for money.

A number of financing mechanisms are available for infrastructure projects, and for public-private partnership (PPP) projects in particular. 

A successful PPP relies not only on sound project preparation but also on innovative and sustainable financing. This section explores a range of financing mechanisms available for infrastructure PPPs, including asset recycling through concession and lease models. It also highlights emerging approaches such as Islamic finance, project-financed transactions, and the role of tariff setting in addressing funding constraints.

In addition, this section introduces commercial value capture strategies—such as land value capture and joint development—that allow governments to harness the increase in land or property value generated by infrastructure investments. These mechanisms can significantly enhance project revenues and reduce reliance on public funding.

Climate finance is also featured as a critical enabler of sustainable infrastructure. By leveraging concessional funding, green bonds, and carbon credit markets, climate finance helps align PPPs with environmental goals while attracting private capital to climate-resilient and low-carbon projects.

Whether you're structuring a new deal or refining an existing model, these tools can help unlock new opportunities and ensure long-term project sustainability.

Key Resources Include:

Blended Finance

Blended finance is a strategic approach that combines public and private funding to mobilize private capital flows towards emerging and frontier markets. It aims to attract commercial capital to projects that benefit society while providing financial returns to investors.

Revenues

Revenues are a critical component of any financial model, providing the income streams necessary to ensure the viability and sustainability of a project. In infrastructure projects, revenues can come from both traditional and innovative sources

Risk Allocation

A number of key risks must be identified, allocated, and managed to ensure successful financing and implementation of a PPP project.

Asset Recycling

Guidelines for implementing asset recycling transactions, particularly through concession and lease models, to unlock capital from existing public assets and reinvest in new infrastructure.

Innovative Revenues for Infrastructure

Exploration of non-traditional revenue streams such as land value capture, advertising rights, and user fees that can enhance project bankability and reduce reliance on public funding.

Commercial Value Capture

Mechanisms that allow public entities to capture a portion of the increased economic value generated by infrastructure investments, including land value capture, tax increment financing, and joint development.

Climate Finance

Tools and strategies to access climate-aligned funding sources, such as green bonds, blended finance, and carbon markets, to support low-carbon and climate-resilient infrastructure.

Local Currency Financing

Approaches to reduce currency risk and improve project affordability by sourcing debt in local currency, often through domestic capital markets or development finance institutions.

Islamic Finance

Sharia-compliant financing structures such as sukuk (Islamic bonds) and ijara (leasing), which offer alternative capital sources for infrastructure investment in relevant markets.

Project-Financed Transactions

Approaches to structuring projects where repayment is primarily based on the cash flow generated by the project itself, rather than the balance sheet of the sponsors.

Tariff Setting and Funding Constraints

Guidance on designing tariff structures that balance cost recovery, affordability, and financial sustainability, while addressing common funding gaps in infrastructure delivery.

Explore the comprehensive resources below to learn more about the various financing mechanisms used in Public-Private Partnerships (PPPs):

Coming Soon: AI-Generated Curricula on Infrastructure Finance & PPPs

With such a vast array of resources, smart tools are essential. That’s why we’re developing AI-driven solutions to deliver a seamless, efficient, and tailored learning experience. Whether you're a government official, investor, advisor, academic, or development practitioner, our platform provides reliable, on-demand knowledge — precisely when and how you need it.

Key Features Under Development:

Soon you’ll find a curated collection of podcasts, videos, and presentations developed with the support of AI tools and guided by expert-reviewed content. Each asset is designed to support learning and practical application across key areas such as innovative revenues, asset recycling, risk mitigation, fiscal risk management or public-private partnerships, amongst others. Whether used as standalone resources or as part of a structured curriculum, these tools provide flexible, on-demand support for professionals at all levels who are working to mobilize private capital for infrastructure development. 

AI-Generated Curricula – Personalized learning paths combining videos, presentations, and podcasts

The AI-powered curriculum generator is designed to streamline the development of tailored learning materials on infrastructure finance. This tool helps design personalized learning pathways using our extensive library of policy notes, reports, guidelines, case studies, and agreements focused on mobilizing private capital for public infrastructure. 

AI-Generated Videos – Concise, engaging summaries of complex infrastructure finance concepts

Explore core concepts through visual storytelling. These short explainer videos distill complex and multifaceted infrastructure finance topics—such as innovative revenues for infrastructure, and blended finance—into digestible, engaging content. Developed using AI tools and grounded in global practice, they serve as a quick and accessible entry point for practitioners and policymakers alike. 

AI-Generated PowerPoints – Ready-to-use, customizable slide decks for any audience (executives, technical teams, or students)

Access ready-to-use presentation decks designed to support training, briefings, and learning sessions on infrastructure finance. These AI-generated slide sets cover a wide range of topics—from fiscal risk management to project preparation—and are built to complement your capacity-building efforts with structured, professional, and easily customizable content. 

