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Bankable investment definition

Efficient and rigorous review and approval processes can not only ensure quality projects are developed, these processes can also help to avoid administrative delays that increase costs and time for project preparation. Independent assurance, reviews and audit processes with separate roles for the project sponsor and independent reviewers should be embedded into infrastructure project preparation to drive transparency, accountability and efficiency improvements and make use of learning from previous projects.

This is crucial to ensure that the processes and standards outlined above are met and followed to a high standard. This should be a multi-stakeholder process to ensure that all key challenges in the project are dealt with comprehensively.

You can read our previous blog in the series on the benefits of well-planned and prioritised infrastructure investment here. Search Search GI Hub. About Us. Contact Us. Contact Page. Sydney Office. Search Our Databases. Infrastructure Sectors. Community Hub. Project Preparation — how do you translate a concept into a bankable project?

This typically involves three steps: Early-stage pipeline screening and pre-feasibility assessment; Rigour in feasibility evaluation; and Periodic review and approvals. Consider feasibility from the start Decisions made at the start of the project preparation process, for example, on scope, technical solutions or procurement routes, are key to the success of a project.

Launch projects in the best way Building government capacity to develop feasible projects is crucial. A structured approach to project evaluation and approval As projects progress, more detailed analysis and gathering of evidence is needed to support informed and transparent decision-making. Efficiency and rigour in project review Efficient and rigorous review and approval processes can not only ensure quality projects are developed, these processes can also help to avoid administrative delays that increase costs and time for project preparation.

Europe , Africa. Infrastructure Driver. Project Preparation Blog Series. Furthermore, the sufficient local infrastructures, including transportation systems, roadways, electricity, water, and other utilities, and local services were greatly important to the bankability of a PPP project [ 8 ]. Lenders believe that the special purpose vehicle SPV shareholders which have the high creditworthiness and reliability would make a strong commitment to a project [ 8 , 30 ].

Based on an empirical study to identify the determining characteristics of a firm to be engaged in a PPP project, Lopes and Teixeira Caetano [ 28 ] disclosed that larger and more leveraged firms had a higher probability of being engaged in a PPP project. The strong financial capability, sufficient commercial experience, and technical expertise of the concessionaire were an important prerequisite to the successful development of a PPP project [ 8 , 23 ].

Factors, such as corruption and rent-seeking behavior, often turn a decision of a PPP project against lenders [ 30 ]. Essentially, the health of the project structure, the commercial plan, and the forecast revenue stream convince the lenders to provide financing to a PPP project [ 8 ]. Furthermore, the findings from a survey on 35 identified financial criteria showed that the price and adjustment mechanism, the attractiveness of main loan agreement, sound financial analysis, and minimal financial risks to the clients were the top four most significant financial criteria [ 23 , 33 ].

The sufficient insurance coverage of a PPP project would further protect the lenders from risks and is viewed as the critical financial criteria measuring the financial capability of a PPP project [ 11 , 23 , 33 ]. A PPP project must have in place a comprehensive insurance scheme, avoiding gaps or overlapping coverage [ 8 ].

Moreover, lenders would prefer that the project company is isolated from sanctions for the breach of environmental regulations and compensation for environmental damage [ 8 ]. To ascertain that all risks are appropriately allocated to various players, lenders would closely look at the network of contracts with the SPV [ 30 ]. In addition, the force majeure and relevant arbitration when a dispute occurs were also identified as critical risks in PPP development [ 31 , 32 ].

As a systematic method of collecting data, the questionnaire survey technique has been widely used to collect professional views [ 7 , 34 , 35 ]. This study conducted a questionnaire survey to investigate the relative importance weights of the bankability criteria. To develop the questionnaire, a comprehensive literature review of the bankability criteria was first carried out.

Afterward, a two-step process was adopted to test the validity and relevance of the questionnaire. The questionnaire was first reviewed by an expert on question construction, ensuring that the survey did not contain common errors such as leading, confusing, or double-barreled questions.

Their feedback was taken into consideration to finalize the questionnaire. The finalized questionnaire first included the questions meant to profile the respondents. Furthermore, the 41 bankability criteria were presented in the questionnaire. Moreover, the brief description of each bankability criterion was provided to ensure consistency throughout the survey. Subsequently, the respondents were asked to conduct the pair-wise comparison of the importance of these bankability criteria using the five linguistic terms: equal importance, weak importance, moderate importance, strong importance, and extreme importance.

