By Chidi Nwafor
The road needed no advocate. It would cut freight transit time between an inland agricultural belt and the nearest port from four days to under one, in a corridor already carrying enough traffic to justify the investment on paper several times over. Government backed it. Local farmers’ associations had lobbied for it for a decade. An engineering feasibility study confirmed the alignment was sound. A well-regarded regional development bank had flagged it as a priority corridor. By any economic measure, the project should have existed already. Three years after the first term sheet was drafted, it still did not exist, and it was not the traffic projections, the government’s commitment, or investor appetite for transport infrastructure that had stalled it. It was that no one had ever actually finished building the project, as opposed to the road.
The financial model had changed hands twice and reflected assumptions no one could fully defend. The land along a third of the alignment had never been formally acquired, and the resettlement framework existed as a draft. The concession agreement allocated construction risk in a way no contractor would accept without repricing. Environmental approvals covered the original alignment, not the one that had since been revised for cost reasons. None of this made the road a bad idea. It made it, in the language investment committees actually use, not yet a project at all, merely a very good idea that had been mistaken for one.
The Fiction of the Bankable Project
Infrastructure finance talks constantly about “bankable projects” and “unbankable projects,” as though bankability were a trait a project either possesses at birth or lacks, like a genetic condition diagnosed once and true forever. This language does real damage, because it locates the problem in the project’s essential nature rather than in the work that has or has not been done to it. A project is not bankable or unbankable. It is prepared or unprepared, and preparation is not a formality that follows a good idea. It is the substantial, expensive, technically demanding work that turns a good idea into something a fiduciary can actually approve.
This distinction matters because it changes where responsibility and investment should sit. If bankability were an inherent quality, the rational response to an infrastructure gap would be to search harder for projects that already have it, or wait for markets to produce more of them. If bankability is instead a constructed outcome, the rational response is to build the capacity that constructs it, deliberately, as infrastructure in its own right. The evidence overwhelmingly supports the second view. The road above was not short of demand, or government support, or an interested market. It was short of the unglamorous sequence of technical, legal and institutional work that converts an idea into a transaction, and no one had been paying for that sequence to be completed.
Five Things That Are Not the Same
The distance between an infrastructure need and an infrastructure asset in operation runs through at least five distinct stages, and conflating them is where much of the gap originates. A good idea is a project that makes economic and developmental sense; the road cutting transit time is a good idea in the most straightforward possible way. A good project adds a credible technical design and an initial cost estimate, still well short of what any financier requires. A bankable project has completed the harder work, feasibility studies robust enough to withstand institutional diligence, land secured, permits obtained, offtake or demand risk addressed, a legal and commercial structure that allocates risk in terms a lender will accept. A financeable transaction has gone further still, structured the actual capital stack, negotiated terms with specific lenders and investors, and resolved the documentation those parties require to commit. And an investable asset is what exists after financial close, generating the risk-adjusted return the capital structure was built around.
Each transition between these stages requires different capability, different capital, and different institutional actors, and the world’s infrastructure-finance conversation routinely collapses all five into a single word: bankable. Governments announce good ideas and call them pipelines. Development institutions catalogue good projects and call them investment opportunities. Investors are then asked to evaluate what is, in reality, still several stages of expensive, specialised work away from being a transaction they can finance, and when they decline, the conclusion drawn is that capital is scarce or risk-averse, rather than that the project was presented several stages too early.
The Preparation Gap, and Why the Market Does Not Close It On Its Own
The reason this gap persists is structural, not accidental. Project preparation, the feasibility studies, legal structuring, environmental and social work, land acquisition, transaction advisory, is expensive, can run into the tens of millions of dollars for a major infrastructure asset, and carries a high probability of failure: a meaningful share of projects that enter preparation will not survive it, for good reasons discovered during the process itself. Commercial capital is structurally reluctant to fund this stage, not because commercial investors are short-sighted, but because the economics do not work for them. A commercial lender earns a return on capital deployed into a financed asset; it has no natural mechanism to earn a return on capital spent developing a project that may never reach financial close. Asking commercial capital to fund preparation is asking it to underwrite outcomes it cannot price.
