World Bank Group2015-11-092015-11-092015-01https://hdl.handle.net/10986/22914This report explores the potential financing mechanism options that can be employed to catalyze more private sector investment in clean energy (renewable energy and energy efficiency) in the small island developing states (SIDS). Various financial instruments that have been used successfully to date are described and placed in the context of the issues and constraints of the SIDS, with suggested options for discussion and follow up. Green infrastructure finance, as defined in the report, makes the important point that is the combination of financial and nonfinancial interventions and instruments that can make green investments in infrastructure more affordable and less risky to private sponsors, financial markets, and governments. The objective of this report is to identify and assess options that can help increase investment in renewable energy and energy efficiency in SIDS through the adoption and funding of financing mechanisms by SIDS and development partners with special attention given to the role that the private sector can play. Many renewable energy technologies are characterized by high initial capital costs with relatively low operating costs compared to thermal alternatives. By providing an analysis of options for a financing facility to catalyze renewable energy and energy efficiency, this work is intended to inform the discussions among SIDS and development partners interested in actions to stimulate investment in renewable energy and energy efficiency. This report summarizes the results of the two stages. The assessment and selection of options identifies a number of measures that will be needed to stimulate increased private sector participation - project sponsors and developers, equity funds, lending institutions - for energy efficiency and renewable energy. The background material reviewed for this report has been summarized in the annexes.en-USCC BY 3.0 IGOFACILITY FUNDBORROWERFINANCE INITIATIVEECONOMIC GROWTHDEVELOPMENT ASSISTANCEPROPERTY TAXFINANCINGINTERESTSOFT LOANSENTREPRENEURSREPAYMENTSEQUITY FINANCINGCAPACITY BUILDINGLOANFEEENDOWMENTBORROWERSPAYMENTSDEVELOPMENT FINANCE INSTITUTIONSCASH FLOWSMFISCREDIT OFFICERSFUNDING SOURCESREVOLVING FUNDSACCESS TO FUNDSEQUITY CAPITALHOUSING LOANSTECHNICAL ASSISTANCEEQUIPMENT PURCHASESINDEBTEDNESSFINANCIAL INSTITUTIONLOAN FUNDMARKET DEVELOPMENTHIGH INTEREST RATESLOAN DEFAULTSCOMMERCIAL BANKMORAL HAZARDPARTIAL CREDITLOAN PRODUCTSFINANCESCREDIT RISKSFINANCIAL INSTITUTIONSPAYMENTDEBTSOURCE OF FUNDSMICRO LOANSMICRO-CREDIT SCHEMELOAN REPAYMENTSPUBLIC FINANCEFINANCIAL • MARKETVENTURE CAPITALENTERPRISESINVESTMENT OPPORTUNITIESDEBT SERVICEAPPROVAL PROCESSCOMMERCIAL BANKINGLOAN SIZESDONOR FUNDSBANK FINANCINGFUTURE CASH FLOWSTERM CREDITSEED FUNDINGBANKSINVESTMENT DECISIONSUNIONSDEBT FINANCINGAFFORDABILITYCAPITALBUSINESS PLANCUSTOMER BASECAPITAL INJECTIONACCESS TO FINANCEBUSINESS DEVELOPMENTDEVELOPMENT BANKSBANKEQUITY FUNDSLOAN GUARANTEESEXTERNAL FUNDSDEBT FINANCEINSTITUTIONAL CAPACITYMEZZANINE FUNDCREDIT GUARANTEECREDIT RISKPROFITABILITYGOVERNMENT POLICIESMICROFINANCEECONOMIC DEVELOPMENTBANK LOANLOAN APPLICATIONSSOURCES OF FUNDSEQUITY FUNDCREDIT GUARANTEESFINANCIAL INTERMEDIATIONFINANCIAL INTERMEDIARIESRATES OF RETURNCOMMERCIAL BANKSHOUSEHOLDSLOAN SIZEPRIVATE INVESTORSEQUIPMENT PURCHASEDEVELOPMENT FINANCEFINANCIAL SUPPORTLENDING POLICYINVESTMENT PLANCAPITAL INVESTMENTCAPITAL COSTSCREDIT LINESPROFITABLE BUSINESSDOWN PAYMENTSDEVELOPMENT BANKCASH FLOWMFIMICROFINANCE INSTITUTIONTARIFFSADVISORY SERVICESLINE OF CREDITCAPITAL MARKETSCAPITAL FUNDSFACILITATIONMATCHING FUNDSGUARANTEESEQUITABLE ACCESSINTEREST RATEPROPERTY RIGHTSREVOLVING FUNDDIRECT CREDITFINANCIAL RESOURCESCOMMERCIAL FINANCEMORTGAGESOURCES OF FINANCESUBSIDYTRANSACTION COSTINTERNATIONAL BANKAGRICULTURE ORGANIZATIONLENDERFINANCING FACILITYBANK LENDINGINTERNATIONAL FINANCECREDITSFINANCIAL SUSTAINABILITYSAVINGSSTART-UPPUBLIC-PRIVATE PARTNERSHIPCREDIT UNIONSLOAN FUNDSMICRO-FINANCE INSTITUTIONSUNIONADMINISTRATIVE CAPACITYPUBLIC FUNDSREVOLVING LOANINTEREST RATESLIMITED ACCESSELIGIBILITY CRITERIAFINANCIAL VIABILITYFINANCIAL PRODUCTSLENDERSBANKERSLOANSPRIVATE EQUITYFINANCEADMINISTRATIVE COSTSFREE LOANSCREDIT LINECOLLATERAL REQUIREMENTSMICRO-CREDITEQUITYGRANTCREDIT CONSTRAINTSLOAN GUARANTEEOPERATING COSTSPROPERTY TAXESDONOR RESOURCESACCESS TO CAPITALCREDITEQUITY INVESTMENTSUNIVERSAL ACCESSINVESTMENT BANKFINANCIAL INSTRUMENTSREPAYMENTENTERPRISEAPPROVAL PROCESSESPROPERTYEQUITY INVESTORSBALANCE SHEETTRANSACTION COSTSBANK ACCOUNTSCREDIT SCHEMEINTERESTSECONOMIC BARRIERSSPECIAL FUNDSBANK LOANSSECURITYFINANCIAL MARKETINVESTMENTBALANCE SHEETSCOLLATERALMICRO-FINANCEFINANCIAL MARKETSTARIFFCOOPERATIONFINANCIAL INTERMEDIARYINITIAL FUNDINGBORROWINGINVESTMENTSRETURN ON INVESTMENTTECHNICAL SUPPORTIMPORT DUTYBARRIERS TO INVESTMENTGUARANTEEReportWorld Bank10.1596/22914