Host governments and private investors are using project finance, a widely used financial tool, more frequently and in greater quantities to fund infrastructure projects. The amount of capital that is currently accessible has been significantly impacted by the recent economic crisis, but project finance is still a vital financing strategy that has several benefits for participants. Additionally, it is probably going to keep expanding as the world economy strengthens.

Countries can construct the infrastructure required to boost growth and development thanks to project funding. Because risks are frequently shared among the numerous participants and development organisations reduce risks by offering political and economic guarantees, it attracts more funding than traditional schemes. Several necessary and life-improving initiatives might not have been built without project financing. Project finance, a relatively recent kind of financing that dates to the 1970s, offers a number of significant benefits. Because it is a non-recourse financing instrument, a borrower's obligation to the lender in the event of a default by the sponsor company is restricted to the assets of the special purpose vehicle rather than the company or entities that own the SPV. As a result, in the event of a default, the companies that control the project site need not be concerned that creditors may seize their assets.

A project finance model resembles the conventional finance model in that it permits the use of equity or debt funding by the organisation. Due to the fact that they retain complete control over the project and can generate a higher return through the use of debt financing, the majority of companies looking for investment capital prefer debt financing to equity financing. Debt financing is the process of borrowing money to pay for a project, in which case the SPV is the only investor. In contrast, equity financing calls on the project sponsors of the SPV to either provide the project with the cash it needs or sell their ownership in the SPV in order to raise money. Debt financing is appealing since project sponsors do not need to commit additional funds to the project, in addition to preserving complete control.