Models for Financing Clean Infrastructure in Middle Income Countries

The paper examines two contrasting models for financing clean infrastructure in middle-income countries: Brazil's centralized approach led by the national development bank (BNDES) and India's decentralized system involving various public and private institutions. Through case studies of wind energy projects, the authors find that despite their structural differences, both systems are dominated by public financing and struggle with a lack of true non-recourse project finance and limited financial innovation. Brazil's model effectively supports national industrial goals through local content requirements and centralized auctions but faces risks of crowding out private investment and governance issues. India's model allows for more diverse participants and smoother integration of international development finance but suffers from higher system costs, uneven investment across sectors, and significant revenue risks due to the poor financial health of state-owned power distribution companies (discoms). The report concludes that the effectiveness of these models is heavily dependent on complementary regulatory and policy frameworks rather than the financing structure alone.

• Brazil employs a centralized financing model centered on the Banco Nacional do Desenvolvimento Econômico e Social (BNDES), which provides stable, low-cost finance and supports national industrial policy through local content requirements.
• India utilizes a decentralized model with a diverse array of public and private financial institutions delivering finance on commercial terms, which facilitates a greater role for international development finance compared to Brazil.
• Despite their different structures, both Brazil and India exhibit similar outcomes: public financing dominates, leverage ratios are similar (approximately 70/30), and there is a widespread failure to adopt sophisticated non-recourse project finance models.
• The Brazilian model's success in the wind sector is attributed more to its integrated regulatory and auction system than the financing model itself, whereas India's fragmented state-level regulation often overwhelms national policy.
• The centralized BNDES model in Brazil may crowd out international and private domestic investment due to the concessional nature of its loans and may limit financial innovation.
• India's decentralized model faces high system costs due to the need for lender consortia and suffers from uneven investment, where sectors like ports and healthcare lack the access to capital enjoyed by power, roads, and rail.
• A major barrier to private and institutional investment in India's power sector is the poor financial health of state-owned distribution companies (discoms), leading to payment delays and revenue risks.

APA

Sahoo, A., Nelson, D., & Goggins, A. (2015). Models for Financing Clean Infrastructure in Middle Income Countries. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Model-for-Financing-Clean-Infrastructure-in-Middle-Income-Countries-–-Working-Paper.pdf

Chicago

Sahoo, Anshuman, David Nelson, and Andrew Goggins. Models for Financing Clean Infrastructure in Middle Income Countries. Climate Policy Initiative, 2015. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Model-for-Financing-Clean-Infrastructure-in-Middle-Income-Countries-–-Working-Paper.pdf.

Wikipedia

{{cite report |last1=Sahoo |first1=Anshuman |last2=Nelson |first2=David |last3=Goggins |first3=Andrew |title=Models for Financing Clean Infrastructure in Middle Income Countries |publisher=Climate Policy Initiative |date=December 2015 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Model-for-Financing-Clean-Infrastructure-in-Middle-Income-Countries-–-Working-Paper.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sahoo2015models, author = {Sahoo, Anshuman and Nelson, David and Goggins, Andrew}, title = {{Models for Financing Clean Infrastructure in Middle Income Countries}}, institution = {Climate Policy Initiative}, year = {2015}, month = dec, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2015/12/Model-for-Financing-Clean-Infrastructure-in-Middle-Income-Countries-–-Working-Paper.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }