Kovalenko Victoria, Doctor of Economics, Professor, Professor, Department of Banking, Odessa National University of Economics, Ukraine

ORCID ID: 0000-0003-2783-186X
e-mail: kovalenko-6868@ukr.net

Risks of Project Financing in the Current Conditions of National Economy Development

Abstract. Introduction. Transformation of economic relations determines the need for real investment, without which it is impossible to upgrade and expand the production potential of economic agencies and the production of competitive products and services.

Purpose. The main purpose of the study is to deepen the theoretical and methodological foundations and to monitor the risks of project financing in the current conditions of the development of the national economy.

Results. The article focuses on the problem of project finance market’s development in the context of uncertainty and risk. The authors consider scientific views on project finance. The systematization of scientific views on the definition of “project financing” has given the authors a possibility to establish the decisive role for banks, taking into account the requirements for the formation of the project itself, its support, risk evaluation and support. The theoretical foundations of project financing are determined, namely: the economic essence of project financing, features of project financing; functions of banks in the process of project financing; principles of its implementation, as well as subjects and objects of this process. The analysis of the current state of bank’s project finance showed that the activity of domestic banks in the project finance market remains low. This is due to the negative impact of environmental factors such as unsatisfying market transformation’s rates; the low level of development in the real sector; the weak and insufficiently transparent financial position of a large number of corporate entities; the underdeveloped of the stock market’s infrastructure; uncertainties about the land market; the low level of protection for creditors’ rights; the high country-risk. It is formed the scheme of sequential actions of a bank for deciding on project finance.

Conclusions. The authors clarify the classification of project finance risks. Project finance risks include: credit risk, interest rate risk in the banking book, market risk, compliance risk and innovation risk. The necessity of introducing mezzanine lending to minimize project financing risks has been proved.

Keywords: project financing, banks, project finance risks, investment project; mezzanine lending.

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