Review of Project Financing Pakistan

Although lending in infrastructure has increased over time it still leaves a lot to be desired. In FY08 there were only telecommunication and petroleum sectors where most of the funds were consumed but since FY08 financing in power generation and power transmission also figured prominently. But more diversification is required as other important sectors like roads, bridges, ports, mass transit, etc. are getting very marginal financing from our banking sector.

Development of secondary markets for long-term funds is necessary as loan tenure in project financing is quite long while financial institutions mostly finance these projects through short-term deposits. This asset-liability mismatch can be overcome by issuing Bonds, Sukuks, and TFCs whose current share in project financing is very marginal. Banks should also promote their products based on the Islamic mode of financing to diversify the existing financing structure and move beyond conventional modes of financing.

Also Read: Infrastructure Project Financing (IPF)