The questionnaire was designed in a bottom-up manner. The questions relating to the criteria under different dimensions were presented in front, while those relating to dimensions were presented at behind. In addition, postsurvey interviews were conducted with three industry experts who possess the relevant experience in PPP financing.

Their views helped us to validate the findings of the survey questionnaire and to provide a better understanding of the findings. The population of this study consisted of all PPP professionals who had PPP financial experience in China, especially experts from banks. A total of sets of survey questionnaires were randomly sent out through email to gather responses from the banks or financial institutions.

Finally, 31 complete sets were received, representing a response rate of Although the sample size was not large, statistically analysis could still be performed because the central limit theorem holds true even when the sample size is no less than 30 according to the generally accepted rule [ 36 , 37 ].

Among the 31 respondents, 30 respondents were from the banks and one respondent from a trust company that acted as a debt finance provider. Moreover, the respondents from the banks were from eight different commercial banks that provided a large portion of the loan for PPP projects in China such as China Construction Bank and Bank of Communications.

Considering the business confidentiality, this study did not disclose the names of the involved banks. In addition, the respondents from the banks were holding the positions of bank director, loan evaluator, and marketing manager. The relatively small sample size was mainly caused by two reasons. First, only those with good PPP finance-related experiences and were willing to perform the survey would be approached to send the survey form. This has significantly reduced the pool size of the potential respondents.

Second, some of the experienced practitioners contacted were reluctant to share their opinions because of business confidentiality. Although the size of the sample was relatively small, the knowledge and judgments of the respondents were reasonable considering the experience of the respondents. Considering the area of the respondents, this study was a location-based study. This study adopted the fuzzy set theory to handle the uncertainty and vagueness of the subjective evaluation of the importance of the identified bankability criteria.

Zadeh [ 38 ] developed the fuzzy set theory to handle such kind of impreciseness of human subjective judgment. Buckley [ 39 ] later extended the hierarchical analysis to the case where experts were allowed to use fuzzy ratios in place of exact ratios.

Instead of using a precise number to assess the priority of a criterion, a triangle fuzzy number was used to express fuzzy ratios. The geometric mean technique was adopted to determine the fuzzy weights of criteria [ 39 ]. Second, the triangular fuzzy number can be utilized in the situations when the comparisons in pair and judgments are uncertain or fuzzy [ 43 ]. The linguistic terms were then transformed into triangular fuzzy numbers in order to facilitate subsequent fuzzy arithmetic operations.

The linguistic values and triangular membership functions are shown in Table 2 with the middle value denoting the most likely or typical value and the lower and upper bounds denoting the lower and upper membership values, respectively. In addition, the spread reflects the fuzziness of the term. If a fuzzy number represents the importance of comparison of criterion C1 to criterion C2, then represents the inverse comparison of criterion C2 to criterion C1.

The evaluation of the importance of the criteria was based on the survey results. The average fuzzy preference was given by the geometric mean of the preferences of all experts as shown in Equation 2. The revised pairwise comparison matrix was depicted in Equation 3.

In the following equations, denotes the average preference of criterion over criterion under dimension :. The following basic fuzzy operations shown from Equations 4 — 7 are required for computing the importance weights of the criteria. Given fuzzy number and , then. The weightings of criterion are geometric mean as follows:. This concept was presented by Equation 9 and depicted in Figure 1. The advantage of this method is that the shape of the membership function is considered:.

Finally, to conform with traditional AHP, the importance weights of the criteria and the dimensions were normalized by ensuring that they sum to 1, as given by the following equation:. The importance weights of bankability dimensions were similarly derived using Equations 1 — Using to represent the normalized importance weight of dimension , the overall importance weight of criterion i is the product of the importance weight of criterion under dimension j and the importance weight of dimension , as computed by Equation The calculation of overall importance weight ensures that each bankability criterion is ranked at the same level.

Because the fuzzy AHP calculation is very complex, this study developed a program written in Microsoft C to process the survey data:. Before analyzing the pertinent finding of this study, this study carried out the Pearson chi-square test to reveal the evaluation consistency of the samples within each set [ 36 ].

