Viability Gap Funding

Viability Gap Funding

  • There are many projects with high economic returns, but the financial returns may not be adequate for a profit-seeking investor.
  • For instance, a rural road connecting several villages to the nearby town.
  • This would yield huge economic benefits by integrating these villages with the market economy, but because of low incomes it may not be possible to charge user fee.
  • In such a situation, the project is unlikely to get private investment.
  • In such cases, the government can pitch in and meet a portion of the cost, making the project viable.
  • This method is known as viability gap funding.

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