Role of Loan Syndication in Project Finance : An Approach to Risk Management

Loan syndication as a project financing mechanism has increased over the last decade despite the diverging needs of the lenders. Loan syndication as a mechanism to finance a project is becoming a trend in developing economy. Many international project like infrastructure project and power project are being financed by the lenders through loan syndication. Both private sector and public sector financial institution are taking major participation in this lending process through a syndicate which is enhancing the entrepreneurship strategy in the emerging economy. This paper examines the application of loan syndication in project finance through analyzing the data of 2006-2011 loan allocation derived from Bank for international settlement by applying the trend analysis approach. The objective of the analysis is to know about the mechanism and to study the trend, how this concept is useful for both side i.e. lender (syndicate) and the project executer (borrower) from risk management point of view. Finally the findings give a bird's eye view about the concept and how it is used as a strategic approach for fund mobilization and risk diversification