The calculated value for the sample sets of the bank was Therefore, it is legitimate to use the geometric mean of the evaluations from the respondents to reflect the relative importance weights of the bankability criteria. Because the revenue cash flows of a PPP project are the main or sole source to meet the financial obligation, the banks must first ensure that the project is financially well structured and profitable [ 6 ].

The bankable consideration was of great importance to the stakeholders of PPP projects [ 7 ]. Furthermore, PPP projects are usually mega projects or infrastructure projects with a vast amount of capital investment. In addition, the findings revealed that the banks do have an emphasis on some of the bankability dimensions.

For the sake of succinct presentation, this study listed the top twenty criteria whose importance weights were above the average, as shown in Table 4. Moreover, the importance weights of the top twenty criteria made up Among the identified 41 criteria, the top ten criteria, which were within the first quartile of all criteria, that affect the bankability of a PPP project were political environment D1.

This study briefly discussed these criteria as follows. Political environment D1. It is well known that PPP projects are mostly infrastructure projects or public-related projects, involving a vast amount of investment.

Moreover, the success of PPP projects would be greatly affected by the cooperation relationship between the public and private sectors. Once there is any divergence between the two parties, the legal system determines the contract enforceability and is the baseline for setting the dispute [ 8 ]. Any change in law would be critical risks for PPP projects, especially in countries using the civil law [ 32 ]. Economic environment D1.

In a sound and stable economic environment, the willingness of the consumer to pay for the use of infrastructure is high, ensuring the cash flow of a proposed project [ 8 ]. Furthermore, the condition of the financial market greatly affects the availability of the lending for PPP projects. The difficulties in the debt arrangements for PPP projects after the credit crisis and economic recession well prove this [ 12 , 47 ]. In a nutshell, the ecosystem that consists of the political environment and economic environment should be sound enough [ 48 ].

The shareholder is the party who commit to developing and operating a PPP project in a long concession period. The experts in the postinterviews pointed out that the strong financial capability of the shareholders was an important prerequisite for a successful debt approval. This may be the reason that larger and more leveraged firms had a higher probability of being engaged in a PPP service concession agreement and receiving the loan from the banks [ 28 ].

Moreover, the operation ability of the shareholder draws great attention recently because many projects step into the operation stage. The operation stage is usually less capital intensive but determines the fulfillment of the revenue of a PPP project [ 3 , 49 ]. Even if there is a concession agreement between the public and private sectors, the public sector who has a low reliability has a high probability to break the contract relationship when difficulties attend during the project development [ 32 ].

Financial structure D4. For a PPP project, the main or sole source to meet financial obligations is the project cash flow [ 6 , 47 ]. An optimal and operational financial structure that reflects the characteristics of project financing is extremely important for both the private sector and the bank because it synchronizes both profitability and repayment capacity [ 50 , 51 ]. Financial terms calculated based on the financial structure, such as the debt service coverage ratio, sensitivity, debt service reserve and debt-equity ratio, were extremely important to a debt financing, greatly influencing the desirability of a PPP project from a debt financing perspective [ 29 ].

Moreover, reasonable and flexible financial arrangements are also needed to deal with unforeseen risks or problems [ 47 ]. For instance, many transportation PPP projects exposed to the financial risk of low profitability due to the inaccurate forecast of traffic volume [ 52 , 53 ]. In this condition, flexible financial arrangements should be considered to overcome the uncertainties.

Moreover, many engineering contractors participate in PPP projects and become a major constituent of the private sector in PPP projects [ 3 , 54 ]. Engineering contractors with a high credibility bring the added value to PPP projects because they have a strong construction and financing capabilities and can improve the development efficiency [ 3 ]. For PPP projects, raising sufficient funds via the debt channel is a key task for all project stakeholders. Considering the lack of a systematic research on the bankability of PPP projects, this study proposed the fuzzy AHP-based approach to identify the critical bankability criteria of PPP projects from a debt financing perspective.

A total of 41 bankability-related criteria were first identified from a comprehensive literature review and further classified into six dimensions. Afterward, a structured questionnaire survey was conducted with 31 industry experts from the bank in China to investigate the relative importance of each criterion.

Finally, this study analyzed the relative importance weight of each criterion using the proposed fuzzy AHP-based approach that can handle the uncertainty and vagueness of the subjective evaluation from surveys. Moreover, the top twenty criteria, the importance weights of which made up In addition, the importance weights of the top twenty criteria made up With the aim of identifying the critical bankability criteria for successful PPP project finance, the empirical results of this study fill a gap in the project finance body of knowledge for the bankability of PPP projects.

