When does patient money change everyday life?
When debt falls due before construction is finished, a project must keep working while looking for its next source of funding. Long-term finance can narrow that timing gap. A more generous repayment schedule, however, does not guarantee a successful project.
This foundational explainer draws on earlier World Bank research into long-term finance. It does not report the terms of a recent bond issue or current project outcomes.
Money needs a timetable that fits the project
Long-lived assets such as roads and power facilities can take time to recover their investment costs. If their funding is short term, a project may need to find fresh money before it is finished. Borrowing again to repay existing debt is called refinancing.
Long-term finance can reduce this refinancing burden and give a project a longer planning horizon. Bank loans and bonds can provide that funding. A longer maturity is not best for every project, however. The appropriate term depends on how long the money is needed and how risks are shared.
Background source · Printed pages 1, 3, 21
A longer maturity does not choose a good project
Having money available for longer is different from using it well. Institutions that uphold contracts, capable management and a viable project also matter. Increasing the supply of finance cannot, on its own, fix those problems.
When reading about fundraising, look beyond the money raised to the projects selected and how they are carried out. A full collection box and a service that works are different milestones, with more evidence needed in between.
Background source · Printed pages 3, 4
Time to wait is not proof of results
Long-term funding can give a project time to deliver results. Whether that time leads to better lives requires separate evidence about implementation and outcomes. The amount raised or the repayment period alone cannot establish improvements in jobs or living conditions.
Background source · Printed pages 1, 3, 4
Source and reuse terms
Global Financial Development Report 2015/2016: Long-Term Finance · CC BY 3.0 IGO
World Bank. 2015. Global Financial Development Report 2015/2016: Long-Term Finance. Washington, DC: World Bank. doi:10.1596/978-1-4648-0472-4. © World Bank. License: Creative Commons Attribution CC BY 3.0 IGO.
SignalTrace Lab wrote the Korean explainer and this English edition from the background research. Original statistics, photographs and figures are not reproduced. The required adaptation and translation notices follow.
This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank.
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