Improving Project Financing Practices for Investment Projects in Commercial Banks

Project finance is instrumental in maintaining a sustainable level of investment activity and securing long-run economic growth, especially in the banking industry of developing countries. Industrial & Commercial banks are relying more and more on project financing modes to carry out large scale projects with the minimum exposure of funds and proper utilization of scarce capital resources. Nevertheless, current modes of project financing (in commercial banks) face difficulties in risk evaluation aspect, institutional restrictions, inefficient analytical assessment and weak monitoring systems. The purpose of this work is to study the existing mechanisms for the financial structuring of investment projects in a commercial bank and to propose recommendations on their improvement. The research utilizes both qualitative and quantitative methods, such as examining the international background and comparing between countries as well as relevant financial indicators of project financing. Attention is also focused on risk management solutions, the design of financing mechanisms and banks as investment stakeholders coordinators. The findings of the research reveal that, to improve the financing of projects, make it possible to create risk analysis system, develop institution's base as well as have a good opportunity for further attraction of credit and direct investments in European countries. The results help in enhancing the project financing models in the commercial banks and also can assist banking industry managers and policy makers in investment- driven economic development.