AI-Generated Podcasts – Expert-style discussions, interviews, and case studies on innovative projects and financing strategies

Listen and learn on the go. Our podcast series features expert-informed discussions on priority infrastructure finance topics, including but not limited to PPPs-related contents, financing strategies, and risk management approaches. Generated with AI assistance and reviewed for clarity and relevance by our experts in the World Bank Group, each episode offers concise, engaging insights to help you navigate real-world challenges in infrastructure development. 

Stay tuned — launching soon! In the meantime, explore our existing resources and prepare for a smarter, faster way to learn. 

Global Best Practice Knowledge on Private Solutions for Public Infrastructure

Welcome to one of the most extensive repositories of know-how on infrastructure finance. It covers topics from PPP to asset recycling, from climate finance, to blended finance, from commercial value creation to limited recourse financing. Each topic is supported by reports, guidelines, case studies and sample agreements, to help users learn more about good, global practices.

Such an extensive assembly of materials from all over the world tests even the most sophisticated of organizational frameworks. Whether you’re a government official, transaction advisor, investor, academic, or development practitioner, this platform is designed to provide you with the best accessibility and bespoke learning experience available, this curated compendium of know-how is supported by an AI powered intuitive ChatBot and a curriculum generator, allowing the user to define and manage their knowledge journey. These AI tools will have the option to feed only off of a dedicated large learning model (LLM) of reliable, robust infrastructure finance knowledge. By focusing on the LLM, users will encounter fewer AI hallucinations, helping those with less experience in infrastructure finance to manage AI driven knowledge more efficiently, and to improve the learning journey.

Infrastructure Finance involves both public finance, sourced from government budgets, grants, and sovereign borrowing, and support from multilateral institutions such as the World Bank, and private finance, contributed by investors, commercial lenders, and financial institutions. The Infrastructure Finance section in PPPRC provides an overview of how capital is mobilized for infrastructure projects, outlining key principles, financing types, risk mitigation strategies, and the range of institutions involved, with a focus on practical tools and mechanisms that support financially viable, resilient, and bankable projects.

Form of Finance

Finance is capital provided to develop an infrastructure asset, generally seeking to be repaid with the possibility of upside in the form of interest to be paid or a share of profit to be earned. Finance comes in the form of equity and debt.

• Equity funds are invested in the project company as share capital and other shareholder funds. They hold the lowest priority of the contributions; for example, equity holders cannot normally receive distributions unless the company is in profit.

• Debt contributions have the highest priority amongst the invested funds (e.g., senior debt must be serviced before most other debts are repaid). Repayment of debt is generally tied to a fixed or floating rate of interest and a program of periodic payments. Debt generally receives no upside; if the project is particularly profitable, the lenders will not receive a share of those profits but will only be paid the agreed debt service.

• Mezzanine/subordinated contributions (e.g., subordinated loans and preference shares) fall somewhere between equity and debt, with lower priority than senior debt but higher priority than equity.

Key Considerations in Attracting Private Finance

Infrastructure must be financially sustainable to attract private financing; its revenues need to be resilient and able to cover all operating expenses, including debt servicing, and provide shareholders with reasonable dividends. Lenders will be concerned about ensuring that the project is able to pay interest and repay the principal. They will have a conservative view on assumptions such as traffic forecasts and impose specific requirements (maintenance funds, reserve fund for debt service, minimum revenue guaranteed) to provide them with additional protections, which will have financial implications.

The decision as to which type of financing to mobilize will depend on government fiscal position, the market availability of financing, and the willingness of lenders to bear certain project risks or credit risks.

Types of Financing Approaches

The basic types of financing reflect the nature of the borrower:

• Government financing – where the government borrows money and provides it to the project through on-lending, grants, or subsidies or where it provides guarantees of indebtedness. The government is constrained by its fiscal space (in particular its debt capacity) and will have a number of critical needs competing for scarce fiscal resources.

• Corporate financing – where a company borrows money against its proven credit position and ongoing business and invests it in the project.

• Project financing – where nonrecourse or limited recourse loans are made directly to a special purpose vehicle. Lenders rely on the cash flow of the project for repayment of the debt; security for the debt is primarily limited to the project assets and future revenue stream. By using such techniques, investors can substantially reduce their equity investment (through debt leverage) and exposure to project liability, thereby reducing the total project cost. This said, project financing requires a complex structure of contracts, subcontracts, guarantees, insurances, and financing agreements in order to provide lenders with the security they require and the risk allocation necessary to convince them to provide funding. This complexity requires significant upfront investment of time and resources by the contracting authority in project development. Further, project financing may increase the overall costs of debt for the project.

