Key Credit Factors for Public Private Partnership (PPP) Projects Financing in Malaysia
Yati Md Lasa1, Norizan Ahmad2, Roshana Takim3
1Yati Md Lasa, Faculty of Architecture, Planning and Surveying, Universiti Teknologi MARA (UiTM) Shah Alam, Selangor, Malaysia.
2Norizan Ahmad, Faculty of Architecture, Planning and Surveying, Universiti Teknologi MARA (UiTM) Shah Alam, Selangor, Malaysia.
3Roshana Takim, Faculty of Architecture, Planning and Surveying, Universiti Teknologi MARA (UiTM) Shah Alam, Selangor, Malaysia.
Manuscript received on 07 May 2019 | Revised Manuscript received on 19 May 2019 | Manuscript Published on 23 May 2019 | PP: 887-897 | Volume-7 Issue-6S5 April 2019 | Retrieval Number: F11530476S319/2019©BEIESP
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© The Authors. Blue Eyes Intelligence Engineering and Sciences Publication (BEIESP). This is an open access article under the CC-BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
Abstract: Public Private Partnership (PPP) has been implemented by many governments around the world as an innovative procurement for development of public infrastructure projects. Since the PPP projects involve large amounts of investment and long concession periods, the projects are associated with high credit risk. Usually, debt portion is between 70% and 95% of project costs. Hence, banks are exposed to credit risk when they are involved in lending to these large projects with long gestation periods. Banks evaluate the creditworthiness of the private company based on quantifiable financial indicators and qualitative elements of the company’s strength. The private company that is lacking in financial capacity, inexperienced in construction, and weak in management capabilities, faces a high probability of failing to secure PPP financing. Therefore, this study aimed to identify and critically assess the key credit factors in PPP project financing. Data collected through literature review and case study investigation were analysed using computer-assisted ATLAS.ti. Five groups of key credit factors were identified consisting of the project’s financial credit strength, strength of sponsor, contractual foundation, transaction characteristics, and security package. The findings contribute to the current knowledge of PPP financing that is to succeed in obtaining funding for PPP projects, it is imperative for the private company to understand the risk profile of the projects from debt-financing perspective.
Keywords: Credit Factor, Financing, PPP Project.
Scope of the Article: Social Sciences