What’s a public infrastructure fund and do they work?

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What?s a public infrastructure fund and do they work? Concept of price changes in construction prices | ©1599686sv, Shutterstock

Many of us in infrastructure finance travel a lot (at least till recently), often to very different places. But some things remain the same: every airport sells Toblerone, and every client seems to ask us the same question: should we establish an infrastructure fund? It was during a catch-up last year after several of us were back at headquarters that we realized we were all being asked that same question. And none of us had a good answer.

What is an infrastructure fund? Does the government own and manage them? Aren’t they just viability gap funds? Oh, some of them also issue guarantees? And on we asked…

In fact, the more colleagues we talked to, the more we realized there was little consensus. Ideas and experiences with infrastructure funds were very different from country to country.

But we found a common theme: interest in leveraging private finance to meet countries’ development goals. This interest was regularly leading them to ask us about the funds, and in particular how these funds could help attract private finance.

Let’s do something…

In the absence of consensus among our colleagues, and amidst an apparent dearth of literature on the topic, we decided we had only one option: research and write a study!

To capture the various experiences we were hearing about from colleagues, we realized we needed to find and analyze a range of infrastructure funds that would provide distinct lessons learned based on different structures, institutional capacities, availability and types of financing/product lines, and purposes.

We identified eight case studies, seven in developing countries (Argentina, Bangladesh, Colombia, Ghana, India, Indonesia, and South Africa), and one in a developed country (Canada).

To obtain the required information and context for each case study, we visited each fund to build relationships and learn more. We followed up over several months with questions, questions, and more questions (we thank each case study fund for their patience!)

So, what’s an infrastructure fund?

First things first, we needed to come up with a definition that captured the broad range of infrastructure funds we were looking at, and of course, being World Bankers, an acronym. Given the role of governments in all of the funds, we decided on “Public Infrastructure Funds” or PIFs.

So, what are PIFs? Based on our analysis of the case studies, we defined PIFs as a specific type of infrastructure financing fund that uses public resources to leverage much larger amounts of private financing for infrastructure development. 

But the design and objectives of PIFs can be very different depending on country context and the specific market failures the PIF is trying to solve.

What are PIFs designed to do?

We found that each PIF had varying objectives. For example, some PIFs focused on structured financial products, such as risk mitigation or credit enhancements (partial credit and partial risk guarantees), while others offered only debt financing. Nevertheless, we identified four broad categories of (often overlapping) objectives:

  • Vehicle for optimizing the use of public support by centralizing various public resources (subsidies/grants, contingent support, etc.) into one platform.
  • Vehicle for effectively managing and ring-fencing financial commitments and contingent liabilities (FCCL) by facilitating centralized oversight of FCCL arising from PPPs.
  • Overcoming market failures by providing financing/products to help well-structured projects attract private finance.
  • Overcoming government failures by creating a one-stop organization, outside of the civil service, with the capacity to implement projects.

Do PIFs actually work?

We found mixed performance across the case studies, but identified some core design features that can critically influence the success of a PIF:

  • Transparent, autonomous governance to ensure financial and decision making autonomy and enable PIFs to make sound investment decisions.
  • Capitalization and funding strategy to ensure financial autonomy and effective use of the initial capitalization (irrespective of its source).
  • Suitability of products offered to match the PIFs product range with the market failures it’s intended to address.
  • Project preparation and expertise to develop high-quality projects through qualified in-house staff and a sustainable source of funding for project preparation.

What’s next?

Here’s the full report and case studies. We’re rolling it out, with a particular emphasis on reaching country authorities that are in the thick of planning and managing PIFs—so that we can begin to establish global awareness and best practices. But the work is only just beginning! Based on the lessons we’ve learned from this initial phase, additional work can focus on the development of a systematic step-by-step guide for governments that want to develop a PIF.

Feel free to leave your comments and questions below.


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This blog is managed by the Infrastructure Finance, PPPs & Guarantees Group of the World Bank. Learn more about our work here.


David Duarte

Senior Public-Private Partnership Specialist

Aijaz Ahmad

Lead Specialist & Acting Practice Manager, Public-Private Partnerships Group, World Bank

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