Moreover, the findings of this study would provide valuable information to the private and public sectors for formulating strategies on improving the bankability of PPP projects. Furthermore, the research methodology proposed in this study could be extended and customized to suit for different stakeholders of PPP projects and different countries implementing PPP projects.

Although the objectives have been achieved, this study still suffers from several limitations. Besides, the findings from this study were well interpreted in the context of China, which may be different from the context of other countries. Nonetheless, this study still provides an operational method to identify the bankability criteria for PPP projects which can be modified and customized to suit for the context of other countries.

Moreover, this study provides an in-depth understanding of the critical bankability criteria because it is widely acknowledged that China government has been promoting PPP to facilitate the infrastructure development. Future studies would use the developed fuzzy AHP-based method to investigate whether the private and public sectors have the same perception on the importance weights of bankability criteria with the bank.

If different parties have different perceptions on bankability criteria, there will be information asymmetry, hindering the financial close of PPP projects. Moreover, future studies would identify best practices to improve the bankability of PPP projects and increase the efficiency and success rate of financial arrangement for PPP projects.

The data used to support the findings of this study are available from the corresponding author upon request. The authors declare that there are no conflicts of interest regarding the publication of this paper. Table A1: qualitative bankability criteria and remarks, which briefly describe each bankability criterion to ensure consistency throughout the study. Supplementary Materials. This is an open access article distributed under the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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Special Issues. Academic Editor: Dujuan Yang. Received 19 Apr Accepted 24 Sep Published 17 Oct Abstract Public-private partnership PPP projects employ a high leverage in terms of debt finance needed by the private consortium. Introduction As an efficient procurement method of the public infrastructure projects or services, the public-private partnership PPP approach has been widely adopted in many countries [ 1 ].

Background 2. Rational of Bankability Evaluation Up until now, there is no uniform definition of the bankability of a project. Identified Bankability Criteria To identify the critical bankability criteria, this study adopted the analytic hierarchy process AHP approach. Table 1.

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These platforms enable retail investors without any previous experience to access such markets by facilitating relatively small initial investments. This possibility can in fact be highly risky for individual investors, despite the prevailing view that FX investments are of a lower risk than investing directly in equity. These platforms frequently offer high leverage and untrained investors can quickly accumulate significant exposures over time as they become emboldened by initial successes.

In the foreign exchange market, investors use leverage to profit from the fluctuations in exchange rates between two different countries. The available leverage in the forex market is one of the highest that investors can obtain. It is significantly larger than the leverage commonly provided on equities and the leverage encountered in the futures market.

Yet, the opportunity offered by leveraged trades comes at a price, potentially very high, which must not be neglected. If the currency underlying one of the trades moves in the opposite direction to what the investor expects, the leverage dramatically amplifies the losses. To avoid a fiasco, forex dealers, for the most part, maintain strict trading rules that incorporate the use of stop and limit orders to control potential losses - all of which requiring a certain level of expertise and a time-commitment reserved for more sophisticated investors.

By no means easy. Investing in the most popular asset classes is simply not as lucrative as it once was. Clearly, in respect to Fixed Income investing, a portfolio of safe government bonds is unlikely to deliver the rates of the previous decades — and in some cases, little more than retail bank deposit rates. The situation has forced even the most risk-averse investors to seek new ways to "buy" risk to finance themselves over the long term. Doing so has led many investors to become even more exposed to the upheavals of the equity markets - a situation that notoriously applies to many pension funds nowadays.

Faced with these new difficulties and uncertainties, there is an alternative asset class that is recovering — almost as if arriving after a long desert crossing. Non-bankable assets can include direct investments in companies' own funds, the purchase or co-acquisition of primary or secondary residences, works of art, and rare collectible objects e.

How do these differ from traditional financial assets? Bankable assets are, by definition, collaterals used by banks to guarantee the repayment of a loan. Non-bankable assets do not belong to this category. Usually, more holistic portfolio management, which includes non-bankable assets, is only offered to a very wealthy elite in exchange for high management fees e.

