Infrastructure Finance: An Introduction
Traditional economists are of the opinion that infrastructure is the heart of the economy. Empirical data clearly shows that given a choice, investors prefer to invest their money in countries whose infrastructure is more developed. Hence, it can be said that rapid infrastructure development is one of the most basic ways in which a country can take advantage of economic opportunities. It is, therefore, no surprise that countries around the world focus heavily on building infrastructure.
Donald Trump i.e., the President of the United States, has openly announced that his government is planning to spend $1 trillion in order to develop infrastructure within the country.
Developing countries like India have also echoed this sentiment as they have also announced plans to spend billions of dollars in order to build and upgrade their infrastructure. Hence, it can be said that infrastructure and its financing is an important issue all across the world regardless of whether the nation is developing or developed.
Since infrastructure is such a high priority issue in the world, the financing of infrastructure projects is also considered to be very important. As a result, an entire subject called infrastructure financing has been developed. We will study infrastructure financing in greater detail in this module. However, before that, we need to understand what infrastructure definition really is.
Definition of Infrastructure Financing
The formal definitions of infrastructure financing are not very clear. Generally, in most countries around the world, the government issues a list of industries that are to be given infrastructure status. The financing of projects or companies involved in these sectors is called infrastructure financing.
However, this definition is more for the governments internal operations. This definition is used in order to provide tax breaks or subsidies that have been promised to the infrastructure sector.
However, there are certain shared characteristics amongst industries that are classified as infrastructure all over the world. Some of these characteristics have been mentioned below:
The bottom line is that the defining feature of infrastructure financing is the sectors to which money is being lent. The different types of loans such as overdraft, term loan, working capital loan, etc. are generally included in the definition of infrastructure financing
Types of Infrastructure Financing
Infrastructure financing has various sub-divisions. These divisions are generally based on the type of industry that the funds will actually be utilized in. The different types of infrastructure financing have been listed below;
The bottom line is that infrastructure financing is a vast field that encompasses many industries. Also, the funding models used here are slightly different since projects with negative NPV are also undertaken many times.

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