PPP Consultants
Buildable is not bankable — preparing infrastructure projects for competitive financing
Engineering feasibility and financial bankability are different tests, set by different people. A project can pass the first with distinction and fail the second, and the gap between them is where most infrastructure projects are lost.
PPP Consultants · September 2026
A large infrastructure project that has been engineered to a high standard — validated design, competent contractor, established construction method — has passed the engineering test. The financing test is a separate examination, with separate criteria, conducted by different people.
A project is buildable when an engineer is satisfied that it can be constructed. It is bankable when a lender is satisfied that its cash flows will repay the debt, under a range of conditions, across the life of the loan. The first is a technical judgement; the second is a commercial one; and a clear yes to the first says nothing about the second.
This article describes what the second test consists of, and the discipline that brings a project through both.
Where projects are lost.
The scale of the problem is measurable. McKinsey’s 2020 study of African infrastructure found that 80 per cent of projects fail at the feasibility and business-plan stage, and that fewer than 10 per cent reach financial close — the point at which contracts are signed,and lenders’ money is committed.
That is not a shortage of projects or of capital: the same study put the continent’s pipeline at US$2.5 trillion and the capital available from international investors for African infrastructure at up to US$550 billion. It is a shortage of projects prepared to the standard lenders require.
The Global Infrastructure Hub’s outlook puts the world’s infrastructure need at US$94 trillion to 2040 and the gap between need and current investment at US$15 trillion; a large part of that gap is projects that exist as engineering and do not yet exist as finance.
The private capital that does reach projects goes to the ones that pass the second test. The World Bank’s count of private investment in infrastructure in low- and middle-income countries reached US$100.7 billion across 315 projects in 2024, a rise of 16 per cent on 2023; in Sub-Saharan Africa the figure was US$7.9 billion across 47 projects, more than double the year before.
Those projects were not the best engineered of their year. They were the ones whose commercial structure a lender could accept.
What a lender tests.
Lenders conducting due diligence — their own independent review of every technical, legal and financial risk in a project — are not assessing whether the project can be built. They assume it can, and they hire engineers to confirm it. They are assessing whether the project’s commercial structure will produce the cash flows needed to service the debt, on time, under stress. The test has four parts:
The revenue source must be clear and evidenced. Infrastructure earns its money through user charges, availability payments from a public authority, regulated tariffs or off-take contracts, and each has a different risk profile. The lender wants to know who pays, under what contract, with what creditworthiness, and what happens to the payment when demand falls or the asset is unavailable.
The risk allocation must be explicit and survivable. Every identified risk — construction cost, delay, demand, operating performance, change in law, currency, force majeure — is allocated to a named party or shared by a stated formula, and the party carrying each risk can absorb it through its balance sheet, its insurance or its subcontracts. A risk that is not allocated is priced by the lender at its worst case.
The cash flows must be modelled to a standard that withstands review. The financial model is the document on which the loan is sized. It must be built so that a lender’s analyst can trace every input to its source, run every sensitivity the lender cares about, and find the point at which the project can no longer service its debt. A model that balances but cannot be interrogated is not a model; it is a spreadsheet.
The sponsor must be evidenced at working level. Lenders lend to projects, but they rely on sponsors, and they want to see operational track record — projects of this kind, in this market, delivered — rather than corporate brochures.
The evidence on what bankability is worth.
Once a project passes the second test, the record of project finance as an asset class is strong, and that record is what lenders are pricing. Moody’s study of 7,354 project finance bank loans between 1983 and 2018 found a ten-year cumulative default rate of 5.0 per cent, an average ultimate recovery of 81.5 per cent when default did occur, and marginal default rates that fall, by year seven, to the level of single-A rated corporate loans.
Properly structured infrastructure debt is among the safest lending a bank does. That is why lenders compete for it, and why the projects that present a bankable structure attract competitive terms while the rest attract none.
Risk allocation: the principle of least cost.
The risk allocation matrix is where the engineering view and the financing view meet most directly. The principle is that each risk goes to the party that can manage it at least cost: construction risk to the contractor, who controls the site; availability risk to the operator, who controls the maintenance; demand risk, where it cannot be controlled by anyone, to the party whose balance sheet can absorb it or to a payment mechanism that removes it.
Authorities and sponsors sometimes believe that transferring more risk is a better bargain. The market corrects them in the price: a risk placed on a party that cannot carry it is priced by every lender as if it will crystallise.
The discipline that produces a matrix lenders will accept is structural. Every risk identified is allocated. For every allocation there is evidence that the party can absorb it. For every shared risk there is a formula an analyst can enter in a spreadsheet.
A matrix that meets that test lowers the lender’s perception of risk, and a lower perception of risk is a lower cost of capital.
Whole-life cost: the second engineering test.
Bankability adds one further engineering discipline that buildability does not require: the cost of the asset across its life, not only its construction. A hospital or a road is financed for twenty or thirty years, and the lender’s model carries its operating, maintenance and renewal costs for that whole term.
Those costs are specific to the country — labour, energy, spare parts, climate — and a project that carries another country’s assumptions will be found out in due diligence. Identifying the full-life cost profile, country by country, is the discipline that separates a plan that can be built from one that can be financed.
A case from the firm’s work.
A private medical infrastructure scheme in southern Africa, of about US$53 million in capital value, had a building to be built and a company committed to building it. What it did not have was a financial case a lender could read.
The firm was appointed as financial adviser, and the appointment expanded into project leadership as the transaction demanded more than advice. The work was the second test. The company’s financial information was rebuilt to lender-grade standard, so that every figure could be traced and tested, and the breakeven patient throughput — the level of activity at which the hospital covers its costs and services its debt — was established and evidenced.
Nothing about the building changed. What changed was that a lender could now read the project. The engagement is anonymised under the firm’s confidentiality obligations; references are available on request, subject to the client’s consent.
What to do differently.
A sponsor with a buildable project should run the financing test before approaching a lender, not during. That means four pieces of work in preparation: a revenue case a lender can verify independently; a risk matrix designed to pass due diligence rather than to be defended through it; a financial model built to be interrogated, with whole-life costs specific to the country; and a sponsor evidence base that answers the lender’s questions before they are asked.
A project prepared this way goes to market once and closes on competitive terms. A project that goes to market on its engineering alone learns the second test from the lender, at the lender’s price and on the lender’s timetable.
Sources: McKinsey & Company, Solving Africa’s infrastructure paradox, March 2020. Global Infrastructure Hub, Global Infrastructure Outlook. World Bank, Private Participation in Infrastructure Annual Report 2024. Moody’s Investors Service, Default and recovery rates for project finance bank loans, 1983–2018.