First and foremost, non-bankable assets have an optimal risk diversification effect on a portfolio of risky financial assets in highly correlated economies, where it has become increasingly costly and complicated to hedge against systemic risk properly. Since the advent of Distributed Ledger Technology DLT and the Blockchain , non-bankable assets have given investors direct access to niche sectors, such as art, classic cars, luxury watches and jewelry, as well as wine and wineries, to name just a few of the markets.

These rather uncompetitive markets are arguably less efficient than standard security markets and, therefore, can offer attractive arbitrage opportunities to passionate, or merely knowledgeable, investors. The boom in DLT has had another very positive impact, which has helped drive the renewed interest in non-bankable assets.

DLT allows anyone to quickly set up their marketplace at moderate costs. It compiles the results of all the other feasibility studies done when planning a mining project and adds information on required permits, environmental impact, negotiated contracts and the costs of closing the mine and reclaiming the ground. It is the full analysis you would use to present a mining project to a bank or investor for funding, but it doesn't guarantee you will receive the money. The first stage of a mining project is mineral exploration.

It includes prospecting for potential mine sites and staking the claims. Once you have the rights to the land, you start working on a series of feasibility studies covering drilling and testing for presence of the mineral, a basic environmental impact study to identify major environmental problems before you get too involved in the project, a social impact study and workforce availability, and preliminary evaluations of the extent and value of the mineral deposit.

These studies give you an idea of whether it is worth developing the mine, which is the second stage that leads to the assembly of the bankable feasibility study. Once you feel you can most likely develop the mine and make a profit, you start digging deeper into information before you do any mining. In this stage you do the detailed determination of where the mineral deposits are located, best methods to mine them, access to the claim and movement of the minerals to transportation hubs, examination of operational options and the preliminary financial projections.

Then you write your mine plan and present it to the appropriate government agencies, local and national, and apply for permits to mine and transport the minerals. Once you have done this, you are ready for the final preparations of your bankable feasibility study. A bankable feasibility study should be thought of in terms of being a detailed business plan that you would present to any investor or bank in hopes of getting approved for project funding.

It includes the results of all your studies, but the investor or banker will likely do due diligence on the information you present. It is only bankable in the sense that it is a proposal ready to be presented for funding.

Acceptable to or at a bank: bankable funds.

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Singapore tianjin eco-city investment holdings ltd Shan, B. Download our data science paper: 'Wealth management redefined using artificial intelligence ' The hidden dangers of leveraged investments In the foreign exchange bankable investment definition, investors use leverage to profit from the fluctuations in exchange rates between two different countries. Usually, more holistic portfolio management, which includes non-bankable assets, is only offered to a very wealthy elite in exchange for high management fees e. The revised pairwise comparison matrix was depicted in Equation 3. As such, the purest example of bankable funds would be cash, while other instruments, such as cashier's checks, are also bankable. Du, H. If a fuzzy number represents the importance of comparison of criterion C1 to criterion C2, then represents the inverse comparison of criterion C2 to criterion C1.
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Northern ireland foreign direct investment database Personal Finance. A total of sets of survey questionnaires were investment casting steel alloys sent bankable investment definition through email to gather responses from the banks or financial institutions. Non-bankable assets do not belong to this category. The evaluation of the importance of the criteria was based on the survey results. The data used to support the findings of this study are available from the corresponding author upon request. Bringing in expertise in these areas into the policy development and early project concept stages will help to develop better projects that are more likely to achieve their intended benefits, with realistic objectives, cost and timelines. Cheng, Y.
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Sip investment examples In addition, postsurvey interviews were conducted with three industry experts who possess the relevant experience in PPP financing. Full bankable investment definition How to use advanced machine learning techniques to compensate for data scarcity steve mauro forex download few data points and data sparsity data points irregularly spaced over time in estimating non-bankable assets expected risk and returns? Independent assurance, reviews and audit processes with separate roles for the project sponsor and independent reviewers should be embedded into infrastructure project preparation to drive transparency, accountability and efficiency improvements and make use of learning from previous projects. As projects progress, more detailed analysis and gathering of evidence is needed to support informed and transparent decision-making. Financial structure D4. Virtually anything can be exchanged with minimum friction and without the need for intermediaries.

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For example, it is possible to invest online using one's own account in the foreign exchange, derivatives or commodities markets e. These platforms enable retail investors without any previous experience to access such markets by facilitating relatively small initial investments. This possibility can in fact be highly risky for individual investors, despite the prevailing view that FX investments are of a lower risk than investing directly in equity.

