Sustainable Financing Model considering Project Risk

Abstract

Implementing various projects in each country leads to the development of that country. The necessity of implementing any project is to finance that project through different methods. In this regard, the cost of financing projects, determining the amount of financing from each technique, and the risk of financing projects are among the things that have caused problems for managers and decision makers. This study presents a new sustainable financing model for international projects in Iran. The main objectives are to minimize the financing cost and risk of funding the projects. Based on the proposed conceptual model based on fuzzy hierarchy analysis, it was observed that Iran’s economic conditions, with a weight coefficient of 0.34, have the highest risk in financing projects. Therefore, a two‐objective model was designed by determining the weighting coefficients to reduce costs and financing risks. Additionally, the epsilon constraint methods and NSGA II algorithm were used. Comparative results between the two algorithms show that financing projects must be changed to reduce the risk of sustainable financing of international projects, which can lead to an increase in the total cost of financing projects. On the other hand, it was observed that the NSGA II algorithm obtained 32 efficient answers (a combination of how projects are financed). Each of the received answers has advantages over the other solutions obtained. The epsilon constraint method also brought 11 efficient answers, demonstrating that the domestic capital market can provide 54.89% of the deficit budget of the country’s international projects. Furthermore, 44.81% of the project deficit budget can be financed from a foreign bank loan source, and only 0.2% of the budget can be funded through the company’s internal resources.