Project Finance as a Driver of Economic Growth in Low-Income Countries

Abstract

This study investigates the role of project finance as a driver of economic growth. We hypothesize that project finance is beneficial to the least developed economies as it compensates for any lack of domestic financial development. The contractual structure unique to project finance should lead to better investment management and governance. Investigating 90 countries from 1991 to 2005, we find support for our hypothesis. Project finance indeed fosters economic growth and this effect is strongest in low-income countries, where financial development and governance is weak.financial economics and financial management ;