These platforms frequently offer high leverage and untrained investors can quickly accumulate significant exposures over time as they become emboldened by initial successes. In the foreign exchange market, investors use leverage to profit from the fluctuations in exchange rates between two different countries.

The available leverage in the forex market is one of the highest that investors can obtain. It is significantly larger than the leverage commonly provided on equities and the leverage encountered in the futures market. Yet, the opportunity offered by leveraged trades comes at a price, potentially very high, which must not be neglected. If the currency underlying one of the trades moves in the opposite direction to what the investor expects, the leverage dramatically amplifies the losses.

To avoid a fiasco, forex dealers, for the most part, maintain strict trading rules that incorporate the use of stop and limit orders to control potential losses - all of which requiring a certain level of expertise and a time-commitment reserved for more sophisticated investors.

By no means easy. Investing in the most popular asset classes is simply not as lucrative as it once was. Clearly, in respect to Fixed Income investing, a portfolio of safe government bonds is unlikely to deliver the rates of the previous decades — and in some cases, little more than retail bank deposit rates.

The situation has forced even the most risk-averse investors to seek new ways to "buy" risk to finance themselves over the long term. Doing so has led many investors to become even more exposed to the upheavals of the equity markets - a situation that notoriously applies to many pension funds nowadays. Faced with these new difficulties and uncertainties, there is an alternative asset class that is recovering — almost as if arriving after a long desert crossing.

Non-bankable assets can include direct investments in companies' own funds, the purchase or co-acquisition of primary or secondary residences, works of art, and rare collectible objects e. How do these differ from traditional financial assets? Bankable assets are, by definition, collaterals used by banks to guarantee the repayment of a loan. Non-bankable assets do not belong to this category. Usually, more holistic portfolio management, which includes non-bankable assets, is only offered to a very wealthy elite in exchange for high management fees e.

First and foremost, non-bankable assets have an optimal risk diversification effect on a portfolio of risky financial assets in highly correlated economies, where it has become increasingly costly and complicated to hedge against systemic risk properly. Since the advent of Distributed Ledger Technology DLT and the Blockchain , non-bankable assets have given investors direct access to niche sectors, such as art, classic cars, luxury watches and jewelry, as well as wine and wineries, to name just a few of the markets.

These rather uncompetitive markets are arguably less efficient than standard security markets and, therefore, can offer attractive arbitrage opportunities to passionate, or merely knowledgeable, investors. The boom in DLT has had another very positive impact, which has helped drive the renewed interest in non-bankable assets.

In addition, the respondents from the banks were holding the positions of bank director, loan evaluator, and marketing manager. The relatively small sample size was mainly caused by two reasons. First, only those with good PPP finance-related experiences and were willing to perform the survey would be approached to send the survey form. This has significantly reduced the pool size of the potential respondents. Second, some of the experienced practitioners contacted were reluctant to share their opinions because of business confidentiality.

Although the size of the sample was relatively small, the knowledge and judgments of the respondents were reasonable considering the experience of the respondents. Considering the area of the respondents, this study was a location-based study. This study adopted the fuzzy set theory to handle the uncertainty and vagueness of the subjective evaluation of the importance of the identified bankability criteria.

Zadeh [ 38 ] developed the fuzzy set theory to handle such kind of impreciseness of human subjective judgment. Buckley [ 39 ] later extended the hierarchical analysis to the case where experts were allowed to use fuzzy ratios in place of exact ratios. Instead of using a precise number to assess the priority of a criterion, a triangle fuzzy number was used to express fuzzy ratios. The geometric mean technique was adopted to determine the fuzzy weights of criteria [ 39 ]. Second, the triangular fuzzy number can be utilized in the situations when the comparisons in pair and judgments are uncertain or fuzzy [ 43 ].

The linguistic terms were then transformed into triangular fuzzy numbers in order to facilitate subsequent fuzzy arithmetic operations. The linguistic values and triangular membership functions are shown in Table 2 with the middle value denoting the most likely or typical value and the lower and upper bounds denoting the lower and upper membership values, respectively. In addition, the spread reflects the fuzziness of the term.