Types of Financiers in Infrastructure

The nature of the financier will have a specific influence on the financing. Financiers for infrastructure reflect a huge variety of sources. The commercial markets provide the largest volumes of potential financing for infrastructure, including commercial banks (international and local), institutional investors (like pension funds, insurance funds), private equity and hedge funds, and corporate investors (eg vendor financing or shareholder loans). Also from the private sector, foundations, and philanthropic investors may support infrastructure, in particular in poor communities or impactful technology. Financing may also be mobilized from public entities, governments (local or foreign), development financiers (include bilaterals - owned by a single country and multilaterals - owned by a number of countries, e.g., the World Bank), sovereign wealth funds, and export credit agencies.

These different lenders can work together to provide a better capital mix to deliver more infrastructure. For example, blended finance is the use of development finance for the mobilization of additional commercial finance by using the low pricing, high-risk tolerance, and perceived risk management of development finance (and the technical assistance and project preparation that comes with it) to bring commercial lenders and borrowers together.

Blended Finance

Blended finance can mobilize commercial finance where such investments would be too risky for private finance alone, especially where the project involves “frontier” countries, technologies, or business models, which are otherwise below investment grade. Blended finance can help rebalance risks, enable investment, and ensure focus on developmental priorities. It uses the relatively low volume development finance to mobilize the high volumes of available commercial finance.

In other cases, financing may be mobilized based on the nature of the investment. For example, climate finance mobilizes capital for infrastructure that delivers climate change mitigation and adaptation activities. Mitigation refers to actions that seek to reduce or avoid the release of greenhouse gas (GHG) emissions or to remove emissions, for example, through increasing the capacity of carbon sinks, to slow the pace of global warming. Adaptation refers to efforts to enhance or improve the resilience of infrastructure, communities, economies, and ecosystems and adjust to both the current adverse effects of climate change and the predicted future impacts.

Climate Finance

Climate finance can provide access to dedicated funds (international and in some cases national), multilateral and bilateral development institutions, and strategic private investors (such as pension funds), as well as nongovernmental and philanthropic organizations that are committed to investing in climate mitigation and adaptation efforts. These entities may also offer low cost financing, such as grants, seed funding, and concessional loans.

Islamic Finance

The Islamic finance market can serve as a complementary source of finance for infrastructure development in emerging markets. Islamic law - shari‘ah – does not allow debt, therefore shari‘ah compliant financing must be structured to avoid debt characteristics. Therefore, due diligence process should include a shari’ah compatibility analysis with the aim of identifying and resolving any potential shari’ah breaches. In certain countries, an external shari’ah audit may be required before a transaction can be described as being shari’ah compliant. Islamic finance structures can be aligned with conventional finance; although the two are documented separately, the terms and conditions are structured to benefit both sets of financiers (Islamic and conventional) from the same or very similar commercial terms.

Explore our Infrastructure Finance section to learn more:

On this page, you will find a collection of sector-specific toolkits designed to support the planning, development, and implementation of public-private partnership (PPP) projects across various infrastructure sectors. 

You will also find the Municipal PPP Framework, a tool specifically developed to support local governments in understanding and implementing public-private partnerships (PPPs). Designed with the unique characteristics, needs, and challenges of municipalities in mind, the Framework draws on global best practices and adapts them to be practical, user-friendly, and relevant for the local context. It aims to align with the capacities and capabilities of local governments, making it easier to plan, structure, and manage PPP projects effectively at the municipal level.

These toolkits bring together practical checklists, guidelines, templates, and best practices tailored to the specific needs of sectors such as transport, energy and water. By offering targeted, sector-relevant guidance, these resources help governments and practitioners design effective, bankable, and sustainable PPP projects that address distinct sectoral challenges and align with broader development objectives.

This section provides insights into the essential legal aspects critical to successful infrastructure development through public-private partnerships (PPPs). It covers key topics such as legal and regulatory issues, various types of PPP arrangements, and practical tools like checklists and risk matrices. Additionally, it offers standardized agreements, bidding documents, guidance manuals, and an overview of dispute resolution mechanisms to support effective PPP implementation.

On this page, you will find subject-specific toolkits designed to address critical cross-cutting development themes such as gender inclusion and community engagement. These toolkits provide global best practices to help ensure that public-private partnerships (PPPs) and infrastructure projects are inclusive, equitable, and socially responsible.

The selected toolkits cover a range of essential areas, including: 

• Gender and PPPs

• Stakeholder Engagement

• Governance

• Fiscal Management

• Transparency and Disclosure 

Additional subject areas and toolkits will be added as this section is updated to reflect emerging priorities and evolving best practices.