This briefing paper proposes better lending practice in conflict-prone states – defined as ‘conflict-sensitive’ project finance – is in the interests of all stakeholders. Such an approach would enable financial institutions to:
Understand the conflict context in which a project is developed
Recognise the two-way process that characterises the interaction between investments and conflict and assess the impact between the project activities and the conflict context
Mitigate negative impacts that may result from such an interaction
Harness opportunities to encourage project sponsors to contribute to a more secure operating environment
A conflict-sensitive approach to lending and insuring can provide project sponsors and investors with increased confidence that cash flow, reputation and relations with host countries and other actors will not be negatively affected by violent conflict. In turn, this approach may also assist multilateral development banks (MDBs) and others to improve their track record of supporting those projects that further developmental goals, as well as projects which ‘do no harm’ and contribute to the building of peace.