If a fuzzy number represents the importance of comparison of criterion C1 to criterion C2, then represents the inverse comparison of criterion C2 to criterion C1. The evaluation of the importance of the criteria was based on the survey results. The average fuzzy preference was given by the geometric mean of the preferences of all experts as shown in Equation 2.

The revised pairwise comparison matrix was depicted in Equation 3. In the following equations, denotes the average preference of criterion over criterion under dimension :. The following basic fuzzy operations shown from Equations 4 — 7 are required for computing the importance weights of the criteria.

Given fuzzy number and , then. The weightings of criterion are geometric mean as follows:. This concept was presented by Equation 9 and depicted in Figure 1. The advantage of this method is that the shape of the membership function is considered:.

Finally, to conform with traditional AHP, the importance weights of the criteria and the dimensions were normalized by ensuring that they sum to 1, as given by the following equation:. The importance weights of bankability dimensions were similarly derived using Equations 1 — Using to represent the normalized importance weight of dimension , the overall importance weight of criterion i is the product of the importance weight of criterion under dimension j and the importance weight of dimension , as computed by Equation The calculation of overall importance weight ensures that each bankability criterion is ranked at the same level.

Because the fuzzy AHP calculation is very complex, this study developed a program written in Microsoft C to process the survey data:. Before analyzing the pertinent finding of this study, this study carried out the Pearson chi-square test to reveal the evaluation consistency of the samples within each set [ 36 ].

The calculated value for the sample sets of the bank was Therefore, it is legitimate to use the geometric mean of the evaluations from the respondents to reflect the relative importance weights of the bankability criteria. Because the revenue cash flows of a PPP project are the main or sole source to meet the financial obligation, the banks must first ensure that the project is financially well structured and profitable [ 6 ].

The bankable consideration was of great importance to the stakeholders of PPP projects [ 7 ]. Furthermore, PPP projects are usually mega projects or infrastructure projects with a vast amount of capital investment.

In addition, the findings revealed that the banks do have an emphasis on some of the bankability dimensions. For the sake of succinct presentation, this study listed the top twenty criteria whose importance weights were above the average, as shown in Table 4. Moreover, the importance weights of the top twenty criteria made up Among the identified 41 criteria, the top ten criteria, which were within the first quartile of all criteria, that affect the bankability of a PPP project were political environment D1.

This study briefly discussed these criteria as follows. Political environment D1. It is well known that PPP projects are mostly infrastructure projects or public-related projects, involving a vast amount of investment. Moreover, the success of PPP projects would be greatly affected by the cooperation relationship between the public and private sectors. Once there is any divergence between the two parties, the legal system determines the contract enforceability and is the baseline for setting the dispute [ 8 ].

Any change in law would be critical risks for PPP projects, especially in countries using the civil law [ 32 ]. Economic environment D1. In a sound and stable economic environment, the willingness of the consumer to pay for the use of infrastructure is high, ensuring the cash flow of a proposed project [ 8 ]. Furthermore, the condition of the financial market greatly affects the availability of the lending for PPP projects. The difficulties in the debt arrangements for PPP projects after the credit crisis and economic recession well prove this [ 12 , 47 ].

In a nutshell, the ecosystem that consists of the political environment and economic environment should be sound enough [ 48 ]. The shareholder is the party who commit to developing and operating a PPP project in a long concession period. The experts in the postinterviews pointed out that the strong financial capability of the shareholders was an important prerequisite for a successful debt approval.

This may be the reason that larger and more leveraged firms had a higher probability of being engaged in a PPP service concession agreement and receiving the loan from the banks [ 28 ]. Moreover, the operation ability of the shareholder draws great attention recently because many projects step into the operation stage.

The operation stage is usually less capital intensive but determines the fulfillment of the revenue of a PPP project [ 3 , 49 ]. Even if there is a concession agreement between the public and private sectors, the public sector who has a low reliability has a high probability to break the contract relationship when difficulties attend during the project development [ 32 ].

Financial structure D4. For a PPP project, the main or sole source to meet financial obligations is the project cash flow [ 6 , 47 ]. An optimal and operational financial structure that reflects the characteristics of project financing is extremely important for both the private sector and the bank because it synchronizes both profitability and repayment capacity [ 50 , 51 ].

