Concessional credit: the least understood tool in African project finance

Concessional credit is a public or multilateral loan on terms more favourable than the market's: reduced interest rates, long amortisation periods and, frequently, an initial grace period. In African infrastructure projects, this instrument remains underused relative to pure commercial financing or non-repayable aid.

Why it goes underused

Three reasons explain the gap. First, access to concessional credit lines — bilateral, World Bank, African Development Bank, or European export credit agencies — requires a prior institutional relationship that most project sponsors simply don't have. Second, structuring a blended operation (concessional plus commercial) requires simultaneous legal and financial coordination across two or three jurisdictions. Third, approval timelines — typically twelve to twenty-four months — discourage sponsors seeking to close financing within a single fiscal cycle.

Where it fits

Concessional credit works best when the project has a clear public-interest component — water, energy, health, transport — and when the receiving government can offer a partial sovereign guarantee. In that profile, blending concessional and commercial finance lowers the project's average cost of capital without shifting all the risk onto the public balance sheet.

The role of an institutional intermediary

Structuring these operations depends on maintaining active relationships with financing bodies on both sides — European and African — before a concrete project is even on the table. It is an investment in relationship, not transaction, and it is exactly the work that sustains an infrastructure project between the design phase and financial close.