Description
These funding streams allow financial institutions (often local banks) to on-lend funds to entities for specific purposes. Typically the credit line is extended to the financial institution as a low-interest rate loan by a donor.
Instrument category
International climate finance
Implementation status
Moderate - tried and tested
Enabling conditions and success factors
- Depends greatly on the selection of competent and committed financial institutions.
- A technical assistance component built into the credit line helps lower projects' technical and financial risk.
- Adequate targeting of customers is needed.
Instrument benefits
- Provides usually much-needed capital to local financial institutions
- Allows them to expand into less known sectors, especially if a technical assistance component is added.
Challenges and risks to implementation
- If there is not adequate monitoring, the funds could be used for alternative purposes.
