Region: Global
Country: Global / Non-Specific
Topic: Financing and Risk Mitigation
Keywords: Knowledge Lab ***, Financing and Risk Mitigation **, Viability Gap Fund (VGF)
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Document Summary:
This paper examines the international experience with three types of PPP funds: viability gap funds, lending facilities, and guarantee funds.
Document Details:
Public–private partnerships (PPPs) change how governments work. They introduce competition into the provision of public services, mobilize additional expertise and financial resources, adopt life-cycle asset management within a results-based approach, base payments to service providers on performance, and allow governments to reduce the risks they bear. These innovations can help deliver public services faster, at a lower cost, and at higher quality. To achieve these benefits, however, the right projects need to be identified, and PPPs need to be developed and implemented effectively.
Many countries have established funds to help finance their PPP programs. This paper examines the international experience with three types of funds: viability gap funds, lending facilities, and guarantee funds. Each type of fund has a very precise purpose. That is, they are designed to address a specific constraint to developing bankable PPP projects.
The analysis yields several important lessons: Funds should only be set up to address specific problems. Dedicated funds can provide better incentives, concentrate expertise, and promote PPPs. However, a dedicated fund is not always necessary to address a problem and a poorly designed fund can have unintended consequences. Finally, the design elements of a fund should support its purpose.
Updated: April 12, 2022