Financial terms calculated based on the financial structure, such as the debt service coverage ratio, sensitivity, debt service reserve and debt-equity ratio, were extremely important to a debt financing, greatly influencing the desirability of a PPP project from a debt financing perspective [ 29 ]. Moreover, reasonable and flexible financial arrangements are also needed to deal with unforeseen risks or problems [ 47 ].

For instance, many transportation PPP projects exposed to the financial risk of low profitability due to the inaccurate forecast of traffic volume [ 52 , 53 ]. In this condition, flexible financial arrangements should be considered to overcome the uncertainties.

Moreover, many engineering contractors participate in PPP projects and become a major constituent of the private sector in PPP projects [ 3 , 54 ]. Engineering contractors with a high credibility bring the added value to PPP projects because they have a strong construction and financing capabilities and can improve the development efficiency [ 3 ]. For PPP projects, raising sufficient funds via the debt channel is a key task for all project stakeholders. Considering the lack of a systematic research on the bankability of PPP projects, this study proposed the fuzzy AHP-based approach to identify the critical bankability criteria of PPP projects from a debt financing perspective.

A total of 41 bankability-related criteria were first identified from a comprehensive literature review and further classified into six dimensions. Afterward, a structured questionnaire survey was conducted with 31 industry experts from the bank in China to investigate the relative importance of each criterion.

Finally, this study analyzed the relative importance weight of each criterion using the proposed fuzzy AHP-based approach that can handle the uncertainty and vagueness of the subjective evaluation from surveys. Moreover, the top twenty criteria, the importance weights of which made up In addition, the importance weights of the top twenty criteria made up With the aim of identifying the critical bankability criteria for successful PPP project finance, the empirical results of this study fill a gap in the project finance body of knowledge for the bankability of PPP projects.

Moreover, the findings of this study would provide valuable information to the private and public sectors for formulating strategies on improving the bankability of PPP projects. Furthermore, the research methodology proposed in this study could be extended and customized to suit for different stakeholders of PPP projects and different countries implementing PPP projects. Although the objectives have been achieved, this study still suffers from several limitations.

Besides, the findings from this study were well interpreted in the context of China, which may be different from the context of other countries. Nonetheless, this study still provides an operational method to identify the bankability criteria for PPP projects which can be modified and customized to suit for the context of other countries. Moreover, this study provides an in-depth understanding of the critical bankability criteria because it is widely acknowledged that China government has been promoting PPP to facilitate the infrastructure development.

Future studies would use the developed fuzzy AHP-based method to investigate whether the private and public sectors have the same perception on the importance weights of bankability criteria with the bank. If different parties have different perceptions on bankability criteria, there will be information asymmetry, hindering the financial close of PPP projects.

Moreover, future studies would identify best practices to improve the bankability of PPP projects and increase the efficiency and success rate of financial arrangement for PPP projects. The data used to support the findings of this study are available from the corresponding author upon request. The authors declare that there are no conflicts of interest regarding the publication of this paper.

Table A1: qualitative bankability criteria and remarks, which briefly describe each bankability criterion to ensure consistency throughout the study. Supplementary Materials. This is an open access article distributed under the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. We will be providing unlimited waivers of publication charges for accepted research articles as well as case reports and case series related to COVID Review articles are excluded from this waiver policy.

Sign up here as a reviewer to help fast-track new submissions. Journal overview. Special Issues. Academic Editor: Dujuan Yang. Received 19 Apr Accepted 24 Sep Published 17 Oct Abstract Public-private partnership PPP projects employ a high leverage in terms of debt finance needed by the private consortium.

Introduction As an efficient procurement method of the public infrastructure projects or services, the public-private partnership PPP approach has been widely adopted in many countries [ 1 ]. Background 2. Rational of Bankability Evaluation Up until now, there is no uniform definition of the bankability of a project. Identified Bankability Criteria To identify the critical bankability criteria, this study adopted the analytic hierarchy process AHP approach.

Table 1. Table 2. The linguistic terms and the corresponding triangular fuzzy numbers. Figure 1. Table 3. Table 4. References L. Zhu, X. Zhao, and D. Du, H. Wu, and L. View at: Google Scholar J. Song, Y. Hu, and Z. Tan, Principles of project and infrastructure finance , Routledge, Kurniawan, S. Ogunlana, and I. Kong, R. Tiong, C. Cheah, A. Permana, and M. Regan, J. Smith, and P. View at: Google Scholar D. View at: Google Scholar E.

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