This is precisely the kind of risk that development finance exists to absorb, and to its credit, much of the development finance system understands this in principle. In practice, funding for project preparation is frequently fragmented across donor grants, government budgets, and ad hoc technical assistance facilities that are too small, too short-lived, or too narrowly scoped to build a genuine pipeline. A preparation grant that expires before a project reaches financial close does not produce a bankable project; it produces a partially prepared one, competing for a second round of funding against a new cohort of equally partial projects. Fragmentation, more than underfunding in the aggregate, is what makes the preparation gap so persistent: the resources exist across the system, but rarely in a single, sufficiently capitalised, sufficiently patient instrument capable of carrying a project the full distance from concept to close.
What Actually Closes the Gap
The instruments that work share a common design principle: they treat preparation as an investment with its own capital structure, not a grant to be dispensed and forgotten. Dedicated project-development facilities, capitalised patiently enough to fund a project through the full preparation sequence and structured to recover their costs, often through a development fee at financial close, from the projects that succeed, create the right incentive: the facility is paid for building bankable projects, not merely for spending a preparation budget. Revolving preparation facilities extend this further, recycling recovered development costs from successful projects back into preparing the next cohort, building institutional memory and technical capability that a one-off grant never accumulates. Transaction advisers, engaged early rather than brought in once a deal is already troubled, bring the specific skill of structuring a project simultaneously for developmental and commercial acceptability, the skill most conspicuously absent from the road project above. Standardised preparation frameworks and documentation, built once and reused across many projects in a sector, cut the cost and time of preparing each subsequent one. And project aggregation, bundling smaller assets that could not individually justify full transaction costs into a single prepared pipeline, makes preparation economical at a scale that matters.
Development finance institutions have a specific and underused role here: not simply as lenders of last resort once a project is already prepared, but as the patient capital willing to fund preparation itself, on the understanding that a meaningful share of what they fund will not survive to financial close, and that this attrition is the cost of producing the projects that do. Institutions that have internalised this, building dedicated project-development arms rather than treating preparation as an occasional grant line item, consistently produce deeper, more reliable pipelines than those that wait for bankable projects to appear and then compete to finance them.
Bankability Is Built
The central insight this article insists on is a simple correction to how the industry talks: the world does not have a shortage of bankable projects waiting to be financed so much as it habitually tries to finance projects before it has finished building them. Bankability is not discovered in due diligence. It is constructed, deliberately, through a sequence of technical, legal and institutional work that costs real money, takes real time, and requires real capability, and every stage skipped or rushed reappears later as a reason financing fails to close.
This connects directly to the first two articles in this series. Article 1 established that capital availability does not guarantee deployment, that the constraint is a shortage of investable projects rather than investable funds. Article 2 established that even a well-conceived project stalls when risk sits unallocated rather than translated into something a financier can hold. Bankability is where these two threads meet: it is the state a project reaches once its risks have been properly allocated and its preparation has been properly financed, the point at which capital that was always available and risk that has been properly translated finally have something ready to receive them.
Even a fully bankable project, however, still faces one more decision before capital arrives: not whether it deserves financing, but what kind of capital should provide it, at what cost, in what proportion of debt to equity, concessional to commercial, and on what terms. A perfectly prepared, perfectly de-risked project can still fail to close if it is offered the wrong capital structure, priced for the wrong risk profile, or sized against the wrong balance sheet. That is the question this series turns to next.
That is the Missing Middle of Financial Structure.
Nwafor is founder and lead strategist at De-Lazuli Consult, an advisory practice focused on energy transition, project finance, DFI engagement and infrastructure investment facilitation. He writes from Lagos and Abuja. chidi.nwafor@de-lazuliconsult.com
