ADB: $150m to design bankable projects in Indonesia

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Jakarta Indonesia

First of its kind green finance mechanism will generate new bankable projects that meet climate and SDG ambitions. 

The Asian Development Bank (ADB) has approved a $150m loan to accelerate Indonesia’s economic recovery by catalysing support for ten green and bankable infrastructure projects. 

The financing will be provided through the SDG Indonesia One-Green Finance Facility (SIO-GFF) – the first facility of its kind in Southeast Asia. SIO-GFF will select and design at least ten projects that help meet UN SDGs, so as to make them bankable and attract additional funding to supplement government investment. 

Anouj Mehta, unit head of the ADB’s green and innovative finance for Southeast Asia, said: “The SIO-GFF aims to catalyse up to eight times the funds invested to support climate-friendly infrastructure and help Indonesia make progress toward the SDGs. It will boost the development of sustainable infrastructure and accelerate the country’s recovery from the COVID-19 pandemic by crowding in capital and creating jobs.”

PT Sarana Multi Infrastruktur (Persero), or PT SMI – a state-owned infrastructure financing institution – will administer the facility. ADB also approved technical assistance to help strengthen PT SMI’s ability to implement the facility and eventually broaden the firm’s services to support other borrowers and catalyse private funding.

That technical assistance is being funded by Australia’s Department of Foreign Affairs and Trade and Luxembourg’s Financial Sector Development Partnership Special Fund.

ADB Senior Financial Sector Specialist Benita Ainabe explained: “With innovative finance models incorporating global green standards, the SIO-GFF will help Indonesia focus on climate-resilient infrastructure as it recovers from the COVID-19 pandemic. We hope to build on our experience in Indonesia to extend the approach to other countries in the region.”

The ADB estimates Indonesia’s annual climate-adjusted infrastructure financing needs from 2016 to 2020 to have been $74bn, with an annual infrastructure financing gap of $51bn. The facility seeks to help manage credit risk during the life cycle of projects, especially the construction phase and the early years of commercial operations when cash flow is negative. The facility will mainly offer loans, but may also provide equity, convertible debt, and guarantees, to reduce the credit risk of projects and attract commercial lenders.